A Roadmap for Super-Coalition Loyalty in the US

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By: Wise Marketer Staff |

Posted on February 19, 2015

Across the US, membership continues to grow in loyalty programmes, and loyalty-based rewards are already becoming a standard form of currency in digital wallets and mobile transactions alike - and it's these two trends that will provide US brands with opportunities to adopt a universal, loyalty-based currency that can be earned and redeemed nationwide. This convergence offers a roadmap to a true nationwide coalition loyalty programme, according to a white paper by Brandon Logsdon, president and CEO for the Fuel Rewards programme operator, Excentus, who here explains how and why it could work.

In a country as geographically expansive and economically diverse as the US, cents-off-per-gallon at the gas pump emerges as a frequently used, high-demand "currency" that can support a successful, nationwide coalition loyalty programme.

Popular elsewhere but still relatively untapped in the United States, coalition loyalty programmes encourage rewards-based partnerships among well-known brands, giving them new opportunities to increase sales and attract new customers. Consumers in turn, benefit from expanded opportunities to earn and redeem rewards from frequent, everyday purchases.

This universal currency can serve as the foundation for a successful coalition loyalty programme that links US brands from retail, dining, entertainment, apparel, department store, travel, electronics, sporting goods and other sectors. US brands today stand to reap the rewards of coalition loyalty initiatives, including more customers, increased sales, lower start-up costs through shared data and resources, and the offer of fuel rewards to their customers-all without discounting the brand.

Coalition means Collaboration
Collaboration is a key concept that lies at the heart of many successful businesses and endeavours. Whether represented by a partnership, a merger or an enlightening brainstorming session, collaboration has the power to create successful companies, launch entirely new industries and lead to innovative new processes and ways of doing business.

One of the manifestations of collaboration in the business world is coalition loyalty, an evolution of standalone loyalty programmes that reward customers for their patronage with points, miles, discounts and other perks. Around the world-especially in Europe, Canada and Australia-brands have recognised the advantages of coalition loyalty programmes with successful ventures that include Nectar in the UK (500 participating online retailers, 1.9 million members), Payback in Germany (hundreds of participating brands, 24 million members) and AIR MILES Canada (dozens of participating partners).

Only 30 years young, coalition loyalty programmes have proven their power to:

  • Attract new customers through increased impressions driven by a multiplicity of merchants promoting the same programme;
  • Increase customer engagement and shopper frequency by creating opportunities for everyday earning within the coalition;
  • Boost overall sales and average spend per transaction by offering meaningful rewards for even small purchases;
  • Provide insightful shopper data to coalition members, allowing for cross-promotional programmes between merchants;
  • Manage "plug-and-play" technology and promotional support for merchants.

The 2013 Colloquy Loyalty Census highlighted opportunities that await US brands that are eager to take advantage of a coalition loyalty programme based on a common currency. What Colloquy uncovered was this curious statistic: membership in US rewards programmes is growing (44% of Americans are active), but participation is not.

Loyalty programmes grew nearly 27% in 2013, to 2.6 billion members, with highest growth rates occurring in department store, drug store, restaurant, hotel and specialty retail programmes.

The average US household claims membership in almost 22 rewards programmes but is active in only 9.5. So why are consumers joining but not following through? What do consumers need to re-engage and become active? They need a reason to participate, including regular and frequent opportunities to earn easily and the equal satisfaction of redeeming their hard-earned rewards just as regularly. Quite simply, consumers aren't seeing sufficient value in existing programmes.

In addition to loyalty membership growth, another market shift is occurring: digital payments and e-wallets are moving from prediction phases to reality. Apple's official roll-out of Apple Pay in October 2014 is expected to lure other mobile payment vendors into the market, giving consumers even more opportunities to stash their plastic credit and debit cards in favour of smartphones they can instead swipe, tap and scan to earn, redeem and pay.

The Reach and Benefits of a Coalition
Coalition loyalty programmes have been thriving in overseas markets because they provide a common, broadly available loyalty currency that appeals to consumers throughout a country or region. The currency serves two main purposes: first, it gives brands a valuable loyalty reward to offer customers, and secondly, it gives brands access to a regional, national or global network of potential customers who already want to shop within the coalition and earn rewards.

US brands have been slow to embrace coalition loyalty, however, for several reasons:

  • A fear of sharing too much customer data with other brands or the programme administrator, in essence "giving away the secret sauce";
  • Concerns around the cost of technical integration typically required of a pilot programme;
  • Concerns from marketers about the cost of supporting a coalition loyalty programme;
  • Concerns about eroded margins or competition with other marketing initiatives;
  • The sheer geographic expanse of the US market, which favours regional brands over national brands.

There's a road ahead, but it needs Fuel
Just as the US has 50 states with one national currency, coalition loyalty has the potential to unite brands through a common currency that appeals to millions of American consumers. Of course, there already exists a single, unified currency that almost every adult American can relate to, values highly, and can use immediately: Fuel-based rewards.

A universal currency like this solves many of the above challenges. The more appealing and relevant the rewards currency, the more successful the coalition will be. In fact, according to the 2013 Nielsen Global Report of Loyalty Sentiment, 84% of consumers worldwide, including 76% of Americans, are more likely to patronise retailers that offer a rewards programme based on loyalty, and 82% of Americans-among the highest support among all countries-say that price discounts are the most significant attraction for using a rewards programme consistently and regularly.

The ability to save money regularly on a commodity product that most Americans need has proven to be both popular among consumers and practical as a form of currency.

"Consumers embrace fuel-based rewards because they can easily earn cents-off-per-gallon at the pump based on every dollar they spend with participating companies," concluded Logsdon. "Regardless of marketplace fluctuations in the price of gas, what consumer doesn't enjoy saving money every time they fill up at the pump? Brands stand to benefit as well because fuel rewards programmes provide a popular, frequently-used unified currency that can support a coast-to-coast loyalty coalition in the US."

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