Once again, one of the latest trends in U.S. retail is following that of Europe, and even the world.
Like shifting hemlines and boot heights, the launch of the Plenti coalition loyalty program by American Express comes after the same movement has been embraced, particularly among retailers, globally. Unlike seasonal fads, coalitions have been around for decades for a good reason – research shows members of coalition programs tend to consolidate their spending to the coalition merchant partners. More on that later.
I know this because I have more than 20 years’ experience operating coalition loyalty initiatives; in 1992 I became the 25th employee of the company that launched Canada’s first and now largest coalition loyalty program, AIR MILES. We also operate the largest coalition program in Brazil, called Dotz.
These markets are very different from the U.S., however, where three unique characteristics have made it challenging for the coalition concept to take root:
- There is high geographic fragmentation among U.S. companies, particularly the high-frequency merchants such as grocers and gas stations. Even some of the largest companies do not operate in all 50 states.
- Unlike Canadian companies, U.S. companies are more protective of sharing their data with other companies, which is an essential component of a successful coalition.
- Many U.S. brands already have invested in their own loyalty programs; some are decades old and have mature banks of data.
Some of these characteristics are evident in Plenti. Plenti’s item-level transactional data will not be shared among partners, American Express told COLLOQUY. It also will not allow competing brands from the same industries and same regions to participate, if existing partners object. This could make building a fully fleshed-out coalition more of a challenge, considering the fragmentation of U.S. companies referred to in my earlier point.
The extent to which these guidelines affect Plenti’s performance will depend on other program features, which I call the six elements to coalition success.
Six elements to success
- Brand appeal: The coalition partners represent most industries, with a balance of lower-frequency (hotels) and high-frequency (grocery) partners. This mix assures that at least one partner has high appeal among each target consumer, broadening the overall scope and potential of enrollments. It is worth noting that Plenti does not yet have a grocery partner.
- Sharing: Coalition programs generate shared data pools that can be accessed by all partners. These rich bodies of insight help the partners better understand their customers – within and outside of their own locations – so they can develop more relevant, one-to-one marketing experiences.
- Marketing control: The partners have the freedom to market their involvement in the program on site, online and through direct communications. There are general guidelines, but the ability to market their involvement and special offers is baked into the model.
- Speedy earnings: One of the single most attractive features of coalitions, for consumers, is the ability to earn rewards faster. We know, for instance, that collecting enough points for a free flight would generally take less than half as much time through a coalition program than through a credit card-only points initiative. This eliminates one of the pain points for consumers: the inability to earn a relevant or meaningful reward.
- Reward variety: Along with earning rewards faster, well-operated coalitions offer a broader array of reward or redemption options, reflecting the many services and products provided by the program partners. There are no restrictions on redemption options. The consumer can rack up all her points at the grocery, but redeem them for a plane ticket.
- Payment freedom: Unlike traditional loyalty programs, coalition programs are tender-neutral, meaning consumers can pay however they want – by credit card, cash, check, you name it.
Growing in multiples
When implemented, these tactics encourage loyalty members to increase their spending with other companies within the same program. We’ve seen it firsthand, and this is what we call coalition multiplier effect.
Think of the coalition environment as a hothouse for participating companies, propagating the effectiveness of each organization’s marketing activities. Each partner benefits from the other brands that also promote the coalition, as well as from the collected customer data. We’ve found, as a result, that the more coalition partners a consumer shops with, the more money she will spend at the company that first brought her into the program.
Say the originating sponsor is the Acme drugstore chain, and the customer purchases beauty products at Acme only, spending $100 at one store. If the same person makes purchases from two other companies within the loyalty coalition, then she is likely to increase her spending with Acme as well. This consolidation of spending among the coalition partners creates the benefits for both consumer and company, yielding a virtuous cycle of benefits.
The U.S. may be later to coalition loyalty than its foreign neighbors, but that does not mean it won’t redefine the trend. Just as hemlines drop and rise, loyalty strategies adapt to the shifting demands of their members. Similarly, the six elements of coalition success can be adapted not only to benefit coalition operators and partners, but also members. It’s the members who will, after all, make the most of Plenti.
This guest post came courtesy of Bryan Pearson. Bryan is the author of The Loyalty Leap For B2B and is president and CEO of the LoyaltyOne consultancy firm.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.