Retailer coalition makes for stronger loyalty program

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.

Loyalty marketing in the U.S. just branched out into new territory with the planned launch by American Express of Plenti, a coalition loyalty program. Such multi-merchant plans are popular in other parts of the world but haven’t gained a foothold in the U.S.

American Express spent the last couple years exploring the possibility of a coalition program and was stunned by the level of interest from consumer focus groups as well as companies that it spoke with while finding potential partners.

"The response was overwhelming to us," said Abeer Bhatia, CEO of U.S. Loyalty at American Express.

Plenti will launch in May with an initial roster of seven partners — AT&T, Exxon, Macy’s, Nationwide, Rite Aid, Direct Energy and Hulu. Members of the free program will earn points when they shop or do business (say, paying their premium or getting an insurance quote at Nationwide) at any of the partner companies and can redeem them for rewards at the various places. Partners pay a one-time fee, along with ongoing performance-based fees.

plenti

While American Express will administer the program, members will not be tied to using its card for payment with the partner companies — in fact, any payment type is acceptable, including MasterCard, Visa and cash. The goal is to be as welcoming as possible, said Mr. Bhatia. There will also be no sharing of transactional data among program partners, he said. If a consumer buys a face cream at Rite Aid, that data is not passed on to other partners.

The program will have a mobile app and website-based platform, as well as traditional membership cards. Points earned will be valid for at least two years.

Mr. Bhatia said the time is ripe for coalition loyalty in the U.S.

"You need two components — the right operator to help put this together and administrate it and put the technology behind it, and the right partners," Mr. Bhatia said.

Unlike some others that have considered a foray into coalition marketing in the U.S., American Express has an understanding of the U.S. marketplace. It also has program operation experience gleaned from outside the U.S. through its 2011 acquisition of Loyalty Partner, which operates coalition programs in Germany, Mexico and Italy.

As for the right partners, Mr. Bhatia said it’s critical to make sure they represent a variety of industries and, more importantly, that they have the right mindset of collaboration and relentless commitment to consumers.

Other companies are exploring potential partnership with Plenti, but they would have to fit the mindset and be in complementary, not competitive, businesses from existing program partners.

BrainTrust

Discussion Questions

What factors will be essential to Plenti achieving success? What lessons should be learned from the failures of past coalition programs? Do you expect other major retailers to join Plenti?

Poll

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Max Goldberg
Max Goldberg
9 years ago

To achieve success, Plenti will need to offer a wide variety of rewards, many of them easy to achieve and others aspirational. The program must be easy to join and easy to follow and redeem. In my opinion the current list of participating companies is too small which will limit consumer membership and active participation.

With almost every retailer offering some sort of loyalty program, do we really need another?

Paula Rosenblum
Paula Rosenblum
9 years ago

I thought this was a big part of the consumer value proposition for MCX?

If so then it’s really smart of AmEx to launch this. In fact, it’s smart for AmEx to launch this all the way around. After all, the processor has taken some real hits lately. I think it desperately needs a way to differentiate.

I do wonder about Exxon being in this program, since it’s also a charter member of the MCX consortium. I understand the core of MCX is as a payment processor, but for consumers to care about it at all, they’re going to have to make some perks available.

Overall, I can’t call this a great move, but I can call it the only logical move AmEx could make.

Ben Ball
Ben Ball
9 years ago

AmEx should be able to overcome the operational hurdles of this sort of program easily enough. Their acquisition of Loyalty Partner is an obvious experience plus.

The hardest part may be the structure of the U.S. market. We tend not to have one dominant retailer in a category. So having Rite Aid does not cover drug/HBA needs for all shoppers who might want to participate in the program. That’s probably less of a limiting factor in a category like gas/oil (how many of us really go to Shell anymore?) but may prove more problematic in high-frequency categories like drug.

Roger Saunders
Roger Saunders
9 years ago

American Express has the experience and understanding to build loyalty success into this program. If they start with the consumer (member) in mind and then move in a manner to meet those member needs, they will have a winner.

Reward programs work best when they are: 1. Consistent with what both parties want/need, 2. Are easy to understand, 3. Are simple for all to administer, 4. Provide timely rewards that keep the engagement juices working and 5. Are significant enough to get all parties excited.

Plenti should be a winner.

Cathy Hotka
Cathy Hotka
9 years ago

I don’t see it. Unless the number of retailers grows, the program won’t be top-of-mind for customers. Is it just me, or is the plethora of rewards programs—credit card programs and e-bates among them—just a little overwhelming?

Mark Price
Mark Price
9 years ago

The challenge of coalition programs has always been to demonstrate incremental volume to the different partners. The bulk of the lift tends to go to companies with higher perceived value to their rewards.

