THE CLARUS Blog

What is the Future of Coalition Loyalty Programs?

The idea of a coalition loyalty program isn’t new.

The idea is that brands across different categories team up and allow program members to earn and redeem points with any of the participating companies.

However, these programs have been largely unsuccessful in the U.S. because they end up focusing on the programs themselves and not the individual brands.

So, what’s changed? Why might a future coalition loyalty program be successful?

 

Why Coalition Loyalty Programs Failed in the Past

In order to better shape the future, we must understand the past.

Everyone remembers Plenti. It was probably the most popular coalition loyalty program in the U.S.

But it failed because it didn’t create differentiation for any of the brands involved.

By its very nature, it’s hard to integrate a coalition program into any brand experience. These programs focus on themselves and not any single brand.

So, while Plenti seemed like a great idea, it failed to drive loyalty to any of the brands themselves.

Read more about the demise of Plenti here.

Differentiation is critical in the Age of the Customer because consumers have so many choices. They can switch brands so easily. A great, focused loyalty program can play a huge part in offering customers something different.

We believe that brands should invest in their own loyalty programs to stand out from the competition.

So, why are we talking about coalition loyalty now?

 

Look at the Present State of Retail

Coalition programs of the past, like Plenti, were made up of many separate brands. Customers had to physically travel to different places to earn and use their rewards.

Not all the brands were in every geographic area. The customers didn’t have a ton of options on where to use points. The physical distance between coalition retailers was a problem.

While most retail transactions still happen in-store, it keeps getting tougher for major retailers to compete with e-commerce companies and Amazon. More than 4,800 retail locations have already closed this year.

But there is still a lot of power in physical space. As Amazon continues to take market share, retailers are getting creative and working together in different ways. Sharing space is one of them.

I recently read an article that got me thinking about the idea of retailers leasing space to other retailers.

For example, Kohl’s will be leasing or selling space to Aldi and Planet Fitness. A LensCrafters is going to open inside Macy’s.

Could certain groups of retailers and brands band together not only on space, but on their loyalty efforts as well?

 

Is the Future of Retail More Cooperative?

Retail has changed and continues to change. Some brands are rethinking ways to work together. Some of that has to do with a concerted effort against Amazon.

Amazon bought Whole Foods and integrated it into the Prime ecosystem. It’s doing the same thing in other industries.

While Amazon owns most of the companies that fall under Prime benefits, perhaps brands that are not Amazon could come together and offer loyalty programs that cover multiple categories.

There are digital native retailers that are starting to pop up everywhere. They are up against Amazon as well.

What if Warby Parker opened inside of Old Navy space? Could purchases made at Old Navy earn rewards on glasses and vice versa?

If Aldi and Planet Fitness are located under the roof of Kohl’s, why not do more to encourage consumers to shop at all three? Join the Kohl’s / Aldi / Planet Fitness loyalty programs and get relevant benefits at all three.

If people are shopping at Kohl’s for athletic apparel, chances are they belong to a gym and are health conscious about groceries.

If someone belongs to Planet Fitness, they’ll need gym shorts and healthy snacks. And unlike Plenti, they won’t have to drive to different locations to enjoy the program benefits. Everything would be under one roof.

If these brands are already working together to cut costs by sharing space, why not take it a step further and start working together on loyalty programs as well?

 

Working Together for the Greater Good of Retail

While this is all just speculation, it’s an interesting concept to think about.

Retailers need to get more creative than ever to win the loyalty of customers as Amazon keeps encroaching on different categories.

We can’t keep looking at loyalty programs the same way. We need to constantly think of ways to use loyalty as a big differentiator.

Are there any complementary retailers that your brand can partner with to make a more attractive loyalty program for your customers?

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