Why Major Brands Are Choosing Private Loyalty Programs Over Coalition Programs
In 2015, we wrote about American Express’ new coalition loyalty program, Plenti, and how we were skeptical that it would find traction in the U.S. Turns out we were right to be. Over the past few months, a disclaimer on Plenti’s website announced that AT&T, Expedia, Enterprise and Macy’s, among several other brands, would be leaving the program in late 2017 and early 2018. This exodus from coalition seems to be a growing North American trend, as even major airline Air Canada has decided to leave Aimia’s Aeroplan program as of 2020.
But don’t be fooled: the big guys aren’t jumping ship because they think all loyalty programs are doomed to fail. They simply see more value in their own loyalty programs. In fact, Macy’s will be concentrating on its Star Rewards, and Air Canada plans to launch a proprietary loyalty program.
If you’re part of a coalition loyalty program or thinking of joining one, here are several reasons why you’ll want to consider a private loyalty program instead.
You’ll have full control of your program
In 2007, Aimia decided to introduce an expiry policy for Aeroplan reward miles, and in 2011, Loyalty One followed suite with Air Miles. Members rushed to redeem their points but found that they had to jump through hoops, and many felt cheated, even going so far as to destroy their cards. Facing massive consumer backlash, Aeroplan and Air Miles had no choice but to rescind their policies in 2013 and 2016 respectively, but by then the harm had been done: their reputations had taken a big hit. These incidents contributed to growing consumer distrust in and frustration with coalition loyalty programs.
But Air Miles and Aeroplan were probably not the only ones who were affected by their decisions: every merchant who participated in their coalition programs was most likely impacted on some level. Think about it: if members stopped trusting the two programs and using their point cards, they’d have one less reason to shop at participating companies and might instead bring their money to competing brands with more positively perceived loyalty programs.
By starting your own private loyalty program, you won’t be impacted if a coalition whose values don’t align with yours makes unilateral decisions that negatively impact your members. Your loyalty program communications will reflect your brand, and the only reputation you’ll have to worry about is your own.
More relevant insight leads to more personalized marketing and rewards
One of the main advantages of subscribing to any loyalty program is collecting data on consumer habits to adapt your sales and marketing strategies. Although coalition programs like Air Miles and Plenti serve several brands under one banner and can gather information from a country-wide consumer base, participating merchants don’t always have the right to access or use detailed member profiles and transaction information. And even if they did, how useful is data about consumers who shop on the other side of the continent anyway?
Coalitions bring together brands from various industries. Even though their target audiences might overlap at times, they’re still mostly different. For example, a car rental company who attracts tourists and people on business trips probably doesn’t have the same audience as a supermarket who serves local shoppers on a regular basis, even though some of the people who do their groceries might rent a car. Different consumer habits should be addressed with different marketing and reward models, so lumping several brands under the same umbrella just doesn’t make sense.
A private loyalty program used at only your brand’s locations will generate data that is entirely relevant to your business. You’ll know who your customers are, when they spend money with you, which locations they visit the most, what they buy, how much they spend and more. With that information, you can adapt your marketing, target your ideal customers and come up with more personalized rewards, which will make customers feel appreciated and strengthen their emotional bond with your brand. They’ll become ambassadors who give you positive online reviews and spread word-of-mouth willingly. And that kind of genuine, unsponsored advertising is priceless.
Above all, you’ll know that members show loyalty toward your brand
The biggest conundrum with coalition programs is figuring out consumers’ motivation to participate in them: are they members because they just want to earn points or because they truly believe in the brands involved?
On one hand, consumers who care more about rewards wouldn’t really care which gasoline stations, grocery stores or pharmacies are part of a coalition program: they’d just gravitate toward whichever brand gives them points. So if a business leaves a coalition and is replaced by a competitor, these types of consumers might just follow the points and shift their shopping to the new business.
On the other hand, if a specific business is a major driving force in a coalition program because consumers love shopping there, the coalition program would lose its value if the business left and took its customers with it.
We think businesses should want clients that are loyal to their brand and who would follow them even if they moved, not stick with whoever fills the empty space out of convenience. By offering a private loyalty program, you won’t have to worry about losing your members if the coalition program you’re part of changes or if you move. Customers can decide to become members of your program specifically, and you’ll know with certainty that they show real loyalty to your brand, not just to points.
Will Plenti be able to survive without Macy’s and Aeroplan without Air Canada, or will consumers follow the brands to wherever their private loyalty programs take them? Only time will tell whether real loyalty or the ability to earn points was keeping consumers in the programs.
Oh — and if you’re considering a coalition loyalty program because you think joining a fully branded, premade program will take less time to set up, think again: a good private loyalty solution provider will handle all the technical aspects and can have your program up and running in only a couple of weeks, so getting started can be as easy as signing up, ordering cards and telling your customers.