Reward flights are the big attraction from credit cards linked to the Aeroplan and Air Miles customer-loyalty programs, plus the RBC Avion and CIBC Aventura cards. At their best, these cards are an efficient way of converting the spending you do on your card into vacations, but there are some pros and cons to each.The Canadian Press
Andreas Souvaliotis is a retired loyalty industry executive and entrepreneur.
The continuing boardroom turmoil at Aimia, the company that used to run Aeroplan, makes for a sad conclusion to what it once was.
Way, way back, at the turn of this century, the smart and trendy money in our country had become enamoured with a shiny new homegrown industry: consumer loyalty programs. Air Miles, a rival program to Aeroplan, was the original darling. It had exploded into a truly massive “loyalty coalition,” whereby collectors were earning the same points every time they shopped at a grocery store, liquor store, pharmacy, hardware store, gas station or even when they simply used the right credit card. In return, collectors semi-wittingly gave up an enormous trove of data on their daily shopping and spending behaviours.
It didn’t take long for an even more hype-drenched entrant to show up. Air Canada’s frequent-flyer program had long been celebrated as one of the stickiest and most successful in the world. Its was an exceptionally simple promise to investors: A frequent-flyer program contains so much untapped value because it can easily be transformed into an Air Miles-like loyalty coalition for the rich. Air Canada quickly spun off Aeroplan – and the new venture was instantly valued at more than $2-billion.
Both unicorns have since vanished from the market. Air Canada was able to repatriate its bruised but essential frequent-flyer program after buying it for pennies on the dollar through a spectacular showdown – leaving Aimia as an empty shell with virtually no business assets other than cash. And, in a similar move, Bank of Montreal was most recently able to snatch the remnants of the Air Miles program through a bankruptcy sale.
But there’s one thing that never changed through all this drama: Canadians still love their points. Loyalty programs can still profoundly influence consumer behaviour, and drive immense value and data wealth to their sponsor brands. What had happened to Air Miles and Aeroplan was not the fault of the business model but the bad individual decisions the companies made.
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Quarter after quarter, both LoyaltyOne and Aimia (the renamed operators of Air Miles and Aeroplan) were reporting plenty of steady profitability, meteoric promises but very little strategic growth. LoyaltyOne had completely saturated its home market and could only really grow by building on the margins of its core business – attempting, but never succeeding, to create Air Miles replicas outside of Canada or launching strange little loyalty consulting practices. Meanwhile, Aimia was hopelessly and aimlessly trying to morph its frequent-flyer jewel into some sort of broader coalition.
As the years passed, and none of the real growth promises materialized, investors started to become disillusioned and impatient. The ballooning pressure on both companies triggered a stream of knee-jerk responses, some of which eventually turned into fatal blunders.
Aimia’s most damaging misstep came in 2013. In a bizarre attempt to persuade the markets that it was still firmly on the path to building a coalition, it suddenly split Aeroplan’s valuable and loyal members into two entirely separate status streams: frequent flyers and frequent spenders. The weird and widely panned initiative was called “Distinction” and it took a terrifyingly massive budget to launch and promote it across the country. But, as it turned out, no amount of cash spent on TV, newspaper and bus shelter ads could stop the pervasive confusion among the program’s most loyal members or the fatal loss of goodwill.
Within a couple of years, LoyaltyOne had plunged into an even clumsier crisis of its own. In an attempt to boost its profitability, it added expiry dates to all the Air Miles that Canadians were earning or had ever earned – triggering a massive outcry from coast to coast and a panic-driven run on the bank. This was followed within weeks by an even more embarrassing reversal of the policy, as governments began to threaten legislation against the expiry of points. The colossal flip-flop triggered an irreparable meltdown among Air Miles’ loyal membership base, and a gradual but unstoppable exodus of most of the pillar brands in their giant retail coalition.
But perhaps all of this has been a good thing. The loyalty market is still just as robust as it was 20 years ago. All that’s gone is the hype, the shiny stock promises and a few billion dollars from investor portfolios.