Loblaw and Shopper's say Optimum loyalty program to stay the same

TORONTO – Shoppers Drug Mart worked to reassure shoppers Monday that the purchase of the pharmacy retailer by Loblaws Companies Ltd. will not affect its popular Optimum loyalty program.

“Hi everyone, Canada’s favourite loyalty program will continue. No plans to change #Optimum for our valued @shopprsdrugmart customers,” the chain’s official Twitter account tweeted.

Shoppers (TSX:SC) says 10 million people are registered to collect Optimum points, which rewards shoppers with 10 points for every dollar spent.

In a call with investors, executives from both companies said Loblaw’s PC Financial division, which oversees banking and credit card services, will undoubtedly “benefit” from Shoppers “incomparable” Optimum points program by being better able to target its products to customers.

“It’s really about adding significant customer insight and significant customer reach to a direction that we’ve already had, which is creating tailored, relevant offers to those individuals,” Shoppers Drug Mart chief executive Domenic Pilla said.

“By the combination of our insights, and access to customer information on their preferences, that we can really leverage that across a much larger base.”

Ken Wong, a marketing and business strategy professor at Queen’s University, said the price Loblaw paid for Shoppers may partly be due to the value of its Optimum program.

“I do think that they are being very wise in keeping the two programs separate. There is no reason why you need to integrated the two under a single banner,” he said.

The two programs are also valuable because they’re affiliated with different financial institutions. Shoppers Optimum also offers a credit card backed by the Royal Bank of Canada (TSX:RY) and PC points is run by PC Financial, which is connected to CIBC (TSX:CM).

Wong said that it would make sense for the programs to integrated in the future. For instance, customers would be able to earn points at both Loblaw grocery stores and Shoppers with either loyalty program.

“Given the premium they paid for the Shoppers stock, they’re paying for the brand name,” he said . “It would be silly to dismiss it.”

Of particular value to Loblaw would be the customer database of Optimum customers in Quebec, where Shoppers runs its Pharmaprix stores and Loblaw has a smaller presence. There is also room to expand the programs by utilizing Shoppers loyalty points database, which has information on customers’ spending habits, to help launch a more rigorous e-commerce platform for points in the future, Wong said.

Loblaw (TSX:L) would not specifically say how many customers it has in its points program, but said that when it launched its new PC Plus points program earlier this year, it had a target of reaching about 15 million customers, which will be helped by the large base of Optimum members.

“It’s about reaching every Canadian family in this country,” Loblaw president Vicente Trius said.

Loblaw announced Monday it had reached a deal to buy Shoppers Drug Mart in a stock-and-cash deal valued at $12.4 billion. The deal brings together the country’s largest grocer with Canada’s largest pharmacy chain.

Bobby Hagedorn, an equity analyst at Edward Jones in St. Louis, Mo., said the acquisition of the Shopper’s Optimum program is a big benefit to the grocer.

“More than anything, Loblaw’s going to be able to learn from Shoppers on how to manage a customer loyalty program,” he said.

“You have a new one rolling out at Loblaw so this kind of presents and opportunity for them to take the best practices that Shoppers has, transition that over to the PC Plus (program).”

Note to readers: This is a corrected story. An earlier version incorrectly attributed quotes to Loblaw president Vicente Trius.

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