We love it, collecting points and turning them into rewards. So much so that on average we hold 10 loyalty cards. For some, it is a game in which they master all the strategies to maximize the gains.
Posted on May 30, 2021 at 6:30 a.m.
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But the undersides of these marketing programs remain a mystery to most people. And several myths are stubborn. Starting with the cost of these programs … for consumers.
PHOTO ALAIN ROBERGE, THE PRESS
Sample loyalty cards
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I recently wrote about the PC Argent bank account, started by Loblaw’s financial subsidiary (Maxi, Provigo, Pharmaprix). Cardholders receive PC Optimum points every time they use their debit card1.
Readers have asked me how much these ever-increasing loyalty programs are costing us. They assume that awarding points redeemable for rewards drives up retail prices, since nothing is free in life.
The reasoning makes sense.
But it is wrong.
“It’s a myth,” swears Hans Laroche, partner at R3 Marketing, a firm of loyalty experts. For almost an hour, he revealed to me the secrets behind all these cards that fill our wallets. The one who also teaches marketing to students of the 2e cycle at the University of Sherbrooke and at ESG UQAM is categorical: companies do not increase their retail prices to finance a loyalty program.
” I have never seen this. Consumers would notice it and journalists would jump on it! Whether it is gas stations, pharmacies or supermarkets, competition is very strong, prices are known and every variation is noticed, he adds.
PHOTO ALAIN ROBERGE, THE PRESS
Hans Laroche, partner at R3 Marketing, a firm of experts in loyalty programs
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Instead, retailers shift a large portion of their budget from “acquisition marketing” to “relationship marketing”.
Concretely, this means that the sums traditionally allocated to recruiting new customers will rather be used to convince current customers to spend more (by offering them rewards on their loyalty card).
Acquisition marketing is expensive. Not only do we have to produce and distribute advertising, but often we also associate a tempting discount that cuts the profit margin. This is all money that can be used to reward customers for being loyal with points.
Moreover, the rewards alone cause 80% of the expenses of a program, specifies Hans Laroche.
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Since the launch in 2015 of the SAQ Inspire card, I have lost count of the times I have been asked why a monopoly is investing in a tool to retain consumers … who are already captive.
In fact, says Hans Laroche, the SAQ sells 60% of alcohol in Quebec. Convenience stores and supermarkets sell the rest. The crown corporation must work together to maintain its market share. It must also offer good service to remain relevant.
The expert recalls that before launching its Inspire program, the SAQ held a few events per year where it offered 15 or 20% discounts to everyone. This reduced his profit margin and caused bottlenecks and frustrating shortages at branches.
PHOTO ALAIN ROBERGE, THE PRESS
The discounts offered only to holders of the SAQ Inspire card must cause frustration, writes our columnist.
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Today, the SAQ sends a weekly personalized email to each of its 2.1 million members according to their tastes. And no two are alike!
These mailings led to the discontinuation of production of the flyer which was distributed province-wide. And a significant reduction in the advertising budget. Targeted marketing has thus enabled the SAQ, for the past five years, to save tens of millions of dollars, specifies its spokesperson Yann Langlais-Plante.
This strategy is not convenient for non-members who like bargains, I agree. The discounts offered only to cardholders, at some retailers, must also cause frustration.
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But in reality, there is no real reason to shun loyalty cards. They cost nothing and end up paying off. Obviously, if the urge to earn points or other perks causes you to overconsume, it is better to avoid them.
Some people fear their data will be stolen. It is a real risk … that we also run by having a bank account, however. Others don’t like the idea of retailers spying on their buying habits. I see more of an advantage: that of only receiving relevant offers.
Moreover, in 2021, the algorithms must be efficient. Do you still have patience with retailers who can’t identify your preferences? Not me. And then, let’s face it, it’s nice to get a free item, a discount, or a privilege once in a while. These little luxuries acquired with points are sweet, I think.
I am not the only one ! Metro realized that the week after sending checks to metro & moi members, the sale of more high-end products jumped, reports Hans Laroche. “People are spoiling themselves! ”
It’s psychological, but I feel like I get more for my points if I use them to get myself a filet mignon rather than a pack of toilet paper. Even though both are the same price. Purely psychological.
Read “Banking Services – Chicken instead of Interest”
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