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Air Canada, The Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce (CIBC), and Visa Canada Corporation (Visa) have made a proposal to Aimia Inc. to acquire its Aeroplan loyalty business (including approximately $2 billion of Aeroplan points liability) for $250 million in cash, representing a total purchase price of approximately $2.25 billion.
Christine Bardwell, senior principal outbound product manager at Oracle Loyalty & Commerce, says of the proposal, “There’s a lot of opportunity for coalition programs the world over, and I expect we’ll continue to see a large amount of growth and interest in this area. The difference now is that brands want to own their own loyalty programs and have direct access to their customers’ data. They want the flexibility to be able to react quickly to customer needs and market changes. Fully outsourcing loyalty programs makes it hard to be dynamic in this way.”
When asked if the transaction comes as a response to other coalition loyalty programs such as that of Loblaws, Ron Gerace, senior vice president of product and marketing at Exchange Solutions, says, “I think this was more about economics, business protection, and data access. With a member base of 5 million, Aeroplan still holds considerable clout in the Canadian marketplace. The core Aeroplan member sees this as a travel program with the privileges it provides in terms of access to Air Canada priority services. This is a different market than the alliance pursued by Loblaws, Shoppers, and Esso. It is logical to purchase this asset, protect the customer franchise, and narrow the proprietary coalition to rein in costs.”
The proposed transaction comes on the heels of a July 20th announcement that Aeroplan will allow members to book tickets with almost any airline in the world starting July 2020. This change in the Aeroplan loyalty program would enable members to redeem their points through any airline accredited by the International Air Transport Association. In addition, Aeroplan miles would become convertible, which would give members the ability to transfer points to nearly 20 other frequent flyer programs and some number of hotel programs as well.
In any case, Gerace believes that such coalitions have certain benefits. “If the consumer buys into the concept, the coalition will make it work.” He does have some reservations, however. “Consumer mindshare is becoming more and more difficult for retailers to win. The fight for it is best made with one-to-one, relevant communications and incentives provided by advanced customer engagement and intelligent loyalty programs.”
In addition, Bardwell thinks that coalitions like these have become the norm. “Many brands partner up to increase their program exposure. It’s disruptive and it meets a need.” Regardless, the hope is that the proposed transaction, if accepted by Aimia, will ensure value and continuity for its members as well as customers of Air Canada, TD, CIBC and Visa. Each coalition member seeks a smooth transition of Aeroplan’s member points to Air Canada's loyalty program, with the goal of safeguarding rewards for millions of Canadians.
Scott Robinson, VP Design & Strategy, argues that the coalition can offer Aeroplan loyalty members this easy transition as well as increase customer engagement. “The customer loyalty industry is starting to morph into service delivery and customer experience. Our research has always shown that the drivers of member satisfaction are the members’ perception of the traditional earn and burn mechanics in a program and their evaluation of the customer and member experience that they have,” he said.
“So, a lot of programs have struggled with how to find the right balance between these two things. A lot of programs are under-investing in the customer experience side. There are things that have perishable, good value, like when the plane is at the gate ready to be boarded. Getting on first is not a material cost to the company and it has value in that moment, but it isn’t something that needs to be carried in liability.”
Furthermore, Loyalty360 has found that the markets of the United States and Canada are very different. “Still,” says Mark Johnson, Loyalty360 CEO, “we continue to see a growing interest in the efficacy of loyalty programs. There has been a good deal of transition in the coalition market in Canada over the past year, and the fact that the value of the liability was so large shows the weight that program still garners there. We love to see that commitment.”
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