When Jeff Fredericks charges a business expense to his credit card, he’s deliberately making a point – or more accurately, he’s earning them.
“I have taken my family to Jamaica two or three times on points,” says Mr. Fredericks, a Toronto communications consultant. He is somewhat more knowledgeable than most about earning travel rewards, in that he used to work for the Air Miles loyalty program.
But Mr. Fredericks is not unlike many small business people, and millions of Canadians, who use travel and loyalty reward programs for both fun and profit.
Canadians are hooked on points. According to Colloquy, a company that tracks global loyalty programs, Canadians held nearly 120 million loyalty program memberships in 2012 – nearly three and a half times the population.
The average Canadian household belongs to eight loyalty programs. While some may be small, providing a free coffee now and then, the big travel programs such as Aeroplan, Air Miles and Avion are immensely popular, and small businesses can take advantage.
Businesses can use travel reward programs in several ways, says Patrick Sojka, founder of rewardscanada.ca, a Calgary-based website that advises about points programs and publishes a subscriber newsletter.
“The easiest way is to issue a company credit card to employees that ties into a points program,” Mr. Sojka says. “The company earns points on corporate spending, which can be used for business travel or as incentives or rewards for employees.”
The downside to this is that employees often want to earn the points for themselves, not the company, Mr. Sojka adds. “It has happened rarely, but I have heard of some people not taking a job because they can’t use their personal cards.”
One way around this is for a company to join a corporate small-business rewards program. For example, the American Express Aeroplan program allows employees to gain personal points while the company receives discounts or rebates at particular hotels and car rental companies.
In addition to tying company purchases to a travel rewards program, businesses can also benefit by linking points to sales. Hardware stores, supermarkets, even the provincially owned Liquor Control Board of Ontario offer air points for loyalty cardholders.
“These programs are not cheap for businesses to join, but for companies with more than one outlet it can be cheaper than setting up your own program,” Mr. Sojka says.
Do travel points really make that much of a difference to employees or consumers? Apparently so – according to Colloquy’s 2013 Loyalty Census, which surveyed consumers across the country, nine out of 10 Canadians use at least one of those loyalty cards in their wallets to collect points.
Doing so is a clear indicator of consumer behaviour, Mr. Sojka contends: “It’s like watching your favourite football team. People get attached, especially when they have redeemed points for rewards. Once they have done that, they find value.”
Mr. Fredericks agrees. In his experience with the industry, point issuers often come across people known as “optimizers,” individuals who will go out of their way to make purchases to optimize their loyalty rewards.
“They would find the crazy bonus deals. They keep very much on top of their account, they know when their points expire and they pay close attention to special offers. Some people will buy a whole skip-load of SOS pads [if there’s a bonus offer] just to get the points,” Mr. Fredericks says.
While there are clear opportunities for small businesses to acquire discounts and attract customers through points, the marketplace is changing, Colloquy’s Loyalty Census warns.
“Now more than ever, Canadian consumers are challenging businesses to give them reasons to stay engaged in their loyalty program as new programs continue to launch each year,” the survey says.
“Consumers are increasingly consolidating and becoming more selective about their participation in loyalty programs. Over all, Canadian loyalty membership growth remained flat in 2012. … Competition for share of wallet and attention span of consumers is heating up.”
Indeed, the Canadian loyalty rewards scene has heated up this very season, as TD Canada Trust prepares to succeed Canadian Imperial Bank of Commerce on Jan. 1 as the primary credit card issuer of Aeroplan points, upsetting some consumers. While a recently negotiated transition deal allows cardholders from both banks to keep and use their Aeroplan points, the competition for retaining and attracting new customers is getting keener.
Even so, consumers are still devoted to points programs.
When people get on the plane for a free flight and it heads down the runway, “there’s a moment of truth,” Mr. Fredericks says. “People say, ‘This is real.’ It gets you right back into wanting to earn more points.”
Sell more pizza
For businesses, another benefit of connecting with big loyalty programs is that they compile detailed data about the Canadians who collect and use points.
“It’s marketing power. They can tell you where your customers live, their income levels and their shopping habits,” says Mr. Sojka.
It’s also data-gathering power, and it seems to be growing. Studies by Aimia Inc., a company that analyzes the global loyalty program industry, suggest that among the marketer-coveted millennial generation – Canadians between 19 and 29 – more than three-quarters are likely to choose a brand or a product that offers some kind of affinity or loyalty reward. And two-thirds of all Canadian consumers are willing to tell others about products in exchange for points or other bonuses.
This kind of information sharing can also give companies insights into where their products might need an extra push. “If you’re a pizza company and you find out you’re not selling well in Saskatchewan, you can offer a double points bonus for two weeks just in that province to draw people in,” Mr. Sojka says.