Business

inflation | Consumers are turning to loyalty programs

Natasha Macmillan had a stack of loyalty program cards in her wallet before COVID-19.

Posted July 26

Brett Bundale
The Canadian Press

But when the pandemic forced her to cut back on her grocery store visits to focus on one big order every two weeks, she began to focus on one rewards program and used it faithfully.

Now she earns enough points to cover an entire grocery store for her family of four every few months.

“We were spending so much on groceries anyway that we wanted to maximize our points,” observed the 34-year-old Ottawa resident and director of day-to-day banking for Ratehub.ca.

“So we limited ourselves to one store and accumulated points very quickly. »

As inflation in Canada rises to its fastest annual rate in nearly 40 years, consumers are looking for ways to save money on essential goods and services.

Research shows that Canadians are increasingly relying on loyalty programs as the cost of everything from gas to groceries increases.

According to the results of a Drop survey conducted by Dig Insights, 62% of respondents say they redeem loyalty points to help manage their spending.

“To the consumer, it’s really a no-brainer,” observed Derrick Fung, CEO of Drop, a mobile rewards platform designed to help shoppers earn money on their purchases at various retailers.

“We are going through difficult economic times. […] so the possibility of earning points is really attractive. »

Very popular programs

Loyalty programs allow shoppers to earn points that can be redeemed for free groceries, cash back, or access to promotions, specials, and coupons.

These programs have proliferated in recent years, with a recent Shopify report noting that over 90% of businesses have some type of rewards program.

As a result, the loyalty program landscape is increasingly competitive and offers Canadian consumers more options to choose from.

Last month, grocery giant Empire became co-owner of the Scene Plus program, operated by Scotiabank and the Cineplex movie theater chain.

The program allows cardholders to earn points when they purchase groceries from supermarkets like IGA, Sobeys, Safeway and Foodland, movie tickets from Cineplex, meals from Recipes Unlimited restaurants, including St-Hubert, Swiss Chalet and Harvey’s, and when carrying out banking transactions with Scotiabank. Points can be redeemed for purchases made from these and other businesses.

Another loyalty program in Canada is the PC Optimum program, which can be used at stores like Provigo, Loblaws, Maxi, Pharmaprix, Shoppers Drug Mart, and Esso gas stations.

The Air Miles program can also be used to collect points at various grocers, gas stations and other businesses. Points can be redeemed for travel, cash back, electronics, entertainment and other items.

For retailers, a loyalty program can help attract and retain customers while increasing a customer’s so-called lifetime value, Fung explained.

“These programs can encourage consumers to shop more frequently at the retailer or spend more on each visit,” he continued.

Some programs are non-exclusive

Unlike store-specific loyalty programs, some shoppers might benefit more from generic programs that can be used by various retailers, Ms.me Macmillan.

Credit cards, for example, often reward users with points for shopping at various stores, as does the Drop program – which Fung calls “agnostic”.

“We do not have the exclusivity of any trader, he explained. We have several grocers, several airlines […] in each category, we allow the consumer to choose what they want. »

While consumers can use loyalty programs to earn points and save money, experts are raising privacy concerns about how loyalty programs use customer information as well as data breaches.

Additionally, customers need to protect themselves from “reward inflation,” Ms.me Macmillan.

Retailers can change the value of their points at any time, she warned, which can reduce the value of points when waiting to redeem them.

“It is recommended that cardholders earn and redeem their points immediately,” said Ms.me Macmillan. For people who are more inclined to save points for a flight or a large grocery store, it might be better to focus on smaller redemptions as they go along (as points are accrued). »

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