Tim Hortons is revamping its loyalty program in an effort to push more members to register, but one expert says the changes will do little to boost sales for the coffee and doughnut chain.
Starting February 26, the program will shift to a points-based system that will see members earn 10 points for each purchase and allow them to redeem a wider range of menu items. Under the previous system, customers were eligible for a free coffee, tea or baked good every seventh visit to Tim Hortons.
With approximately 7.5 million Canadians signed up for Tim Rewards, the loyalty program has been weighing on sales as restaurants are forced to give away coffee and food items for free. Jose Cil, the chief executive of Tim Hortons’ parent company Restaurant Brands International (QSR), said on Monday that the loyalty program dragged comparable sales down three per cent. Comparable sales, a key metric that measures sales at locations opened for more than a year, were down 4.6 per cent in Canada, an all-time low for Tim Hortons.
“We've attracted far more guests to our loyalty program, far more quickly than we had planned,” Cil told analysts.
Of those 7.5 million active loyalty members, just 25 per cent are registered online and have shared their contact information with Tim Hortons. A key part of the rewards revamp is to encourage a higher digital registration rate, which will allow the chain to offer exclusive offers to customers based on their purchase history.
Joshua Kobza, RBI’s chief corporate officer, told analysts Monday that the company’s future success will be “increasingly dependent on digital capabilities.”
“In the next phase of loyalty, the goal is really about driving two things. One is being able to open up the menu and give more options and the other thing is about moving more into a digital form of the program,” Kobza said.
“That's going to allow us to better understand how our guests interact with our brand and use our brand... and provide more personalized benefits to those guests.”
But one loyalty program expert does not believe the changes will help Tim Hortons boost sales.
While the new system will provide a wider range of benefits to customers, RewardsCanada.ca founder Patrick Sojka is skeptical that changes will drive additional revenue for the company.
“I don’t think it’s going to lead to more business at all,” Sojka said. The point-per-visit system, he said, will not encourage additional spending, as customers will earn 10 points regardless of how much money they spend.
“With loyalty programs, it’s not only about loyalty, but also trying to influence behaviour. And this isn’t going to influence behaviour because there’s no change on the earning (points) side.”
How the new program will work
Under the new system, registered loyalty members will first select a reward they want to earn points towards before they are able to redeem the item. Tim Hortons said this is to ensure that guests will have a quick and seamless in-store experience. Customers will earn 10 points per eligible purchase, which is defined as worth more than 50 cents and made 30 minutes or more after your most recent transaction. Points can be banked and saved for up to a year.
Registered members who don’t select a reward level will still be able to redeem a hot drink or baked good after seven visits. As of April, those that are not registered will have to wait every 12 visits to get a free item.
The menu items up for redemption will cost members between 50 points for hash browns, classic donuts and cookies, and 220 points for lunch sandwiches and chili.
Here’s how the point system breaks down:
50 points: hash browns, classic doughnuts, specialty doughnuts, cookies
70 points: brewed coffee, tea, Dream doughnuts, bagels and baked goods
100 points: hot chocolate, French vanilla, iced coffee, wedges
140 points: Classic Iced Capp, frozen beverages, espresso drinks, box of 10 Timbits, yogurt, oatmeal
180 points: breakfast sandwiches, soups
220 points: BELT, farmers breakfast sandwiches, lunch sandwiches, chili