After more than a year of testing, Tim Hortons will launch its new loyalty program across Canada on Wednesday, giving the company a new tool to fend off challenges to its coffee supremacy.
The rewards program is centred on visits, which must involve a purchase of $0.50 or more, and can’t be within half an hour of each other. After seven visits, customers get a free coffee or tea at any size, or a baked good (except Timbits and bagels).
Instead of a paper card, the rewards program will be offered on the Tim Hortons mobile app as well as on a plastic, reusable swipe card — giving Tim Hortons a wider window into customer buying habits.
While the program was announced as a way of “thanking” frequent customers, industry observers said it looked more like a proactive attempt to hold onto market share amid increased competition from the likes of McDonalds and Starbucks.
McDonalds has its own rewards program — buy seven hot beverages, get one free — and has been aggressively encroaching on the coffee category, said Robert Carter, an industry advisor with NPD group.
NPD research, which Tim Hortons frequently cites, has found that eight out of 10 cups of coffee sold in Canada are from Tims. But to maintain its base, Carter said, Tim Hortons needs to give “incentives to come one more time or buy one more additional item.”
“It’s surprising it took this long for Tims,” he said of the loyalty program.
Michael Hancock, Tim Hortons’ chief operating officer, said Tuesday that testing on the program took longer than anything the chain has worked on before. “We wanted to make sure we got this launch right.”
“In terms of timing, we’ve had a ton on our plate in the past year in a half,” he said, pointing to restaurant renovations, and menu changes such as all-day breakfast. Tim Hortons has also been working to rehabilitate its public image after a drawn-out dispute with a group of disgruntled franchisees.
This isn’t a coffee program
Hancock said insights gleaned from the data will allow Tim Hortons to tweak its offerings to better serve its customers.
Asked whether it was also a response to reward programs at competitors like McDonalds, Hancock stressed that the Tim Hortons program was different.
“This isn’t a coffee program,” he said. “This program wasn’t built to compete with other coffee programs.”
David Soberman, a marketing professor at the University of Toronto’s Rotman School of Management, said the program appeared to go beyond McDonald’s.
A rule for retailers, he said, is if you’re doing something because competitive pressure has forced your hand, “make it at least as competitive as the competitor.”
And by expanding its rewards to baked goods, he said, Tim Hortons has at least slightly outdone McDonalds.
“Sometimes the competition forces you to do things,” Soberman said. You don’t really have too much a choice.”
By Jake Edmiston
Financial Post
Copyright Postmedia Network Inc., 2019