I am also concerned that the member companies cannot use purchase data from other partners to help them better target offers and communications programs.

Not sure the program has legs to overcome these hurdles—we will have to see.

Mark Heckman
Mark Heckman
9 years ago

Many retailers that have invested mightily in their own loyalty programs are inherently suspicious of joining forces with other retailers in fear of either losing control of their data or existing equity of their program. Both concerns are real, but have been mitigated to some extent by those recent entries in the coalition business.

Retailers should take a strong look at programs like Plenti if they truly want to remain relevant with their shoppers. Most loyalty members are well past their saturation point with dozens of key fobs or entries on their program aggregator app. Consolidating engagement portals, mobile apps and offering multiple outlets for points rewards will always test positively with the wary loyalty consumer.

To increase the chance of retailers joining a coalition, insuring that their “loyalty database firewall” is never breached is step one. In other words, while the retailer may transfer points and content to the coordinator of a coalition, most will not expose the shopper’s personal information or even shopper behavioral data to outside sources.

Bigger retailers with more loyalty members are also reticent to join coalitions with smaller retailers as they believe they are contributing more equity into the program than they are receiving. Tiered programs with “anchors” can address this concern, but the code has not been cracked on that one yet.

All in all, coalitions done right will prosper. As with most things these days, the customer is driving change. Retailers can chose to either resist or stay abreast with the loyalty shopper.

Jonathan Marek
Jonathan Marek
9 years ago

I’ve never understood why coalition loyalty programs haven’t done well in the US. I think the right best practices exist in other countries, notably Japan and Canada. In Japan, for example, there aren’t many category-dominant players, but yet programs like T-point still do quite well.

Martin Mehalchin
Martin Mehalchin
9 years ago

These programs have gained traction outside the US but have not had much success in our market. Three factors that Plenti will need to have a chance of catching on:

Nationwide Consistency & Relevancy: If the participating brands aren’t in a consumer’s area, it’s unlikely they will join. To complicate matters, relevancy must also be considered. You need participating brands that meet the needs of a mass market audience while seeking out potential loyalty program enthusiasts at the same time. With Macy’s, Rite Aid, AT&T and Exxon Mobil on the initial roster, Plenti seems to have done it’s homework here.

Utility: Even though more Americans belong to loyalty programs than ever, the percent of active members continues to drop. If consumers can’t see their efforts result in a meaningful reward quickly, they will typically opt-out. That makes “every day spend” categories like gas, grocery, and mass retail critical to the success of these programs. Again, Plenti has a good start in some key categories.

Digital: Today, consumers are increasingly living digital lives. Their “everyday spend” is no longer limited to brick & mortar, yet these programs tend to focus on offline partnership. We will see how seamless Plenti’s digital experience turns out to be.

Finally, with new brand loyalty programs popping up nearly every day, one of Plenti’s challenges will be simply breaking through the noise and acquiring active members. The install base of Amex cardholders should definitely help with awareness.

Kai Clarke
Kai Clarke
9 years ago

Success in the this program will require a “no fees” approach. Who wants to be paying every month to “belong” to a loyalty program? The concept of loyalty programs are to increase repeat purchases by offering additional rewards and incentives to the consumer for their increased and repeated purchases. Charging a monthly fee for just the access to this service is ridiculous and something that AMEX is clearly confused about.

Robert Hilarides
Robert Hilarides
9 years ago

If the goal of the program is loyalty, I’d have a hard time giving up ownership of my relationship with the customer. Perhaps it’s okay for low involvement/frequency relationships where the customer doesn’t want to invest much. But then how differentiating is it? And what behavior is really going to be changed? Many of these partners already have their customers somewhat locked in…are they just subsidizing their loyal buyers unnecessarily? Macy’s, Exxon/Mobil and CVS can convert a few incremental trips to their sites, but don’t see as much benefit for the others.

If the goal is about insight into shopper behavior, maybe Amex can add some value if the retailer hasn’t been able to get their arms around that big data challenge. It would sure be nice to see behavior across retailers, though, and be able to market directly to those Plenti members that opt in. One more example of power shifting from the consumer.

Alan Lipson
Alan Lipson
9 years ago

As a consumer, I am looking for a program that will allow me to have access to a set of products and services that I am interested in and that I find to be of appropriate value for the points required for redemption.

I don’t really think of these as rewards programs. There are so many of these around already. Most of my credit cards already offer some sort of rewards programs. Some of the travel programs I am enrolled in allow me to purchase products or turn my points into gift cards.

I would expect that in time more retailers will join the coalition, but what will make it a success is good products and services along with great customer service both when redeeming rewards and even more importantly when dealing with any customer issues.