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USE THEM OR LOSE THEM Air Miles sets expiry date on unused reward miles

JAN 2011: One of Canada's most popular loyalty programmes has a 03 message for Air Miles collectors: use 'em or lose 'em. As of Saturday, participants in the Air Miles reward programme will be required to use .their existing miles before they expire on December 31, 2016

In addition, reward miles earned after New Year's Eve will only be valid for five years after they're first posted. Air Miles collectors gather miles by making qualified purchases from the programme's participating sponsors. Until now, the miles - redeemable for eligible merchandise, including electronic goods, plane tickets and vacation packages - never carried an expiration date. There are more than 10 million active Air Miles collector accounts. The programme gives away more than $500 million in rewards each year, said Neil Everett, executive vice-president and chief marketing officer for Air Miles. Everett said while the programme has been ``tremendously successful,'' there's still a large percentage of collectors who have never redeemed miles. ``We've got collectors with miles sitting on our books for 20 years,'' he said in an interview Friday. ``As a result of that, it makes it very difficult as a programme continues to grow to be able to basically plan your financials accurately. And as a result, we need to get better discipline in place.'' Everett said they want collectors to redeem because it's the only way the programme stays viable. ``If we upset too many collectors and they become disengaged and they don't get value out of the programme, they stop shopping our sponsors and they stop earning the miles - in which case, everybody loses.'' Everett said the average collector who redeems miles typically takes 2 1/2 years from when they start earning to when they cash them in. ``What we tried to do was set some rules in place that allowed the vast majority of the collectors to not be impacted by expiry but also to give us a timeframe that's more realistic for us to plan with. And as a result, we came up with the five-year rule,'' he said. ``That's double (the length of time) the average collector takes to redeem their miles, and is what we felt was a fair and reasonable approach to our collectors.'' A new feature called Air Miles Cash will allow collectors to instantly cash in their miles at participating retailers, using them toward purchases for

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USE THEM OR LOSE THEM: Air Miles sets expiry date on unused reward miles - Trav... Page 2 of 2

items like gas and groceries. Under the programme, which begins in March, 95 reward miles will earn collectors $10 off while cashing out their purchases. Collectors will be able to redeem in $10 increments up to a maximum of $200 per day, including taxes. But collectors won't be able to carry over existing miles to redeem for Air Miles Cash. Everett said they interviewed nearly 3,500 collectors and asked whether they wanted the programme kept the same or opt for the instant cash feature that would require them to start fresh. Given the choice, Everett said collectors loved the convenience of instant cash and accepted the inability to transfer miles as a short-term problem. Tens of thousands of collectors have apparently activated accounts for Air Miles Cash with most splitting their miles between dream rewards for merchandise and travel - and cash rewards. But he also acknowledges they expect there will be ``a segment of collectors'' who won't be happy about the implementation of an expiry date. Everett notes that about one-third of rewards redeemed annually are for trips, and collectors succeed at doing so because they set goals, research and assess how to best leverage the programme. Everett acknowledges accumulating enough miles to redeem for trips won't be achievable for everyone, which is why he said Air Miles Cash is .another option

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