Neil Everett is the senior vice-president and chief marketing officer of the Air Miles Reward Program, the country's largest rewards program with 10 million active collector accounts. This year the company will give away about $500-million in rewards.
He speaks with The Globe and Mail's Noreen Rasbach about how small businesses can leverage programs when they're buying goods and services – and increase loyalty with their own customer base.
To begin, let's get an idea of how popular loyalty and points programs are. What does the market research show?
Canada is actually one of the highest-penetrated markets in the world for loyalty programs, with the average Canadian active in 9.2 programs, almost 50 per cent higher than the average U.S. household at 6.2 programs.
Some of those programs could be points-based, some could be immediate discounts, like coffee-card programs. You'd be surprised when you pull out your wallet and start going through it, how many cards have accumulated.
What about small businesses? Do they use the programs?
I can't recall the exact number, but we have several hundred thousand small businesses that use our program. They vary from a single person working out of their home, to larger businesses.
What do they get out of them?
For people who have a home business, usually they use the rewards program as a personal benefit for themselves or their families. They'll just put their business expenses through a program to ensure that they get enough points to basically pay for their free vacation each year.
For other small businesses – well, I'll give you an example. A small business that may be running credit card expenditures of $15,000 a month, that translates in our program to 1,000 miles a month, 12,000 miles a year – that's the equivalent of 16 flights between Toronto and New York, every year.
In some cases, businesses will use programs to alleviate expenditures. So, for example, if I am pitching new business, or trying to grow my business, if it's on my penny, paying for those flights using points is a great way of allowing me to pursue this business without eating into my pocket.
Once a year we invite a bunch of our high-value collectors, which typically are small business collectors, to a Leafs or Raptors game. One gentleman I was talking to runs a computer business, and he runs $5-million worth of business expenses through his credit card a year, so he gets a ton of value back. In some cases, he also donates things.
Do a lot of people use points for charity giving?
Yes. They get a tax receipt for doing so.
What if a small business wants to join or set up its own loyalty program? How do they choose one?
First and foremost, will the program you want reflect the needs and interests of the consumers you are trying to attract? It depends on what the business's objectives are, who their customer base is, who they typically try and attract.
Secondly you have to look at the economics of your business and decide: How much can I afford to give away as a reward? Can I offer one per cent of my sales, or five per cent of my sales? If you go to a coffee-card type program where you buy 10 and get one free, that's a 10-per-cent cost. That's a very expensive program.
The third element is attainability: How quickly do I want people to achieve a reward to keep their interest level?
Is it possible for a small business to be one of your members as a company?
We use a third party. The company is called RMG Loyalty, who basically work with small businesses across Canada and will sell Air Miles to them on a promotional basis so they don't have to sign up as a full-time sponsor. If they just want to do one event a year, they can buy Air Miles from us, and give them away as gifts or incentives or tie them into a promotion for their business, any way they want to use it.
Just as a matter of interest, how many Air Miles points do you have?
I earn about 40,000 miles a year. Mostly through travelling, though my wife is a big shopper.
This interview has been edited and condensed