Companies teaming up to attract millennials
Loyalty rewards programs are joining forces in a race to meet consumer expectations
Canadian consumers are on the cusp of cashing in on a “super rewards” bonanza, as many brands start to team up to form new partnerships, potentially transforming the loyalty rewards landscape.
“It’s still early days,” says Derrick Fung, CEO of Drop Loyalty, a Toronto-based startup that launched a new loyalty program that helps users collect reward points from brands across different industries.
“However, you have a lot of companies (in the Canadian marketplace) that are trying to stay relevant and cater to the millennial demographic — and this is the next frontier.”
Canada’s big banks, in particular, are finding new ways to reach innovative, tech-savvy millennials, says Fung. For example, RBC recently teamed up with popular ride-sharing app Uber. The bank is now offering credit-card holders double rewards points, plus a $20 discount on their first Uber ride, when they sign up using their card.
This announcement comes on the heels of RBC’s partnership with Airbnb late last year — when, for a limited time, customers could earn double the RBC Rewards points when they booked an Airbnb stay anywhere in the world, while firsttime Airbnb Canada guests earned 7,000 RBC Rewards points as a welcome bonus.
“This union between a bank and a tech-savvy company is interesting because it allows RBC to be associated with a cool brand,” Fung says. “It’s away that allows (RBC), for example, to reach out to potential new clients.”
It’s an important move for banks to make, especially with research showing that millennials in North America are eschewing credit card products, adds Fung.
According to a study conducted by personal finance website Nerd Wallet, about three in 10 adults between the ages of 18 and 34 in the U.S. have never applied for a credit card.
Whether these agreements will pay long-term dividends for Canadian banks remains uncertain. But for consumers it creates a more diverse marketplace allowing them to try new products, says Avery Campbell, founder of Awarding Canada.
“It’s a wonderful idea because it gives consumers more options for (points) redemption, which is great,” says Campbell. “However, in the grander scheme of things, it will likely create less specific brand loyalty.”
Barry Choi, a Toronto-based personal finance blogger, agrees. Choi says that, equipped with the Internet, and a proliferation of choices, consumers are choosing short-term pragmatism over long-term loyalty.
As brands examine the advantages of these piggyback partnerships, experts agree the growth of the socalled “super rewards” programs underscores a marked shift, not only in how consumers collect points, but how they are redeemed.
For example, the Scene program, offered by Scotiabank, is popular amongst millennials, Choi says, because it allows members to redeem points to do “every day” activities, such as seeing a movie or collecting additional points for Cara chain restaurants, including Swiss Chalet and Milestones.
“Younger consumers are looking for that sense of instant gratification; something that is easy to understand and doesn’t require years and years to save for,” he says.
Moreover, Fung says, catering to younger consumers requires rewards programs to be mobile and accessible whenever, and wherever, a consumer needs them.
“The future is on mobile where programs can consolidate and consumers don’t have to carry around physical cards from multiple companies,” he says.
Fung says he sees a significant opportunity for growth in mobile redemptions, as only about one-quarter of rewards programs, including Aeroplan, allow consumers to redeem points via their mobile phones. That’s a fact he calls “shocking” and “inefficient” resulting in billions of points going to waste each year.
Alyssa Richard, founder of Rate Hub, a company that compares financial products, says she will be paying close attention to see which companies emerge as leaders in the race to redeem rewards points across multiple platforms.
“Canada is still an immature market, so these (super rewards) incentive programs are likely to grow once some of the technological aspects get caught up,” says Richard.
While still in its infancy in Canada, experts agree that consumers only need to look south of the border to see the explosion of combined rewards programs. From Starbucks teaming up with ride-sharing app Lyft, to Uber joining forces with American Airlines, there is a growing proliferation of partnerships, albeit, sometimes, with strange bedfellows.