Inflation | Consumers are turning to loyalty programs

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

Posted at 12:00 p.m

Brett Bundale
The Canadian Press

But when the pandemic forced her to limit her visits to the grocery store to focus on one big order every two weeks, she began focusing on a rewards program and using it faithfully.

Now she’s accumulating 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,” noted the 34-year-old Ottawa resident and head of day-to-day banking at Ratehub.ca.

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

As inflation in Canada soars to the highest 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 rises.

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

“It’s really a no-brainer for the consumer,” noted Derrick Fung, CEO of Drop, a mobile rewards platform designed to help shoppers monetize their purchases at various retailers.

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

Very popular programs

Loyalty programs allow shoppers to earn points that can be redeemed for free groceries, cashback, or access to promotions, special offers, 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 becoming increasingly competitive, offering Canadian consumers more choices.

Last month food giant Empire became co-owner of the Scene Plus programme, which is run by Scotiabank and cinema chain Cineplex.

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

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

The Air Miles program can also be used to earn points at various grocery stores, gas stations, and other businesses. Points can be redeemed for travel, cashback, 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 at the retailer more often or to spend more on each visit,” he continued.

Some programs are not exclusive

As opposed to store-specific loyalty programs, some shoppers may benefit more from generic programs that can be used by different retailers, said Ms.me Macmillan.

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

“We don’t have the exclusivity of a dealer,” he explained. We have multiple grocery stores, multiple airlines […] In each category we let the consumer choose what they want. »

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

Additionally, customers need to guard against “reward inflation,” says Ms.me Macmillan.

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

“It is recommended that cardholders earn and redeem their points immediately,” Ms. saidme Macmillan. For people who are more inclined to save up points for a flight or a big grocery store, it may be better to focus on smaller redemptions (as points are accumulated) over time. »

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