BrainTrust Query: Canada’s Second Unofficial Currency Gets a New Addition
Commentary by Doron
Levy, president, Captus Business Consulting
Canadian Tire Money is probably
one of the most successful retail loyalty programs out there. If you haven’t
heard of it, the program is very simple. You buy stuff; you get Canadian
Tire Money back on your purchase when you pay by cash or debit. That money
can be used on anything at the store with no conditions or limitations.
To illustrate how flexible
the program is, a friend of mine just purchased a clearance tagged Master
Chef Barbecue for $499 and paid for all of it, taxes included, with a huge
wad of Canadian Tire Money he had been saving up since 2000. You even get
Canadian Tire Money when you fill up at Canadian Tire Gas Bars. Its simplicity
has made it a fixture in Canadian retail since its inception in 1958.
Canadian Tire created the
program in response to gas stations offering toasters and dishes as incentives
to their customers. Wanting to build up their gas business and stay ahead
of their competition, they created the “cash bonus coupon” which could
be used for any merchandise the customer wanted at the adjacent Canadian
Tire store. Over the decades, the program evolved and purchases made at the
store qualified for the coupons. As credit cards came on the scene, CT offered
money on cash purchases only to 
discourage use of credit cards (and
save on the processing fees that retailers are charged). As the demand for
credit cards increased, CT created and offered the Options Mastercard in
2000. Customers can collect CT Money on any purchases made with the card
(even outside of Canadian Tire stores).
So what’s next for Canadian
Tire Money? On December 5th and 6th, customers who spent a minimum of $25
at the store received a special limited edition $1 Canadian Tire Money
coin. This coin is actually minted by the Canadian Mint so it’s high quality
tender that will be sure to end up as a collector’s item down the road. (Yes,
collecting Canadian Tire Money is a popular hobby here in Canada.) Is it
a sign of the times? The Canadian government has been trying to get
rid of paper money for a long time now and our $1 and $2 tenders are already
coins (called loonies because of the loon that appears on the $1 coin and
toonies because we couldn’t find a better name for the $2 coin). This dollar
coin from CT could be a sign that paper Canadian Tire money will be a thing
of the past.
Canadian Tire Money is actually
considered part of Canadian culture and I’m not sure a bar coded key ring
or plastic card can deliver the same value message that being handed paper
money can.
Discussion
Questions: Does Canadian Tire’s paper money program seem archaic or is
its simplicity what makes it so successful? What is your overall view of
cash-rewards driven loyalty programs versus other incentives?
I’m all for simplicity, since it decreases the friction of the interactions with the consumer. But if a program is too simple, it can leave real value on the table.
From Doron’s description, it sounds like Canadian Tire is using the program to get repeat purchases and visits, *not* to track individual shoppers’ purchases. If that’s the case, then this is a big missed opportunity.
There is huge value in knowing who your best (and not-so-best) shoppers are, what they buy (and don’t buy), and how, where, and when they shop. Instead of migrating to a different format for their (untraceable) rewards, perhaps Canadian Tire should instead give shoppers digital accounts to store, trade, and spend their Canadian Tire Money while at the same time allowing Canadian Tire to learn more about its customers.
No one, I mean no one, messes with Canadian Tire money! I moved to Scottsdale from Toronto 12 years ago and I still find CT money in boxes, old winter jacket pockets and my wife’s old purses and feel misty every time I find some. This is as sacred as Tim Horton’s, loonies and toonies, Red River cereal, and poutine. Every self-respecting Canadian kid bought his/her hockey equipment with CT money. Yes our flag has a leaf on it and our national animal is a beaver but I double-dog dare someone to cast aspersions on Canadian Tire money!
Cash and simplicity are king, and Canadian Tire seems to have tapped into both. Unlike airline miles or store points, CT Money is easy to collect and use. There is no secret formula to determine the value of miles or points; no confusing tiers of points or miles to qualify for an award. The price you see is the price you pay in CT Money. Pretty simple. Pretty easy for consumers to understand. And isn’t that what consumers want?
