The phrase “Teamwork makes the dream work” is often times overused, but for Loyalty Programs it’s the very opposite. Teamwork within Loyalty Programs comes in the form of something called a Coalition Program
A Coalition Loyalty Program can be seen almost like a joint venture, where different companies come together to create a single shared loyalty program whose points can be exchanged and redeemed from every partnered brand.
Think of it as a wallet where instead of earning money from just one job and spending it on one store, you’re able to earn it from hundreds of jobs and spend it on thousands of stores. A few examples are AIR MILES Canada, Brazil’s Dotz, Indonesia’s Ponta , Germany’s Paybackand UK’s Nectar.
In recent years, a shift towards Coalition Programs has been on the uprise due to downward trends of Standalone Programs. A 2013 Report made by COLLOQUY Loyalty saw that on average, Standalone Loyalty programs only had an active customer base of 44%. Whereas in the same year, AIR MILES Canada, one of the world’s leading Coalition Program, had a staggering household penetration of 70%.
To comprehend why Coalition Programs are more effective than Standalone Programs, we must see why they’re so sought after for both consumers and business’.
Consumers
1) Allows for easier point accumulation
Forming partnerships with different companies amongst different industries is mandatory in a Coalition Program. In Standalone programs Members can only shop from one brand, a limited way to earn point.
However in Coalition Programs they are able to shop from a multitude of different brands spread amongst a wide variety of industries, with shops in every geographic region. This becomes much easier and convenient for Members to accumulate points as most, if not all, monthly purchases can be sought from the different partnered brand.
AIR MILES Canada alone has over 220 sponsors, with products ranging from Auto Care & Supplies to Pet Supplies, finding a routine while ecompasses all of it’s brands would not be impossible!
2) Allows for wider range of rewards
With the same reasoning as before, we can further understand how more brands enables an even wider reward pool for it’s members. As different brands offer their own redeemable rewards, as the number of brands increase, so will the number of rewards. Unlike a standalone program, who has the limited budget to offer rewards.
Taking American Express’ Plenti program as an example, we see sponsors from a variety of brands, whether that be department stores such as Macy’s, restaurant chains such as Chili’s, or mobile providers such as AT&T.
This has resulted in the program having over 20 million members who regularly redeem from their catalogue. This provides first hand proof of the increasing value proposition of a Coalition Program towards its members, heightening enrollment and activity through high customer engagement.
3) Allows for better quality rewards
Having quality partners allows for more attractive rewards to be redeemed, some may even provide limitless possibilities. Take UK’s most popular Coalition Program, Nectar. Nectar has partnered with eBay, one of the internet’s largest e-commerce website, which has essentially provided Nectar members all of it’s items up for redemption, which increases its value proposition to worldly heights. With partnerships such as eBay, it’s not surprising why 68% of all households across the UK have Nectar memberships.
Along with this, providing an easier process to accumulate points also allows for programs to have very sought after rewards worth a mountain of points, such as a trip to an exotic island or a luxurious car.
Therefore, the added flexibility, ability and scope in point collecting and rewards redemption becomes driving factors for consumers to favor Coalition Programs rather than Standalone Programs, who have daunting point accumulation and limited choices.
With Coalition Programs having such depths in points collecting, spending and value. It’s not a coincidence that they’re so popular with the general public.
Companies
1) Allows better data collecting from a 360 degree view angle
Coalition Programs with partners across different industries provides access to deeper customer information and data sets which form around a whole economy, rather than a specific industry.
Information such as Geographic Locations, Purchasing and Spending Behavior, Reward and Redemption Behavior, Contact Information and more, isn’t only limited to existing customers of a specific brand, but also potential customers which exist in other brands as well. This creates a 360 degree market view for all parties.
Through this, creating cross category target markets with aided marketing tactics and pricing strategies would be a breeze!
2) Sharing of resources
One of the fundamental aspects of forming a coalition program is the resources shared between companies, one important resource being finance.
