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Loyalty Coalitions 101: the what, who, how and why

You’ve heard the old expression, “there’s power in numbers.” Well, that’s basically the underlying concept behind loyalty coalitions.  Here’s an overview of just how they work.

What are they? Loyalty coalitions are formed when a group of companies band together to form one loyalty program, allowing customers to earn and use reward points at any of the participating businesses – even totally unrelated ones. Let’s say, for example, that a consumer earns points from buying a pair of shoes from a participating company. She can then use those points to get a discount on her  car insurance at another coalition business. Now that’s what you call buying power. While coalitions have been in place for some time abroad (Connexions is a partner in SMILES, the Brazil-based loyalty coalition as well as the LifeMiles coalition in Colombia), coalitions have only recently been introduced here in the U.S.

Who are the players? The two main loyalty program coalitions currently in the U.S. are Plenti and Belly. Plenti, operated by American Express, has a roster of some major brands, including Macy’s, Rite Aid, AT&T, ExxonMobil, Nationwide, Hulu, Enterprise and Direct Energy. Belly’s network is made up of smaller retailers, about 7,000 in all across the nation.

How do they work?

       
  • Plenti: Members automatically earn points to their Plenti card by spending money at participating businesses and can roll up even more points by activating certain offers in advance. No credit cards are required with Plenti, though members can still earn rewards from them or any company-specific loyalty program. Every 1,000 points gets you  at least $10 in buying power.
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  • Belly: Unlike Plenti, members accumulate Belly points just by visiting a store rather than spending money there. It’s a smartphone-based app, so no loyalty or credit card is required. Members simply use a QR code to check-in at the stores. It also has some other nifty features: profiles sharing store hours and contact information and can even help you “Belly-up” to participating stores closest to your current location.

What does it mean for customers? Simply put, more benefits. Martine Reardon, CMO for Macy’s, says that “the value proposition behind this is just really great for the consumer.” And Matt Shultz, a senior industry analyst for CreditCards.com agrees:  “anything that gives consumers more options, more flexibility when it comes to loyalty and cashing in rewards, is a good thing.”

And for businesses?  Loyalty program coalitions are also great for businesses, providing them an inexpensive (but limited, because you don’t own the data) way to gather data on consumers. And while coalitions may not foster brand loyalty per se (the power of coalitions lies in the number of participating brands, so customers aren’t necessarily tied to just one brand), coalitions can help businesses expand their customer base and introduce their brand to new customers.

Coalitions may still be new in the U.S., but they are worth keeping an eye on.  Meanwhile, we’ll keep you updated on their progress.  Be sure to subscribe to our newsletter and follow us on LinkedIn and Twitter to get the latest updates. 

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Tags: loyalty, coalitions, rewards programs

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