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Loyalty programs in Canada: why are they points based and not discount based?

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  • Jun 17th, 2016 1:21 pm
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[OP]
Member
Aug 9, 2014
468 posts
106 upvotes
Toronto, ON

Loyalty programs in Canada: why are they points based and not discount based?

I'm not sure if this is the correct forum; however as the title states, why are the majority of retailer based loyalty programs a points system and not a discount? For example, in the US, Walgreens offers a reduced price on promotional products if you have their card.
10 replies
Penalty Box
Apr 16, 2012
3565 posts
687 upvotes
Greely
Probably because they can make it look like a bigger number is better?

Harder for consumers to calculate the value of the program if you use points.

e.g. Earn 25,000 Shoppers points when you simply spend $75 in stores
Jr. Member
Sep 1, 2015
150 posts
67 upvotes
Niagara Falls, ON
just like most PC parts likes to offer mail in rebate vs directly discount.
It give people feels of discount, and most people forget to send mail in form/spend gift card after purchase
Deal Addict
Apr 12, 2005
1425 posts
180 upvotes
here2day wrote: I'm not sure if this is the correct forum; however as the title states, why are the majority of retailer based loyalty programs a points system and not a discount? For example, in the US, Walgreens offers a reduced price on promotional products if you have their card.
if the merchant just gives you discount, you might not shop the same merchant in the future. if they give you points and the points are so small, it will take a lot of spending to get something meaningful, then you will keep going back to shop in order to get more points. it is like free cocaine to start, then once you are an addict, then you have to buy more. haha.
Deal Addict
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Apr 10, 2010
1390 posts
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a_1_a wrote: if the merchant just gives you discount, you might not shop the same merchant in the future. if they give you points and the points are so small, it will take a lot of spending to get something meaningful, then you will keep going back to shop in order to get more points. it is like free cocaine to start, then once you are an addict, then you have to buy more. haha.
This.

Plus that a discount is an immediate reduction in revenue, but points is a liability deferred to the future and could potentially be written off over time as LOTS OF PEOPLE don't redeem them or don't redeem the optimum value out of them. Plus that points still acts as the hook that invites people to come back and gives them the perception that they have earned something that they don't want to lose.

It makes every financial, psychological, and business sense, than a discount.
Deal Addict
Nov 25, 2014
1739 posts
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Newton Brook, ON
What loyalty programs in the US are discount-only and no points?
Deal Fanatic
Nov 15, 2008
9527 posts
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513263337 wrote: This.

Plus that a discount is an immediate reduction in revenue, but points is a liability deferred to the future and could potentially be written off over time as LOTS OF PEOPLE don't redeem them or don't redeem the optimum value out of them. Plus that points still acts as the hook that invites people to come back and gives them the perception that they have earned something that they don't want to lose.

It makes every financial, psychological, and business sense, than a discount.
LOTS of people hoard points and despite not redeeming their earned discounts, feel that they have saved and have "money" in the bank. You don't save anything until you use your points, so hoarding points gives people the illusion that they have saved without actually giving them any discount. Total win for the retailer.
Deal Addict
Nov 25, 2014
1739 posts
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Newton Brook, ON
lecale wrote: LOTS of people hoard points and despite not redeeming their earned discounts, feel that they have saved and have "money" in the bank. You don't save anything until you use your points, so hoarding points gives people the illusion that they have saved without actually giving them any discount. Total win for the retailer.
This more or less describes how actual "money in the bank" works too.
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May 11, 2014
4622 posts
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Iqaluit, NU
I think the biggest reason is by making it point based, the retailer at any time can devalue the points (Club Z -> HBC Rewards, Aeroplan, Airmiles), place expiry/ restrictions (Aeroplan, Airmiles etc.) and essentially whittle-down the liability that these points represent. Also, when the customer knows they have to earn a certain amount of points to get a certain reward, they will spend more to get it.

So really, it's so we as a consumer are screwed further.
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