Last week I mentioned some of my favourite ads from Australia, but this week I would like to mention something I’ve noticed during my past year in Canada, loyalty rewards cards. Unlike Australia, it seems in Canada you need a card for every chain. It seems to me that this is really smart policy for several reasons, and it makes me wonder why Australian companies haven’t used it as much.
The points system is great for changing consumer decisions. Usually in Australia, when a store wants to attract customers to the store, or get rid of excess stock, the obvious choice would be discounting a product. Point based rewards systems make this considerably cheaper for the business. I would like to illustrate this through a real life example. I recently saw at Shoppers Drug Mart they offer 200 points if you buy two pieces of particular product (which cost around $5 each). At the Shoppers rate of 8000 points = $10 of Shoppers credit, this 200/8000 points = $0.25, which would be a fairly small discount on $10 of spending, though 200 looks like a big number. It gets even better for Shoppers! Unlike a discount, to ever use that $10, I would need another 7800 points, which at the normal Shoppers rate for earning points of 10points/$1 spent means spending a further $780 if I want to ever see my $0.25, which means I have to be loyal to get that investment, and builds value for Shoppers in me as a customer. If I get 7800 points, a $10 store credit is also far cheaper for Shoppers than a $10 discount because presumably the goods cost Shoppers less than the $10 they retail for. Store credit also means one more trip to Shoppers. I’m likely to spend more than $10, and start racking up my points again. What a fantastic marketing idea, but a raw deal for customers!
