Canadian Coalition Loyalty Programs

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Loyalty Landscape in Canada

Loyalty programs are incredibly popular in Canada, with more than 90% of Canadians enrolled in at least one program. This rate is far higher than in most other developed countries. Most consumers report belonging to multiple loyalty programs, with some major programs including Air Miles, Shoppers Drug Mart Optimum, and Loblaw’s PC Plus. While penetration is quite high in Canada, satisfaction is low, with less than half of members highly satisfied with their program. Financial information provided on these programs below are in Canadian dollars, unless otherwise noted.

Program Structure

Single retailer loyalty programs offer consumer rewards for shopping with one brand. The second largest loyalty program in Canada, Optimum by Shoppers Drug Mart, is an example of a single retailer loyalty program. Two-thirds of Canadian households currently participate in the program. The program is free to enter and offers rewards at a rate 15 points for every $1 spent at a Shoppers Drug Mart-owned location. There was previously an option to receive a MasterCard associated with the program, which accrued points at a slower rate when used for other purchases. This program has subsequently been discontinued. Points can be redeemed for discounts in-store or donated to charities through an online portal.

Unlike single retailer programs, coalition loyalty programs offer incentives for customers to shop at multiple businesses. Consumers then earn points that are redeemable for a common currency (such as air miles). The single largest loyalty program in Canada is Air Miles, which boasts 11 million consumers. This program is a prime example of how a coalition program operates. When customers spend money with any of 220 partner businesses (called sponsors), they earn miles on their accounts. These miles can then be redeemed for cash rewards (either in-store with a partner business or online) or specific purchases like flights, merchandise, or concerts. Customers earn miles at an approximate rate of 1 mile for every $20 spent, but this can vary, depending on the policy of individual retailers within the program. Air Miles' parent company, Alliance Data, reported that in 2016, the program brought in US$7.1 billion in revenue. This is significant when compared to Aeroplan, a Canadian company that runs a coalition program similar to Air Miles, who reported revenue of $2.2 billion in 2016.

Coalition loyalty programs offer a major advantage to retailers as well: they can see consumer data across a range of industries. This data allows them to better understand their customers' buying habits and demographics, which gives them the ability to better tailor promotions and products to their customers.

Incentives Offered

The biggest advantage coalition plans offer consumers is flexibility. This flexibility comes in terms of where consumers can shop — coalitions often include over 100 partners — and in terms of what they can do with their rewards. Although programs like Air Miles and Aeroplan are obviously building on the success of airline reward programs, they offer a variety of rewards, including cash, electronics, gift cards, event tickets, and even vacation packages, in addition to miles.

In turn, this flexibility offers consumers ease of use. Instead of having to balance a dozen different loyalty programs, a coalition program only requires consumers to remember one set of information. This leads to higher rates of use across the board. Retailers then see increased purchases while consumers see rewards accrue faster. Increased engagement, higher brand value, and stronger brand-specific loyalty have also been seen in coalition programs.

Canadian Attitudes

Although Canada has some of the highest loyalty program membership rates in the world, experience with them is decidedly mixed. On the positive side, over 90% of Canadian consumers report belonging to a loyalty program, and many belong to three or more programs. For Air Miles specifically, 81% of Canadian households have at least one member who participates in the program, for a total of 11 million active members. In addition, growth in the coalition loyalty membership has surpassed other loyalty programs in recent years. Between 2014 and 2016, loyalty memberships of all types grew by 35% in Canada. Coalition loyalty programs grew twice as fast, increasing by 78% to 27.2 million members.

While they only account for 16% of the loyalty program marketplace as measured by membership, this rapid growth suggests that Canadians are interested in the value these programs add. The percentage of people who modify their buying habits to increase their rewards points has also increased, up to 68% of consumers in 2016.

In contrast, Canadians also display consistently negative attitudes towards their loyalty programs. Only 16% of female and 8% of male consumers reported that their loyalty programs "are meeting their needs." Another study from Bond Brand Loyalty indicated that only 16% of consumers were "very satisfied" with their coalition loyalty program, compared to 42% for credit card reward programs. This low-level of satisfaction is largely due to unhappiness with customer service and customization options. The rate at which consumers redeem rewards had less of an impact on satisfaction for coalition programs than other programs, but redemption still plays a significant role in consumer satisfaction.


