Saturday, September 26

Monopolies and Air Miles

I was at the LCBO earlier today to buy some beer, and it struck me as strange that they participate in Air Miles. Air Miles, for those who don't know, is a customer loyalty program; they give you rewards if you buy enough stuff.

But the LCBO has a virtual monopoly over booze sales in Ontario, so it seems very strange that they would be part of a customer loyalty program. My understanding is that the point of these programs is to differentiate companies from their competitors in hopes customers will keep coming back. So gas stations, for example, usually sell almost identical products at almost identical prices, so a customer loyalty program would make sense because it gives customers a reason to patronize your station instead of the one across the street.

But it's not like there is lots of choice over where to buy booze in Ontario. If I want booze, I'm going to go to the LCBO whether or not they have a customer loyalty program. It makes me wonder what the LCBO's logic was in joining Air Miles.