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Loblaws pitches upgraded loyalty program for $9.99 a month for premium perks

Galen G. Weston, Executive President and Chairman of Loblaw Limited poses for a photo at the company's annual general meeting in Toronto, Thursday, May 5, 2016. (THE CANADIAN PRESS/Fred Thornhill)

Loblaws is launching a fee-based subscription program targeting its existing loyalty program members that sweetens the pot for them in terms of rewards, in exchange for an ongoing fee.

For $9.99 a month — or $99 a year — a new program the retailer is launching today called PC Insiders will give people who sign up discounts and reward points across many of the chain's stores, both in-person and online.

"We are working hard to meet the changing needs of Canadians through the combined reach of our digital properties and retail network," Loblaws chairman Galen G. Weston said. "Together with our customers, we are excited to see where this program might take us next."

There's no change to the chain's existing PC Points program, where shoppers can save up points in exchange for purchases, without having to pay an annual fee. Rather, Monday's announcement is targeting at PC Plus loyalty members who are also President's Choice Financial Mastercard holders, and banking on their being willing to pay a little bit more, to get more in terms of points and discounts.

During the pilot program, anyone who signs up will get the following perks any time they use their MasterCard:

- 20 per cent back in PC points on the essentials such as diapers, infant formula, and all PC Organics products in-store and online.

- 20 per cent back in PC points on all Joe Fresh products in-store and online at joefresh.com.

- 20 times the PC points every day when customers shop online at beautyBOUTIQUE.ca. 

- Free Click & Collect pick-up service at nearly 200 locations. 

- Free shipping on all beautyBOUTIQUE.ca and joefresh.com purchases. 

- $99 PC travel credit once a year when booking a trip on pctravel.ca (annual subscriptions only).

The retailer is pitching the plan as a way for existing points collectors to get an ever better deal, but admittedly asking customers to pay for their own loyalty is "pretty atypical," said Rob MacLean, CEO of Points International Ltd., a TSX-listed company that provides loyalty e-commerce and technology solutions to some of the world's top brands.

"With a fee structure like this, it will be important for consumers to get early returns for them to stay engaged," MacLean said.

In August, CIBC took over the PC Financial brand and renamed it Simplii Financial, so Monday's announcement is the grocer's way of making sure financial services customers it wooed over the previous 20 years have a reason to stay loyal to the chain.

CIBC took over the PC Financial business at the start of this month, but the Mastercard portion still accrues PC Points.

Alina Nastasoiu, a marketing professor at the DeGroote School of Business at McMaster University in Hamilton who studies loyalty programs, says the move is clearly an attempt at giving PC Mastercard holders a reason to keep using their cards.

"They are also trying to get some leverage with that," she said in an interview, "and make sure the credit cards are still there."

It's also the chain's attempt to use its well-known bricks and mortar stores to promote their online offerings, which aren't all household names. Incentives such 20 times the points for cosmetics, and free shipping on clothes purchased online could be a good way of doing that, she said. "With this move Loblaw is trying to play in both fields — online and in-store," she said.

And finally, the move seems squarely targeted on a growing market that many retailers want: young families.

"Whenever you have a new child you tend to shop more frequently and buy more things when you do," Nastasoiu said, which explains why the chain is pushing discounts on baby essentials like diapers and baby food.

"Focusing on baby products," she said, "was not random."

Beyond baby products, MacLean adds that he expects the program will focus more on individual product categories as it evolves. "Loyalty programs often will use their points as an incentive to drive upsell activity, possibly to more profitable products during in-store campaigns."

That helps spur sales of more profitable products, and ultimately gives the retailer exactly what it wants: as much information about its customers as possible. "They then take that information," he said, "and create very customized offers that are relevant to that specific member.

"If the program can do that well,  they can really drive engagement," he said.