Richard Schenker is a leading expert on loyalty marketing and the original architect of Canada’s most popular points program PC Optimum.
“Open, Shop, Scan, Earn” shouts the banner headline on Shopper Drug Mart’s promotional email, listing all of the latest “exclusive” opportunities to rack up points in its famously popular PC Optimum Program.
Click on the “Get My Offers” button and you’re immediately taken to a web page where you can scroll through a list of bonus points offers on a wide range of promoted products. At the very top of the page is a running tally showing the total points accrued over the lifetime of the membership along with the sum of actual dollars saved. For an avid collector those savings can amount to a couple of thousand dollars per year, enough of an incentive to turn point collection into an obsessive habit.
Shopper’s Drug Mart is owned by Canada’s grocery conglomerate Loblaw and is the leading pharmacy retailer in Canada. PC Optimum members can earn points at all of the Loblaw-owned stores as well as at program partner Esso. A savvy program member is able to maximize points by stocking up on select promoted items at Shoppers as well as by taking advantage of “20 times points” events which they can then redeem for big food savings at any of Loblaw’s banner stores. In times of rising food inflation, those savings can make a substantial difference in the grocery budget, giving members a powerful reason to stick with the program and consolidate their grocery shopping.
Loblaw inherited the Optimum program when it bought Shoppers in 2014. The program had been launched 14 years earlier to great fanfare and success. Within six weeks of its launch in January 2000 the program blew past its first-year enrollment target of six million members. In 2018 Loblaw chose to merge its own PC Plus loyalty program with Optimum to form Canada’s largest points program. Since then it has become one of the world’s largest loyalty programs with 17 million members (equalling about 40% of the Canadian population).
The question, of course, is whether the Optimum program – like any points program – should even be thought of as a “loyalty” program. It does very little to instill feelings of true brand loyalty. Mostly it serves as a barrier to exit. A lot of Loblaw customers ridicule the store (especially on Reddit) for its perceived price gouging and accuse it of profiteering at their expense – but at the same time they love the points program because of the money it saves them. As one member who is in the top one per cent of Optimum points earners says, “My biggest incentive is to avoid being ripped off”.
Ever since the airlines first began their frequent flyer programs in the early 1980s, points programs have become pervasive across many different consumer sectors – retail, travel, hospitality, gas stations, quick serve restaurants, food delivery and much more. Today almost all Canadians belong to one or more programs – the average is around 14 – although they may only be active in half of them. Although these programs can be very pricey to operate and can lead to a pretty hefty balance sheet liability due to deferred redemption, they do deliver results. Every shopping metric is boosted through the halo effect of points currency: basket size – share of wallet –cross-category buying – average receipt size – churn – and, most importantly, incremental recurring revenue. In other words, the member base grows more valuable each year due to higher spending without having to give away margin on mass flyer promotions or needing to compete directly on price at the shelf level. The discounts go only to loyal shoppers, not to bargain hunters sniffing out the best deal.
Yet despite the power of points to influence where and how often customers choose to purchase, these programs, for the most part, foster strictly “give-to-get” relationships. The customer has agreed to terms of membership that are entirely based on their spending behaviour. The opportunity these programs are missing, according to loyalty expert Richard Schenker, is to deepen the emotional bond with customers by encouraging ongoing engagement beyond point collection. Members would love to get more than cash savings. What they really pine for is special treatment: entitlements, privileges, status recognition, access to one-of-a-kind events– anything that can turn the tedious chore of shopping into an experience they can actually look forward to. That way the program becomes a more meaningful part of their lives and not simply a “way to avoid being ripped off”.
Richard was the principal architect behind the original Shoppers Drug Mart program. He later went on to serve at Loyalty One, where he worked on the Air Miles coalition program, and most recently was Managing Director at Bond Brand Loyalty. Today he runs his own loyalty consultancy practice.
Richard began his career at the now defunct Hudson’s Bay department store where he looked after the credit card portfolio and launched and managed the company’s “Bay Dollars” loyalty program. I began by asking him how he felt about the recent demise of the Bay which in its heyday was the crown jewel of Canadian retailing.
Richard Schenker (RS):: Very painful to see the demise of the Hudson’s Bay Company. I’m not alone in this matter. But, when you think about the demise of the Hudson’s Bay Company, I think it’s primarily because the organization as a whole really did not innovate. As we know the department store business is not a business that is as attractive as it used to be, when you and I sort of started off in this industry. There have been a number of changes. Certainly, you know, the younger demographic does not shop department stores.
I think HBC, unfortunately, was late to the e-commerce game. And I think, quite frankly, the private equity organization that owned them at the time1 was more interested in the leases and how they could sort of flip those and extract equity out of that. So it sort of had a combination of the wrong level of innovation and intensity against the organization, which I believe led to the demise of the organization. And it’s really sad, you know, if you think about an institution that’s 355 years old and see it just rot away so quickly. It’s a really sad commentary on the state of commerce in this country, and I would say, you know, worldwide, as it pertains to a company of this great heritage.
Stephen Shaw (SS):: Well, certainly you, me, and a lot of other people of our generation grew up with HBC. And I certainly did a lot of shopping at HBC. I would have called myself a loyal customer. And there was an emotional undercurrent to that relationship for sure, which you must have saw at the time when you were working there, right? There was a strong foundational connection to the institution. Not just because it was 355 or 400 years old, but they kind of got the retail experience pretty right at the time, as I recall.