Coalitions 'the next big thing' in US marketing?
A panel of customer loyalty experts at the recent US Direct Marketing Association's (DMA) annual meeting explored and explained the rapidly-growing phenomena of coalition loyalty marketing, and concluded that this programme structure has not only been successful in other countries but may well become 'the next big thing' in customer retention in North America.
Unlike the single-operator loyalty rewards programmes that are currently familiar to American consumers, coalition programmes - which are already very popular in Canada, Brazil, Germany, Australia, the United Kingdom and other markets - allow the consumer to use one card or membership to earn points across a range of categories and sectors.
Those points, which tend to accumulate for more quickly than they would with a single operator programme, can then be redeemed for a range of rewards either from the coalition operator or from a selection of merchant partners.
For example, a typical coalition programme's points-issuing partner list includes a high frequency retailer (such as a supermarket/grocer), a fuel retailer, a credit card (which allows so-called 'double dipping' in which members can earn points both for using the card itself and by shopping with a points-issuing partner), a range of merchants providing other household and day-to-day goods, and several less frequent - but usually high value - services (such as car servicing, opticians, and so on).
The DMA panel entitled 'Loyalty leaders tell all: Coalition programmes from around the globe', featured Bryan Pearson (president for LoyaltyOne, operator of the Air Miles programme in Canada), Alexander Rittweger (CEO for the German Payback programme), Phil Hawkins (general manager for FlyBuys in Australia), and David Rochon (president for the US-based college savings reward programme Upromise).
The panel agreed that the coalition model's key differentiator is making use of consumers' everyday spending in high frequency categories to offer more attainable rewards that can't be earned as easily in traditional single operator programmes.
Among the recent facts highlighted by the panel:
- In Canada, Air Miles' market penetration far exceeds US rewards programmes, reaching some 66% of Canadian households;
- A coalition loyalty programme that Payback recently introduced into Poland attracted 2 million members in two weeks;
- A coalition loyalty race is already underway around the world, with the major prizes being the US and Chinese marketplaces;
- LoyaltyOne recently purchased a 29% stake in the Brazilian coalition programme operator, Dotz, while Aeroplan in Canada has recently acquired the operator of the UK's Nectar coalition programme.
According to Pearson, "The introduction in the United States of a nationwide coalition loyalty programme consisting of some combination of fuel, grocery, credit card, travel and department store sponsors is not a matter of 'if' but simply 'when'."
"Ironically, the recession may open a window that allows a US coalition programme to take flight," concluded Colloquy partner, Kelly Hlavinka, who chaired the panel. "A lack of liquidity and low consumer confidence may temporarily weaken investments in sole-proprietor loyalty offerings, and that same environment could fuel a need for companies to share marketing costs and control programme liability more effectively, both of which could drive demand for coalition loyalty models."