Similar to any other Joint Venture, all costs of the program are split amongst its members, whether that be marketing, operational or development costs. With the added capital amongst it’s partners, Coalition Programs are able to focus on rewarding it’s members in terms of monetary rewards and non-monetary rewards, further driving up the value of it.
However, finances aren’t the only resources shared between partners, other aspects such as infastructure, information, technology, branding and promotions are all able to be shared, allowing for a Program backed by a collection of resources which Standalone Programs are unable to even touch.
3) Unreplicable program and benefits
Coalition Programs have the added benefit of easier point accumulation, with this members will have a much higher value invested in Coalition Programs allowing for large rewards, financed by the added capital, to act as motivational trophies. This coupled with non-monetary rewards, such as private seasonal greetings or customer specific rewards, creates an everlasting emotional relationship with the members which can’t be replicated by other Standalone Programs.
Standalone Programs tend to rely on costly, monetary rewards with low values such as discounts and cashbacks, which create a temporary member base who’s in it only for the discount. A member base who’d leap to the next brand that offers a better deal to them.
However, through establishing a highly invested emotional relationship, members would be less keen to do so due to the recognition received and time spent in the program.
4) Ability to maximise the market potential
Attaining such levels of information about potential and existing customers from such a diverse collection of industries provided by other partners opens up a world of marketing tactics to maximise the spending behaviour of each member and create features, ads, shopping layouts and more, to entice potential customers and retain existing ones as well.
This provides a 360 degree view of members shopping behavior, which if not for the exchange of points, may very well be the highlight of any loyalty program.
5) Increased brand exposure
Understanding why brands under a Coalition Program receives such praise and exposure is quite simple. The reason for it may be because of the free publicity and branding received from partnering with quality brands amongst different industries, the accredited marketing tactics formed by in-depth data for both potential and existing members, the creation of attractive cross reward and redemption events, or even having voluntary Brand Angels recruited due to strong emotional relationships represent the company.
All of this is reflected in Dotz, Brazil’s most successful Coalition and Loyalty Program. Released in 2000, Dotz has created a network of over 300 partners within 690 cities, across 12 states, shared by 23 millions clients, averaging a total 900 Dotz distributed per second and having over 10,000 redemptions a day.
6) Increased value proposition which will interest new members
Having a rich and flexible reward catalogue from a number of quality brands, obtained easily through achievable points, received through spending in a close geographic region creates an unheard of value proposition only Coalition Programs may hold.
In oppose to this, Standalone programs often have a less richer and far less flexible reward catalogue from a single brand, which are exchanged for high amounts of spending, over a wide geographic region.
Thus, this difference creates a high value proposition for Coalition Programs which also becomes its unique selling point which undoubtedly works. Dotz has a market penetration of 45% in Brazil with an annual growth rate of 5-10%, which is virtually unheard of in any Standalone program.
7) Sustainable competitive advantage through differentiation
As stated previously, the emotional, financial and logical benefits of a Coalition Program has allowed for its success.
Coalition Programs have become the Apex Predator in any Loyalty Program Landscape. This is because of the formation of unreplicable features such as an extensive rewards catalogue by quality brands, a family-esque company relationship supported by extensive customer data analysis, and a customer friendly program. Thus creating a strong barrier of exit for the customers, causing for a sustainable business model, resuling in brand halos.
Payback is a prime example of such a case, with its formation in 2000 in Germany, to its expansions to countries such as Italy, Poland, India and Mexico, this Coalition Program has worked its way up to be Germany’s top brand. And with over 30 Million users, EUR 381 million in collected Points and over 4 million uses a day, such praises are well deserved.
Therefore, for companies the ability to obtain unreplicable and sustainable customer data at a low cost would become a structure for marketing dominance and the curation of a stellar loyalty program with viable rewards of both monetary and non-monetary value. This would add to the value proposition and form a uniqe selling point for the partnered brands. Hence enhancing the brand image and it’s exposure to the point where it becomes a Brand Halo, thus creating a competitive advantage unrivaled by any standalone program. Such an oppurtunity is sure one which should never be rejected.
