Almost any stand-alone loyalty program has the potential to grow into an sector-wide coalition of like-minded and product-compatible partners, according to Ernex loyalty expert Malcolm Fowler, who also explains how the evolution takes place.
According to Fowler, loyalty programmes have become so popular that consumers seem happy to make good use of any innovative scheme that crosses their everyday shopping path. For example, a recent survey from Synergistics Research Corp. found that credit cards with a rewards program more than double card usage to an average of 12.6 times per month versus 5.2 times per month for a card without a rewards program.
The obvious path for an already-active loyalty programme, Fowler suggests, is to grow it into new and diverse areas by expanding business relationships with like-minded, non-competing, and product-compatible companies that can issue and redeem the points currency. Ernex uses the word 'Growalition' to describe this phenomena.
In Fowler's article on the subject, published here at The Wise Marketer (click here), he offers a typical airline frequent flyer programme as an example: first, the airline decides what other companies its customers are likely to use, then it negotiates mutually beneficial coalition partnerships with sector-exclusive businesses. The airline may decide that its passengers to a busy international hub might need car hire and hotel rooms, so it makes sense to approach a car hire firm that operates at the same airport, as well as a big hotel near the airport. These partners can then issue points in the airline programme's currency.
These partnerships create benefits for all involved: the original loyalty scheme gets increased exposure as partner companies help spread the word, it becomes more relevant for existing and new members (who now have more avenues to collect rewards points), and it creates an environment where the new partners help fund and grow the programme.
The partner companies benefit because the coalition brings new customers, and they can also be seen to be offering relevant rewards in a market where (like airport car rentals) there may be very little else to differentiate between all the local players.
Last (but most certainly not least) the consumers - your loyalty programme members - gain by having more ways and options to earn and redeem their rewards.
Explaining the rules
In Fowler's article he details the prerequisites for a loyalty programme before it can consider expanding in such a way, and the key steps involved in choosing the right partners for the expansion into coalition territory.
Among other things, Fowler quite rightly warns that partner companies shouldn't be competitors, and must appeal directly to the same target audience. Another key to success is building the coalition one partner at a time - otherwise it's difficult to market them all together, making the management of new partners' expectations dangerously difficult.
Malcolm Fowler is vice president and general manager for Ernex (a division of Moneris Solutions Corporation) and has provided professional consulting services to corporations such as Eddie Bauer, Radio Shack, Choice Hotels, and Royal Bank of Canada.