Is a loyalty program war on the way?

Don’t mistake Air Canada’s motivations to retake control of its rewards plan as a sign loyalty programs are failing. Rob Daniel, EVP client leadership at Bond Brand Loyalty, says quite the opposite is true.

Consumers openly admit that rewards plans affect their behaviour, says Daniel at Bond Brand Loyalty, a company that helps brands optimize their loyalty programs. More than three quarters of consumers say they are more likely to do business with brands because of loyalty programs. Two-thirds of consumers say they modify when and where they make purchases to maximize their loyalty rewards. And nearly 60% will alter how much they spend to maximize points.

Air Canada’s move to build its own loyalty program could significantly impact loyalty programs in Canada, particularly coalition reward programs, like Aeroplan and Air Miles. These are programs which are often tied to a particular brand but allow you to collect rewards through other channels. Here’s a look at how Air Canada’s decision will affect loyalty programs and what it means for consumers:

Are consumers suffering from loyalty fatigue?

“Loyalty programs are incredibly effective,” says Daniel. “Our data has shown us that for seven years in a row there are very few marketing endeavors that can create that likelihood that you will continue doing business, willingness to shift where we spend, willingness to advocacy that loyalty programs can provide while coalition program loyalty is very challenged right now, there are many loyalty programs for consumers and brands that want to be successful in this space.”

While loyalty programs overall are successful, coalition reward programs like Aeroplan and Air Miles, are struggling. Is this the beginning of the end for coalition reward programs?

Not right away, says Daniel, but they are certainly in trouble. They need to evolve, he adds. Coalition programs need to focus on creating enjoyable experiences that align the program with the broader brand promises and create easy redemption experiences. “Loyalty programs are very effective in Canada and coalition loyalty programs are increasingly not effective,” says Daniel, noting that have been dissatisfied in these programs for quite some time. “I think they were already thinking about the relevancy of these programs and this just accelerates that.”

How do consumers view these programs?

These programs were already struggling in 2016 when Air Miles enraged consumers with an ill-conceived plan to allow rewards to expire. According to Bond Brand Loyalty, consumer satisfaction ranking for coalition programs was at a low point of 25% in 2016 and that figure continues to erode. The most recent figures suggest only 16% are satisfied with coalition programs.

What will this mean for existing Aeroplan credit card holders with TD and CIBC?

“I think it’s reasonable to think Aeroplan customers are now vulnerable and the Aeroplan value proposition either direct or through some other card is going to be called into question, both by existing members and people thinking about becoming members,” says Daniel.

Should we expect an Air Canada credit card by 2020?

“Nothing is a foregone conclusion, but they certainly would have lot to offer a credit card partner,” says Daniel.

Will this spark a war between loyalty programs?

Expect loyalty programs to become more aggressive at courting customers, although it may not come in the form of richer rewards. “If they are smart they are going to create neat and differentiated experiences for consumers,” says Daniel. And although the new Air Canada rewards programs is still years off, consumers won’t have to wait long before loyalty programs try to do more to keep their members and attract new ones. Consumer build towards long-term goals when they sign on to these programs and some are going to start rethinking their affiliation with certain loyalty programs.

What should consumers do?

As enticing as it is to chase after programs that offer the most points or richest rewards, that might not be the most beneficial way to pursue a loyalty program. Consumers aren’t going to be very engaged if the program is tied to a brand that they’re not particularly interested in or if the redemption experience is painful.

Rather than chasing the currency, Daniel says consumers should be focus on the ones that connect them to brands that they truly like and have respected them and are treating them in a way they want to be treated.

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