As rewards and loyalty programs have become important lures for chains looking to build brand loyalty, they’re also becoming more controversial. Shoppers Drug Mart Corp. is facing a class action lawsuit in Quebec over changes to its Optimum rewards program in 2010. Options Consommateurs, a lobby group, has been given approval by a provincial court to sue the company, which operates as Pharmaprix in Quebec, for devaluing its rewards points.
In July 2010, Shoppers announced a new conversion rate for its points: to get $1 in merchandise, customers would need 800 instead of 700 points. (The changes were effective Canada-wide but the lawsuit only represents Quebec customers.) Marie-Anaïs Sauvé, one of the lawyers representing the plaintiffs, called these changes “abusive” and “illegal” in a statement.
The case echoes another lawsuit, filed in 2009, also in Quebec, against Aeroplan’s reward program, which brought in unpopular new rules that see members’ points expire if they don’t redeem any miles at least once a year. At a time where loyalty programs are becoming the norm for major retailers, the lawsuits highlight questions over how valuable the programs really are. Michael McCall, a professor of marketing at Ithaca College who specializes in rewards programs, thinks companies are not handling the initiatives properly. “There are huge administrative costs,” he says, and, more importantly, “the programs themselves end up becoming debts on [company] balance sheets.” This, McCall explains, is the reason why companies have been trying to devalue their points, and trying to force customers to spend them faster. Unfortunately, those efforts are causing anger among many customers who are invested (financially and emotionally) in these programs.
The lawsuits against Shoppers and Aeroplan are not likely to go to court for another two years. McCall says this will allow Shoppers and Aeroplan to study their responses and even reconsider or redesign their loyalty programs. One thing they can’t do, he underlines, is ignore “consumers’ incredible ability to unite.”