The battle between competing drug store chains over whether the B.C. government should prevent them from offering loyalty points on prescription drug purchases highlights customer reward programs in general and how they fit into corporate business models.
Proponents see loyalty point programs as a valuable tool to attract and retain customers; skeptics believe they increase costs and product prices.
"We know that our [prescription drug dispensing] fees are lower than Safeway. The difference can be as low as $0.50 less or as much as $2.50," said London Drugs vice-president of pharmacy, John Tse, whose drug store chain does not allow customers to obtain loyalty points on prescription drug purchases.
A quick check on Pacific Blue Cross' website Pharmacycompass.ca for a range of drugs revealed that dispensing fees are lower at London Drugs, although in some cases Safeway offered a better total drug price.
Mitchell Merowitz, vice-president of corporate affairs at Loyalty One, which runs the Air Miles rewards program, told BIV that prices would not necessarily be lower if retailers stop using loyalty point programs.
Loyalty One bills retailers for the cost of all points that it awards customers at their stores.
"Stores do not build that price into the product," he said. "Safeway or any other business partner has a marketing budget for its brand. They use that budget to pay for loyalty programs."
Safeway Canada public affairs manager Betty Kellsey confirmed that if Safeway were prohibited from allowing customers to collect Air Miles on prescription drugs, the chain would funnel any savings into other marketing initiatives such as flyers, billboards or radio commercials.
Tammy Smitham, Shoppers Drug Mart (SDM) vice-president of communications and corporate affairs, said the situation would be similar at her chain, which has its own loyalty point program.
SDM gives shoppers 10 points per dollar spent on their SDM Optimum Card. The lowest redemption potential is for shoppers to cash in 8,000 points for a $10 rebate – a gift that works out to a 1.25% discount for using the store's loyalty program.
Smitham said the same budget that pays for that discount pays for sales and coupons in flyers.
