Is the Canadian retail loyalty program dead?

Canadian loyalty programs aren’t quite ready to be buried yet, they just need to be reimagined to fulfill their potential with customers // By Shelby Hautala

In the competitive landscape of retail, loyalty programs serve as essential tools for brands seeking to develop lasting relationships with consumers. As the retail environment continues to evolve, understanding the current state of loyalty programs in Canada has never been more crucial – but are retailers using them properly? Joanna Walker, Founder and CEO of Loyalty & Co, and Larry Leung, customer experience leader, discuss the current challenges facing programs, answering the question: are loyalty programs dead?

Remove barriers that make loyalty feel chore-like

Consumers are increasingly overwhelmed by complex loyalty programs and are in need of simple and personalized programs:

“Consumers want simplification, they want things to be easier,” says Leung.

He argues that personalization is critical. It’s not just about making a program simpler, but also about making it significantly more tailored to individual preferences, helping to create meaningful connections with customers.

“The goal is to present the right offers to the right customer at the right time,” says Leung. “Consumers today are looking for loyalty programs that don’t just bombard them with options, but instead focus on delivering what is actually useful and relevant to their needs. The challenge for retailers is to design programs that are easy to understand and use, while being sophisticated enough to offer personalized experiences. It is about removing barriers that make loyalty programs feel like a chore, making them a seamless part of everyday shopping.”

Leung emphasizes that personalized loyalty programs are not just about using the consumer’s email, but about understanding their shopping behaviours, preferences and spending habits:

“This approach not only enhances the customer experience, but also significantly boosts the effectiveness of the loyalty program,” says Leung.

Going beyond the first impression

Walker says some loyalty programs offer sign-up discounts, which are beneficial if retailers plan to continue them, but can be annoying to consumers if ghosted. Walker says it is necessary for loyalty programs to extend value beyond initial discounts.

“Consumers all probably have a personal example of when they were like ‘oh my god, this is great – fantastic’ and then the retailer takes back the rewards and it is not a great customer experience,” suggests Walker.

Looking for relevance

Walker emphasizes that today’s consumers are not just looking for rewards; they are looking for recognition and relevance in the offers they receive from retailers. This includes connecting loyalty rewards with the consumer’s personal shopping habits and lifestyle.

“Consumers today are looking for more than just collecting points; they want offers that resonate with their specific needs and lifestyle choices,” she says. “They want to feel that the brands they are loyal to truly understand them. So, when we talk about personalization, it is about more than just addressing them by name in emails. It is about crafting offers that hit the mark by aligning with their shopping behaviours and personal preferences. For instance, if someone is frequently buying organic products, personalizing their rewards with offers on new organic items or providing them with exclusive early access to a sale on eco-friendly products can make all the difference.”

Reward programs must focus on value and personalization, and be timely and easy to use. One challenge Walker has noticed is retailers devaluing programs.

Finding a balance in loyalty offerings

Leung says the value attached to the program drives the success:

“If it is only good for the business, but is of no value to consumers – you don’t have a good program,” he asserts. “Conversely, if it is only good for the consumer, but not the business, then the business doesn’t make any money. This equilibrium is crucial for the sustainability of loyalty programs.”

To maintain balance, Leung suggests that knowing your consumer by receiving proper data is critical.

“It is all about deepening your understanding of who your best customers are, what their behaviours are, making sure that you are serving up the right offers and delivering value to those best customers,” he says.

However, while creating offers, Leung warns against launching overly generous programs that might need scaling back as this can derail trust and engagement with consumers.

Although programs might have been created to attract consumers to sign-up; if those benefits and offers start to decrease, it can lead to consumers feeling underappreciated, causing longterm damage to their relationship with the brand.

“Retailers would never want to go back to market with a weak value proposition, but it is better to start with more of a conservative offer and build on that, than to take offers away,” says Leung. “If you launch with a very rich program and then have to pull it back, it damages trust. Consumers feel the loss deeply, which can sour the relationship.”

Keeping up with AI and consumer expectations

Like everything, Leung says the evolution of loyalty programs will be shaped by AI and data analytics. Leung believes these technologies will enable retailers to develop a deeper and more effective level of personalization.

“Loyalty programs offered by retailers in Canada must innovate to stay relevant,” he suggests. “The future of loyalty is bright, but it hinges on harnessing technologies that can truly understand and predict consumer behaviour. Brands also need to keep investing to ensure they evolve with consumer expectations and technological advancements. It is not just about maintaining a program; it is about continuously enhancing it to deliver genuine value.”

Going forward, Leung predicts a shift towards more integrated loyalty systems, where data from various sources are connected to provide a comprehensive view of the consumer.

“The integration of different data streams will allow for a more holistic approach to loyalty, where offers and rewards are precisely tailored, not just based on past purchases, but on a complete lifestyle understanding,” he says.

Walker’s future insights on loyalty programs

Walker highlights the need for retailers to continuously enhance loyalty programs, especially through the inroduction of new technologies that enhance service and offering:

“Incorporating new technologies enhances our ability to meet consumer needs and elevates the overall shopping experience,” she says.

Walker stresses that for retailers to continue improving their loyalty offering and ensure their long-term relevance, they need to keep up with the latest technologies.

In addition, she underlines the importance of redemption events as a means by which to not only bring consumers in, but to keep them. Redemption events not only benefit the consumer, but also the retailer.

“It is all about driving value,” she says. “The reason retailers do redemption events is because they are trying to burn points off their books as there are so many unused points out there. In addition to that, they will also get the uplift: if they give me $100 for 80,000 points, I am going to go in and I am actually going to spend $200. So, it is a good deal for them.”

If retailers hold more redemption events, Walker says this will also balance out providing points and discounts. As a result, consumers will feel more appreciated by the brand and will hopefully remain loyal.

Overall, Walker says retailers must focus on balancing loyalty reward programs so it benefits both the company and consumers. Not only should retailers be focusing on bringing balance and looking at what the consumer wants, they should also be keeping up with customer service.

“The level of customer service is diminishing, and there is no loyalty program that can help a retailer solve that,” she says. “And so, it is really important, from an operations perspective, that you are treating the customer well. People are in your retail location, and you are engaging with them, so make sure employees are trained well and then allow the program to do what you need it to do: deliver the right offers and make sure they are delivering value. If you have a really bad customer experience, but a great loyalty program – you are still going to have challenges from a retail perspective.”

Loyalty programs aren’t dead; they are evolving

Although Leung says most programs are not dead, he does acknowledge traditional systems are no longer efficient today. And, if a loyalty program is failing, Leung says it is a call for action for innovation rather than a sign of decreasing popularity.

“The entire industry is in critical need of rethinking how retailers and brands define loyalty, requiring an approach that moves well beyond points and discounts to create genuine connections and enriched experiences for consumers,” he says.

Leung’s insights show loyalty programs are not dead – yet. However, their survival depends on how well retailers adapt to new consumer expectations and technological advancements, moving from traditional reward systems to a more dynamic, personalized model.

Leung acknowledges that while some loyalty programs are struggling, the concept of loyalty programs itself is far from extinct.

“Brands must seize the opportunity to transform their loyalty strategies,” he says. “The future of the programs they offer them is not just what we offer, but on how we understand and engage with our consumers. Incorporating technology, like AI, to anticipate customer needs and crafting more personalized experiences is not just beneficial – it is imperative for survival in the competitive retail landscape.”

Both Walker and Leung emphasize the necessity of evolving loyalty programs to meet consumer demands. While Leung discusses the role of emerging technologies, Walker stresses the importance of integrating these technologies to provide exceptional customer service to create loyalty programs that are not only advanced, but also customer-centric.