While the coalition structure has long been established as a loyalty marketing program model in the consumer sector, there have been few attempts at this approach in the B2B space. It is time for B2B marketers to reconsider. A few insights are offered in this commentary.
By: Colin Samson
Coalition structures align multiple brands in a single program with a common identity and loyalty value proposition. Each brand “buys” a common currency — points, miles, etc. — and issues that same currency to members at a rate established by the brand. The program is typically operated by a 3rd party on behalf of the participating brands, who market the loyalty program under the common identity. Members can earn benefits faster because they are earning based on patronage across brands and categories. The brands share the cost of loyalty operations and technology which lowers their investment and has the potential to substantially increase their return on investment (ROI). When done right, everybody wins!
But the B2B sector has launched and operated very few loyalty designs which use this model. We have been fortunate in New Zealand to operate one of the oldest of these programs, launched in 2007 — The Plumbers Club — which deals with registered plumbers and gasfitters and multiple brands like Rheem NZ, Apex Valves, and Hydroflow. The products are primarily bought through wholesalers and are increasingly promoted in a bundle with extra discounts for members who buy all three. Shared communications and bonus point programs increase the coalition effect and the synergy between the primary brands.
The best approach in B2B coalition structures is to focus on a “niche” audience. Groups of customers who share a common affinity, like plumbers, buy many different goods and services to maintain their business. But they all buy similar goods. And their buying profile is typically similar and of strong transaction value across categories. The brands they buy will undoubtedly be different, but a “niche” coalition can establish a strong incentive for the affinity group to buy from the companies within the coalition. Especially when product, price, and service quality meet the expectations of the members.
B2B niche coalitions are viable in a variety of industries
The participating brands should be non-competitive with each other, signaling industries where brand choice is widespread. These structures work especially well where a significant percentage of the brands’ sales volume comes from businesses that are small to medium-sized, independent, and void of large corporate purchasing constraints. The trades audience is especially attractive — builders, contractors, electricians, plumbers, auto mechanics, and a dozen other niche groups who buy a substantial amount of product over a year and they have multiple brand choices. We also believe that professional B2B audiences — vets, dentists, salon and personal care operators, golf pros, accountants, lawyers, farmers, etc. have all the necessary niche criteria and substantial purchasing potential.
While each of these industries have different sales channels involving distributors, retailers and other intermediaries, each has expanded their direct-to-end-user capabilities via e-commerce in recent years. The global pandemic of 2020-21 has only accelerated these efforts.
Having a direct relationship with the end user, building a detailed customer database and transaction profile through a loyalty program can benefit the brand and accelerate their insights into customer wants, needs, and preferences. Not to mention helping to gain share of customer and incremental sales without using pure price promotion and margin erosion as the tactic.
Whether direct or through distribution channels, getting the purchasing data without burning bridges is the key to success. Provided everybody wins, the operational hurdles can be overcome, and the end-user customer receives reward and recognition for all they procure within the coalition network of companies. The companies increase their share of wallet, take the focus off price, build a substantial database that can leveraged going forward and enjoy increased ROI given reduced expense.
There are a few case studies around the world that prove this model is viable, profitable, and a significant improvement over the current B2B marketing practices observed.
If you would like to learn more, drop us a line. Maybe, together, we can come up with something that’s blockbuster.
Colin Samson is the CEO of Reward Paths, a North American Loyalty service provider which specializes in the B2B marketplace. Colin also serves as the Chief Executive for Reward Paths parent company, Incentive Solutions in New Zealand and Australia. He is a frequent contributor to the Wise Marketer.