Loyalty programs are moving from discount programs into more complex alliances, according to Rupert Duchesne, President of Aeroplan Canada. He had some interesting things to say over morning coffee last week at a seminar.
- More and more, typical loyalty programs will create less and less loyalty. Notable exceptions are the programs offered by Sears and Zellers.
- Consumers want portability of their points under programs
- As a result of points 1 and 2, major programs are going to consolidate into competitive alliances which will look more and more like the battles of giants
- Inclusive loyalty programs need to take these major spending categories into account: GAS, PHARMA, BANKS, TRAVEL and GROCERIES
- Wal-Mart doesn't have a loyalty program -- they put this 3% cost into lower prices. So loyalty programs that are really just discount programs may actually be doing damage to the companies that sponsor them, if they compete with Wal-Mart primarily on price
- Starbucks has created unreasonable loyalty (speak for yourself, there Mr. Duchesne, I think it's quite rational, actually)
- Only one in 6 of their 6 million members are regular flyers
- Aeroplan aspires to make their miles as fungible as currency
After his talk, I had a chance to ask him if Air Canada was actually at risk due to their relationship with the now-independent Aeroplan. Mr. Duchesne told me that this risk is actually the reason that they are in a 20 year agreement, and the non-renewal provisions are favorable to Air Canada for that very reason. For example, Aeroplan would have to wait a full year to align with another carrier if they did not renew with Aeroplan.
If he's right, things could get interesting in Kansas, Dorothy. Stay tuned, especially to see which grocer lines up with Aeroplan, and which with AirMiles. And what does this mean for PC Financial? (Maybe they start PC Travel???)