Coalition loyalty programs can be extremely effective. Coalition programs involve a group of dissimilar businesses working together to offer membership benefits.
Coalition Loyalty Programmes: the who, why, and how big?
By By Peter Clark (co-author, The Loyalty Guide)
Published by The Wise Marketer in April 2006
There are two types of multi-partner programme: true coalitions and in-house programmes that have partners. Here we explore the strengths, weaknesses, opportunities and threats of true coalitions... Tesco's Clubcard is a single operator programme that bloomed into a multi-partner programme, while built-for-the-purpose coalitions include Nectar (UK), Air Miles (various countries), Bonus Link (Malaysia), Gold Points (USA), PayBack (Germany), and Infinity (South Africa), among others. From here on, we're only talking about the true coalition loyalty model. The four governing factors
There are four essentials that a coalition loyalty programme must provide if it's to be successful: 1. Rapid market penetration
A coalition programme should launch with a major partner in several of the key consumer sectors in order to quickly capture a significant proportion of consumers' spend. Ideally, these would include a major grocer, fuel retailer, bank or credit card, department store, and a mobile telecoms provider.
2. Deliver attractive rewards
One of the main advantages of a coalition programme for the consumer is that aspirational rewards can be earned within a reasonable time - even in as little as six months. This is because points can be earned on a large proportion of their normal monthly spend, if they buy from the right outlets.
3. Be first into the market
Generally, the first coalition programme in a region has an almost unassailable advantage. Once more than half of target households are signed up and have begun collecting, it is very difficult to tempt them to change to another programme. But there are exceptions: Nectar launched in the UK where Air Miles had already been for 13 years, but the founding partners brought huge existing member bases into the programme, in some cases automatically.
4. Build reliable communications:
Today's consumer wants to communicate via all sorts of channels: the mail, the internet, by telephone, by text message and even in person by face-to-face contact - all of which offer different strengths, weaknesses and costs. In general, partners save a fortune on marketing and communications - but they're also 'tarred with the same brush' if the programme manager's communications aren't up to the standard consumers expect. Are coalitions a good or bad idea?
Let's start with a few major advantages, then we'll move on to some disadvantages. The advantages of coalition programmes apply equally to consumer and partner. Advantages include...
5. Consumers are interested in greater rewards Consumers' interest is most easily held by a loyalty programme that offers that magic word: choice. The opportunities to earn points are more frequent and varied, the rewards are bigger and can be more aspirational, and the range of rewards can be greater.
6. Wallet space and consumer engagement
The coalition's plastic card, token, or electronic ID is more likely to be carried all the time, and more likely to be used frequently. Each time it is used, it reminds the customer of the programme and further stimulates interest and engagement.
7. Cost benefits and competitive advantages A major cost benefit - and often a competitive advantage - is that most of the development work has already been done by the coalition programme's operator, sparing partners the time, money, and manpower of developing a programme. But while the costs are usually borne by the operator, in some cases they may be shared by founding partners. ...
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