In summary, approximately 90% of Canadians are enrolled in at least one loyalty program, making these programs more popular in Canada than in most developed countries. Popular programs include Air Miles, Shoppers Drug Mart Optimum, and Loblaw's PC Plus, with Air Miles being the largest single loyalty program in Canada. Coalition programs are increasing in popularity in Canada, despite overall dissatisfaction with these programs.
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Loyalty Global Trends

Coalition loyalty programs are an excellent way for businesses to pool their resources, provide customers with benefits across a range of stores and share data about consumer purchasing. They are increasing their global reach, with about 2 billion people in 2015 a member of at least one program (28.4% of the world’s adult population), and still showing strong growth today.

Global trends and best practices in coalition loyalty programs worldwide include the use of mobile wallets, perceived special treatment of individual customers, social media and data integration, changing and adapting to customer behavior, providing a wide range of benefits, and leveraging data for better analytics. These key trends and best practices are outlined in further detail below.

1. Mobile Wallets

Coalition loyalty programs are having good success by tapping into the growing trend of mobile wallets. Integrating the loyalty systems with mobile wallets allows customers to easily use their loyalty rewards across the different businesses involved in the loyalty program. Mobile also creates an additional ability to target offers and rewards to customers using geo-targeting and beacon technology. This enables a new marketing channel that is visible to consumers wherever they are across the loyalty program network.
There is also the possibility of combining different coalition rewards programs using the mobile wallet to increase sales and further incentivize purchase behavior.

2. Perceived Special Treatment

This European study shows that service failures within a coalition loyalty program can have negative effects on both the business responsible, and the program as a whole. This negative effect can be lessened however, if the perceived benefits of the program are high enough. Importantly, the perceived special treatment the program gives a customer is paramount to reducing any ill effects of a service failure within the program.
Therefore, new and existing coalition loyalty programs would be well served to ensure that special treatment and making the customer feel like an individual the program cares about are at the forefront of their marketing message.

3. Integrating social media

Most coalition loyalty programs have an online portal where members can track their points/activity across the various brands within the program. This provides an excellent platform for social media integration, incentivizing things like sharing posts, liking and commenting, providing product reviews etc to both broaden the reach of the program and increase the interaction with the brands.
This can be further enhanced by expanding beyond the basic points for purchasing system towards a points for engagement program.

4. Changing Customer Behavior

This academic paper investigated data from >5000 randomly selected members of a large coalition loyalty program (3 million total members) to elucidate different strategies that may strengthen (or decrease) purchase behavior. They found that promoting different product categories, and how aggressively they are promoted can have varying impacts on customer purchasing. For example, encouraging accelerated accrual of points through more purchasing was shown to have a negative effect, especially when the customer may have enough points to purchase a reward. However, promoting rewards like flights can increase purchase behavior if the customer has stable or low purchase rates.
Therefore, programs must be careful and targeted with their marketing of rewards and products and not push blanket marketing strategies to all customers.

5. Provide a Wide Range of Benefits

Customers are individuals, and therefore must be treated as such. Different customers will have different ideas about the value of rewards. Provision of a wide variety of rewards across many different businesses will give the customers more choice and let them feel they are getting their money's worth, while increasing their loyalty to both the brand and the loyalty program. For example, Nectar is one of the biggest and most successful coalition loyalty programs in the United Kingdom with over 500 rewards partners.

6. Leveraging Data for Better Analytics

A coalition loyalty program provides businesses with a large amount of data, so it's important for member businesses to leverage this to investigate whether the program is having a positive or negative effect, and whether there are specific demographics or types of customer that engage more with the program. Key measures include Customer Retention Rate, Negative Churn, Net Promoter Score, and Customer Effort Score.


In summary, the use of mobile wallets, perceived special treatment of individual customers, social media integration, changing and adapting to customer behavior, providing a wide range of benefits, and leveraging data for better analytics are important trends and best practices related to coalition loyalty programs. Effective implementation of these programs helps businesses help each other, and progress customers along the "customer journey", from visitor, to purchaser, repeat purchaser and finally brand advocate.