Being a Canadian, I have a drawer full of Canadian Tire money that one day I will probably count up and haul over to the store to buy a hammer, ladder or something I need. Doron is right on in his description of how CT money is almost a cultural thing. It somehow separates them from the rest of the pack.
However, as noted above, a missed opportunity arises because there is no customer tracking feasible. I can’t imagine that the very bright brains who run Canadian Tire won’t one day soon change to a system that will allow them to track their very loyal customers.
This gets at the heart of a true loyalty program. It generates a compelling reason to shop THAT store, as opposed to any other store that simply gives unwarranted discounts because you felt compelled to sign up for their program. If you don’t sign up, then you know you are getting ripped off. That isn’t loyalty, that’s a frequent shopper giveaway.
Canadian Tire is driving people BACK to their stores…a key differentiator. Also, regardless of all the ways to save online with eCoupons, etc, tangible discount instruments, like paper coupons and paper money (and coins) still have more intrinsic value to consumers because they can be held in their hands. If they can touch it, it seems to have more value.
A brilliant and innovative concept in its day and certainly a Canadian institution but I agree with Kevin; I think Canadian Tire will soon move to a program that can be tracked.
It’s also a secondary POS function when customers are given their Canadian Tire money after purchase. And if you’ve never been in line behind the guy buying a major item with Canadian Tire Money, lets just say, it can take a while. They come in 5, 10, 25 and 50 cent as well as 1 dollar denominations, so it’s a little like bringing your piggy bank in.
If it is working, then it is working. But Ben’s and Kevin’s hoards would suggest that it is working better for Canadian Tire than it is for all of those who lose and misplace the currency.
For me, it would be the ultimate annoyance. Another currency to put in my pocket??? A coffee can to collect coins and bills for 9 years to purchase something??? Better check under the seats before I trade in my automobile.
This is not a consumer friendly program. It counts on the breakage to hold the costs down. It may make the customer feel good, but I wonder what the real redemption rate is.
I much prefer a program that gives the real savings immediately like Starbucks and many supermarket programs or programs that keep accumulations for you like the airline and hotel programs.
While moving CT dollars to an electronic system would allow the merchant to better track consumer habits, doing so would significantly devalue the brand. Consumers expect to be able to have and hold their CT dollars. As it stands, CT money can be traded amongst your friends, anted at a friendly poker game, and given to children as a means to develop early spending and saving habits, all of which would be impossible, or at least awkwardly difficult, with an electronic system. Swapping CT dollars is a time-honored tradition, a part of the culture. Taking away the physical dollars would be an upset to the expectations of consumers.
What’s more, the CT dollars you find in your dressers’ drawers, in the pockets of your trousers as you do the wash, and inside your glove box are consistent conspicuous advertisements for CT. A card or a keychain widget would lack the immediacy of finding a wad of CT dollars and being reminded to shop at CT.
Keep is Simple (KIS) and CT did just that and has for over 50 years. Several lessons to learn:
1) Easy for the shopper to understand.
2) There is a light (or a gas grill) at the end of the tunnel.
3) No blackout dates/restrictions.
4) The program has withstood the test of time.
5) The value of the CT coin is worth far more than redemption now that they have turned it into a collector’s item
Creating loyalty programs that includes a light at the end of the tunnel will have the greatest success. This is why airline loyalty programs have struggled with building loyal travelers. A traveler has a hard time seeing how they will accumulate enough miles to earn a free flight. Even when they do, the restrictions scare people away.
I agree with Ben Sprecher that keeping the points electronically could help a retailer better understand their loyal and not so loyal customers. That said, if you’re not prepared to do something with the data you collect, don’t worry about collecting it. Also, I find the physical coins interesting in that they are high quality and have actually become a collectors item. This lowers redemption and increases the perceived value of the coins.
Nice work CT! I hope a retailer in the US picks up a few ideas from your success story.
Canada would not be Canada without Canadian Tire money. I have some in my car like most Canadians and I collect it for some special purchase all the time.
