Getting Personal: The Evolution Of Loyalty Programs

Scanning the weekly flyers and clipping coupons is a great Canadian tradition but – like the landline telephone, VCRs, and analog TV – coupons and flyers are on their way out. Retailers are moving their loyalty programs online and developing smart phone applications to get more personal with their offers.

Rapid advances in technology, coupled with the rise of social media, has given retailers unprecedented insight into consumer behaviour – information that’s used to offer tailor-made discounts based on their spending habits.

“You have to be aware that in exchange for a small reward you’re giving up a lot of personal info,” says Jonathan Bishop, an analyst with the Public Interest Advocacy Centre, a non-profit consumer advocacy group based in Ottawa.

Related: The steep cost of consumer loyalty

The benefits to consumers are rewards and discounts sent straight to your smart phone. It’s an easy way to save money. The trade-off is that you give up privacy and you may not be sure how much and whether the retailer is selling the information to a third party.

By signing up, you agree to let the retailer capture your habits and the details of what you are buying. They’ll try to get you to spend more by offering deals based on your behaviour.

Many retailers are already doing this, including Loblaws, Shoppers Drug Mart, Hudson’s Bay Company, Safeway, and Shell Canada. Even Canadian Tire joined the online loyalty world last year, though it has no plans to get rid of its iconic paper currency.

Loblaws launched a new digital loyalty program called PC Plus in 2013. It targets customers based on their purchase histories, offering discounts and bonus PC Points on items they buy regularly.

But the application goes a step further by providing dinner suggestions and offering bigger discounts on products that consumers might be interested in, but need some incentive to try.

Related: The conflict of interest in sales

Grocery loyalty programs have been around for more than 20 years – since the launch of Tesco’s program in the United Kingdom. The programs haven’t changed much – customers get a plastic card and weekly flyers that encourage them to shop at the retailer.

Last April, Canada Safeway discontinued its Club Card program so that customers no longer have to carry a loyalty card or give their phone number to get the best prices in-store. Now they get it automatically. The grocery store continues to offer Air Miles and sends weekly printable coupons to customers through a program called Safeway eMail Direct.

PIAC’s Jonathan Bishop says Air Miles has an enormous amount of data on consumer shopping habits, which is shared with partners like Safeway to use for direct and in-store marketing.

Air Miles went through its own transition three years ago when the company introduced Air Miles Cash. This feature allows collectors to redeem miles in $10 increments at the cash register for groceries and gas.

A new e-Voucher program lets Air Miles collectors use their smart phone to get $10 off at retailers like Cineplex, Starbucks, and iTunes. The new program is clearly aimed at Millennials, who want ways to use their reward miles for instant gratification.

“There’s no waiting for a reward to arrive in the mail,” said, Andy Wright, Air Miles president, adding that 2 million Air Miles collectors use the cash feature.

Related: Aeroplan, Avion, Avios, Adios

The granddaddy of all loyalty programs, Canadian Tire Money, has proven that you don’t need a plastic card or a smart phone to gain customer affinity. How else can you describe a program that, according to Moody’s Investor Services, is so well accepted among retailers that it could almost be considered an unofficial currency?

But Canadian Tire acknowledged that even its iconic loyalty program had to evolve. In 2012, the retail giant tested a plastic card in Nova Scotia that customers can use to collect points. Last year, the company introduced My Canadian Tire ‘Money’, which allowed customers to earn e-Canadian Tire ‘Money’ on purchases in-store and online.

Erin Sufrin, a spokesperson for Canadian Tire, says that given the affinity for Canadian Tire Money, the paper money is definitely not going away.

“Any evolution to our loyalty program will co-exist in parallel with our paper money.”

Final thoughts

The future of customer loyalty is directly tied to digital adoption. Already, marketers and retailers are moving from a traditional model to a digital model just to keep up with consumers. The trick will be to integrate the technology in a way that doesn’t cross the line when it comes to privacy.

Related: Why SCENE rewards is one of Canada’s hidden gems

How do you feel about the evolution of loyalty programs and retailers personalizing their offers based on your shopping habits?