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Loyalty program matchmaker

As a personal finance journalist who also covers travel, editors and readers routinely ask me, "What is the best rewards program in Canada?" It's one of the toughest questions to answer because it really depends on the priorities of the consumer. But, finally, there's a tool designed to help consumers determine what loyalty program best suits their needs.

With the new website, www.compareloyaltyprograms.ca, all consumers have to do is answer questions -- such as, what retail categories they shop in most, whether sign-up bonuses are important to them and whether they would sign up for a loyalty-branded credit card -- and the site recommends programs that will best help them achieve their rewards goals.

Reframing the discussion
The site looks at which rewards cards are best suited to certain types of Canadians, but it does it in a way that's truly unique.

"The real innovation with this program is it changes the lens. It really reframes the discussion about loyalty programs from dividend rewards, which is, What are you getting paid back for a dollar spent? into, How quickly do those rewards build into something actually useable?" says David MacDonald, group vice-president of Environics Research Group, which developed the site's algorithm.

After consumers input the types of things they shop for and the types of rewards they prefer, the site will turn up three rewards programs, which are ranked according to what will get the consumers to a useable reward the fastest.

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"If you're able to raise a program that allows you to maximize the number of spending occasions, you're going to get to your rewards much more quickly," says MacDonald. "In contrast, what a lot of Canadians are doing, is spreading their loyalty spending over several different programs, so they're making incremental steps on each of them periodically, but collectively not really getting anywhere."

How it works
Together with the marketing department at Queen's University, Environics Research Group looked at 22 top rewards programs (according to instances of usage by Canadians) and within that 61 different program variations.

They then took a composite of average spending patterns from Statistics Canada and asked if the average consumer shopped in each of these areas what would the rewards be?

They factored in sign-up bonuses, along with ratios of higher reward to lower reward, and created an econometric model that would allow each program to be assigned a time to reward value: The average number of months it would take the average consumer to achieve $100 worth of value.

Lessons learned
For Canadian consumers who visit the site, MacDonald hopes that the experience will lead to smarter spending habits.

"Ultimately, what we're trying to do is just make Canadians aware that there is a different way of thinking when it comes to reward programs and they should take time to educate themselves as to not just what these reward programs are offering them, but how their spending patterns can influence what they're actually going to get."

Aaron Broverman is a freelance writer in Toronto

-- Posted August 12, 2013
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