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Why did Walgreens Balance Rewards change its point expiration policy?

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Why did Walgreens Balance Rewards change its point expiration policy?
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Walgreens, the leading US-based pharmacy chain, announced a big change to its Balance Rewards loyalty program earlier this month. Beginning August 25, 2017, points accumulated by Balance Rewards members will expire in 1 year. The previous life of points was 3 years, so you can be sure the shift caught the attention of the 87 Million active members claimed by Walgreens in its last annual report.

The change in point expiration rules should not be a bother for members, at least on the surface. Pharmacy is a high-frequency retail business. An effective loyalty program in this space should be built to encourage increased store visits, consolidation of category spend, and stimulate customer engagement. In other words, if the program doesn’t deliver enough value to allow members to redeem for something perceived as worthwhile in a 3-6 month period, then something is wrong.

There will be some angst among the membership however regarding the timing of the announcement vis a vis the effective date of change. As part of the rule change, Walgreens announced that Balance Reward Points earned prior to August 1, 2016 will expire on August 25, 2017. The time between announcement and impact is more or less 3 weeks, therefore program members have little time to digest the message and decide how to use their accumulated points before they vanish.

The short time frame baked into the announcement is cause for concern. With the point-expiration debacle at Canadian AirMiles fresh in consumer memory, Walgreens will certainly want to take extra steps to communicate the change to its members. No matter how well to communicates with its membership, Walgreens should also be prepared to address the flood of requests that are certain to come from members who just missed the date and wake up on August 26 with a zero balance.

Looking deeper into the announcement, it’s important to understand that it is highly likely the change in point expiration had less to do with Balance Rewards and its Members, but much more to do with Walgreens. There are new revenue recognition standards coming to the US effective January 1, 2018. Promulgated by the IASB and FASB, the jointly composed standards are covered under something called “IFRS 15 Revenue from Contracts with Customers”.

The new standard replaces all existing IFRS and US GAAP revenue requirements and the changes will impact every brand that operates a customer loyalty program. It will be interesting to see how other brands react to these new accounting standards and what changes they make to their loyalty program rules in anticipation of implementation during 2018.

Stay informed!

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