Canada: Loyalty faces a PR crisis 
The loyalty industry in Canada is undergoing sever turbulance as pressure from consumers, the media, and even the Ontario government bumps up against the need for loyalty program providers to institute reasonable expiry policies on the points and miles they issue to consumers. Unfortunately, missteps in communication and public relations management have resulted in an antagonistic press and bruised member relationships. How can Canadian program providers weather this storm? By Rick Ferguson[Editor's note: One day after the publication of this column, Air Miles announced that it was ending its controversial miles expiry policy. Click here for the story.] At the crux of the issue: Are loyalty points simply deferred promotional discounts subject to explicit terms and conditions, or do they represent an implicit if not binding contract with program members? The public disagreement over the redemption commitment inherent in loyalty points has trained a harsh spotlight on the biggest loyalty programs in Canada. The catalyst for the disagreement is the deadline looming as Air Miles older than five years begin expiring at the end of this year - a decision made by Air Miles in late 2011 that has caused the venerable loyalty program no end of negative PR as the deadline nears. Just this week, Toronto Star political columnist Martin Regg Cohn accused coalition loyalty program Air Miles of betraying the public trust:
"In a perfect market economy, you could take your marbles elsewhere by patronizing a competing loyalty program - if you had perfect foresight or could travel back in time. But if you've been a loyal Air Miles member for years, stashing points in hopes of cashing in later, how do you retroactively retrieve your investment in a scheme that dilutes or disputes its promise of future redemptions? ... You are stuck with LoyaltyOne, with their unilaterally imposed terms and conditions and revisions after the fact... You can't easily take your business elsewhere."
Cohn supports the plaintiffs of a September class-action lawsuit filed against Air Miles parent company LoyaltyOne with the Court of Queen's Bench alleging that the company made "unfair and unilateral" changes to Air Miles terms and conditions. As if that wasn't enough pressure on the company, LoyaltyOne executives this week stood before the standing committee on regulations and private bills at Queen's Park to argue against Bill 47, which seeks to amend Ontario's Consumer Protection Act to prevent the expiry of loyalty points - a bill put forward by MPP Arthur Potts specifically to address the Air Miles expiry policy. Money quote from LoyaltyOne CEO Bryan Pearson, who argues that the bill will hamper the profitibality of loyalty programs in Canada:
[The bill] It creates uncertainty ... because at any point the rules can change. If there’s one thing companies need to create value, it's a level of consistency and a clear understanding of what the playing field will be for industry."
According to the Globe and Mail, Pearson even suggested that, should the bill pass, companies might choose to forgo offering loyalty programs in Ontario altogether. As unlikely as such a move is - ending Air Miles in Canada's largest province by population would effectively end Air Miles altogether - Pearson isn't alone in denouncing the bill. Aimia president Vince Timpano also spoke against the bill before the commitee, arguing that, "Our policy is fundamental to the health of our business. It requires members to stay engaged in the program." In essence, the Canadian loyalty industry is a victim of its own success. So ingrained have programs like Air Miles and Aeroplan become in the lives of Canadian consumers that the Canadian business press covers them with a scrutiny unheard of anywhere else in the Western world. Points expiry is a long-standing best practice in loyalty program financial models; expiration drives engagement by encouraging active consumers to redeem, and drives program financial health by removing liability from the books accrued by disengaged, low-value members. The trick is to devise aspirational rewards that remain in reach while providing enough velocity of earning that program members feel that high-ticket rewards are achievable before their points expire. Air Miles is staffed by some of the smartest people in the loyalty business, and I've no doubt that they will manage this feat successfully. Whether deserved or no, however, the company is suffering from a severe public relations backlash that it needs to address. The real trouble began over the summer, when the press began documenting consumer outrage over Air Miles' preference-driven redemption options, which saw high-value rewards mysteriously disappear from member catalogs with little apparent rhyme or reason. The company was soon forced to apologize and promise to make redemption options available by tier. Air Miles handled that PR crisis so poorly that our own Bill Hanifin was forced to lament the company's fall from grace:
"I worry that AIR MILES is waiting too long to make its move as it has stayed uncomfortably silent in the media despite growing criticism...Brands are normally advised to tackle a problem head-on, acknowledge criticism and suggest solutions. Absent this proactive approach, consumers, Collectors, and media will continue to skewer the brand in every social and traditional media channel available... It's time for AIR MILES to act quickly and exert influence over the outcome of this story."
Unfortunately, if Martin Cohn's opinion counts then it appears as if Air Miles still hasn't addressed its PR problem head-on. While I'm not in the armchair quarterbacking business, if anyone asked me then I'd say that it's time for Air Miles, Aeroplan, and Canada's other major loyalty programs to start acting like what they are: a public trust. Yes, these programs are businesses designed ultimately for one purpose: to return profits to shareholders. But they are also a part of the fabric of Canadian life, and as such their operators owe it to their members to demonstrate daily that they value these relationships so carefully constructed by members over years of earning and redemption activity. Arguing before the legislature against consumer protection bills while members are livid over upcoming miles expiry is, at the very least, bad optics. Here's another example of bad optics. How can Air Miles members determine when their Miles are about to expire? According to the Air Miles web site, here's how:
"You can request a personalized Expiry email statement to show you how many Miles are due to expire each quarter for the next 12 months. To request an Expiry Statement, sign into airmiles.ca using your Collector number and PIN. Once you're signed in, click on the Your profile drop down menu in the top right hand corner of the screen and select View Transactions, then click on Expiry Statement. This will generate your customized email outlining the status of the Miles in your accounts, which you'll receive within 12-24 hours."
I may be just a simple country boy from the Midwest, but this policy strikes me as the opposite of a frictionless customer experience. Is it a good idea to make members do the work to find out when their miles expire - especially when they're already angry over the policy change? You tell me. So here's some unsolicited advice, Canadian loyalty program operators: Over-communicate. Go the extra mile to proactively make your members' lives easier. Practice targeted generosity. Canadian consumers love your programs - all you need to do is demonstrate that their love, freely given, does not go unrequited. Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.
