Coalition Loyalty or Proprietary Loyalty: Insights From Around the Globe

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By: Wise Marketer Staff |

Posted on February 25, 2021

Which one will come out on top? Our recent story on Coalition vs Proprietary loyalty designs prompted some lively debate among readers — just as we hoped it would. The subject continues to be a lightning rod for our industry with strong proponents on both sides of the aisle. As one anonymous reader put it, “There is no right or wrong answer. Only arguments with various degrees of persuasion.” We couldn’t have stated it any better.

We gathered up a handful of our readers responses who were knowledgeable on the subject and eager to chime in. One subscriber felt that “proprietary is the only way to go if you want to protect and enhance your own brand.” An opposite point of view was expressed by a loyalty practitioner from Brazil who was adamantly in favor of coalition:

“In many countries there simply is not enough spend in a household for a given category. Proprietary will offer no benefit to the consumer. By building a coalition among brands in different categories, the ability to increase spend and ultimately the benefits offered to the consumer rise dramatically.”

Chuck Ehredt, CEO of Currency Alliance and both a long-time member of The Loyalty Academy and a frequent contributor to The Wise Marketer, had a tangible suggestion and offered to debate the article’s authors on the subject:

“Coalitions of multiple brands are the strongest proposition, but not with a 3rd party operating the program, collecting all the data, charging high fees, and forcing a single currency on all partners. The new and better model is to allow the brands to operate as peers in an open collaboration network — possibly with their own currencies, but making them fungible across partners.”

We also solicited members of the Customer Strategy Network (CSN), a global consortium of loyalty marketing experts to gather additional points-of-view from around the world. We often ask CSN in our attempt to gain richer, deeper perspectives from practitioners on topics of interest in loyalty marketing. Here’s what they had to say:

Nick Chambers, CLMP, Mobile Loyalty Technologies (UK):

“In my view, coalition loyalty programs should be viewed in the context of the payment process. Where both payments and loyalty combine to deliver real consumer value across a coalition of participating merchants.

Retail Banks are in the process of evolving their ‘cash back’ programs, using the digital receipt providers to publish item level purchase information within their bank apps initially to support the merchant returns process, but soon to deliver basket level consumer loyalty and promotions across their participating merchants.  

And, despite the set-back of Libra, Facebook will implement their digital payments strategy enabling participating Facebook merchants to incentivise and measure changes in consumer behaviour using their digital currency.”   

Adam Schaffer, CLMP, Ellipsis & Co (AUS):

“Is there a future for coalition (multi-partner) loyalty...? Interesting perspective from the Wise Marketer team arguing that 2 things are critical to making coalitions work: selective partnering and providing those partners with valuable data analytics.” 

A well thought out response from Simon Rowles, CLMP, CEO of Beyonde in New Zealand:

“With few exceptions, retail coalitions have done their dash. The old loyalty coalitions as we knew them are either gone or going. The UK’s Nectar is now owned by Sainsbury’s supermarket and Australia’s successful Flybuys has become half owner Coles supermarket’s program. Plenti had a very short run in the USA before closing.

When they were first conceived in the 1980’s they were brilliant marketing engines. Participating enterprises could access other companies customers and incentivise them with heavily marketed and highly attractive points instead of discounts. What could go wrong?

The world changed.

Customers still want to collect valuable currencies. Unfortunately for retail coalitions in every market the most attractive coalition currency are the frequent flyer points of the national airline. In Australia 35% of all credit card spend is on credit cards collecting Qantas Frequent Flyer Points. In New Zealand 25% of credit card spend collects Air New Zealand Airpoints. The retail coalitions in Australia and New Zealand can’t deliver performance anywhere near close to that.

Faster, better, cheaper technology

Getting into loyalty used to be expensive. It was a board level decision on a multi-year contract. Technology was bespoke and people with the right skills were rare.

Any company can now deploy a bespoke, tailored, and brand specific loyalty program. Technology costs have fallen as SaaS offerings from the likes of Eagle Eye or Cheetah Digital are carrying more features than almost any program is likely to use in offerings. They’ve become easier to integrate with offerings from Antavo and Open Loyalty delivering headless architecture. In January Salesforce launched Loyalty Management.”

Finally, we add the comments of our own Mike Capizzi, CLMP and Dean of the Loyalty Academy, who is also a founding member of CSN (US):

“There are many variations of both the proprietary and coalition designs that need to be considered. I personally believe that niche coalitions are underdeveloped for specific affinity groups in the consumer arena and huge opportunity exists for the niche concept in B2B loyalty. The problem with coalition isn’t the model. One size never fits all when it comes to best customer strategies. And the risk of failure in a new proprietary design may be higher in today’s environment than the return on investment.”

Have a perspective you’d like to add? Let’s keep the collective conversation going by sending us your input.