Let’s not be fooled by the simplicity of this loyalty tool. Canadian Tire’s financial arm is powerful with over 5 million Canadian Tire credit cards in use today and 1,700 people working in the CT Financial.
With a 93% customer conversion rate, they know their customers and what their customers want.
Yes, someday they probably will have some initiative to collect customer data and manage the currency but the weekly Canadian Tire flyer is one of the most read flyers in the retail industry in Canada.
Canadian Tire money is a mainstay of being Canadian and I hope it stays a bit longer but then again, with a 93% customer conversion rate, why would it not?
Canadian Tire money has been incredibly successful with its loyal customers for over 50 years–and continues to provide value to many shoppers. For a very long time, Canadian Tire was the place to shop for many items. The frequency of trips is very high. For lots of Dads, DIYers, families–it’s a stop on Saturday mornings; it’s the place to buy our gas a little cheaper; it’s a destination for most of us.
Canadian Tire money shopping is a habit–price compare, maybe, but then factor in savings with Canadian Tire money–and there are more reasons to shop there. Longer term, Canadian Tire can do more to leverage shopper loyalty, but it is too simple and successful to risk change without a lot of very careful thought and a really good reason to switch!
Bravo Canadian Tire!
Yes to “cash” denomination, yes to no restrictions, and now throw in keeping track of it electronically so I can apply at the register when I want (without delay or remembering to collect and bring more paper with me), and you may actually have loyalty over time measured in wallet share and customer profitability.
This requires a whole new mindset and analytical approach that has so far not been seen south of the Canadian border. I’m ready, US retailers–let’s go!
P.S. This does not exempt you from still having the right product, at the right place, at the right time, and at the right price.
In response to tracking customer behavior, CT does offer its Options MasterCard which accumulates points virtually. The reward percentage is greater for Options as well. And you can’t swing a bag of doorknobs without hitting some POP trying to get you to apply. CT obviously realizes the importance of harvested data but there seems to be a greater consumer connection to the paper bills.
It’s a trading stamp program. Just put a little glue on the backs of the bills and give customers a handy-dandy book to stick ’em in. Sperry & Hutchinson did it with Green Stamps forever, it seems. In Oklahoma and Texas it was Gunn Brothers Stamps. Dozens of other trading stamp programs proliferated throughout the U.S. at one time or another, and they were the same thing as Canadian Tire money.
Familiar with the terms “slippage” or “breakage?” That’s where the provider of a purchase loyalty program counts on only a small percentage of the rewards ever being claimed. AT&T recently took thousands of roll-over minutes from me when I downgraded our family’s plan. I paid for those minutes and they are mine. But, AT&T stole them from me. That’s slippage. All of us have probably lost airline rewards because they expired. That’s breakage. Canadian Tire and other trading stamp programs count on their reward vouchers getting lost in the wash, forgotten in the glove box, or tossed out with their receipts. That’s slippage AND breakage which would be considerably reduced with the introduction and use of an electronic system. It would be easier for shoppers to keep track of their rewards, and the retailer won’t want that.
Just like Sear, whose sagging fortunes were lamented appropriately, in much detail in the discussion on Friday–Canadian Tire is a retailer whose relevance on the retail landscape peaked decades ago. But unlike Sears, and to its credit, Canadian Tire has managed to maintain a soft spot in the hearts of the general public, even people who have not set foot in their stores for a long time. Canadian Tire money is responsible for much of that goodwill.
While I would be the first one to propose migration to an electronic format that allows for basket analysis and one to one marketing, I am very aware of the reality that the slightest change to a loyalty program that has been around since 1958 has to be accompanied by a very unique and powerful value proposition that it easy to communicate to the consumer and capable of winning instant buy-in.
There are well documented cases of CPG brands that have launched radical packaging changes that only succeeded in alienating their core customers (the 20% of customers that make up the 80% of sales) Similarly a sudden shift by Canadian Tire to plastic cards could alienate Canadian Tire’s core customers.
Perception is reality and there seems to be a real bond between Canadians and their Canadian Tire money as such any future change to their loyalty program should be evolutionary versus revolutionary.