Coalition loyalty programs let consumers earn and spend points across multiple businesses.
It’s a simple enough premise: increase the number of ways customers can transact across your loyalty program and you create more engagement with them. At the same time, partner brands gain access to more customers and more data than running a stand-alone program.
While this model makes a lot of sense, a seismic shift is taking place in the coalition loyalty space, driven both by new technologies for managing loyalty programs and changing customer expectations.
Many traditional coalition loyalty programs are struggling to keep pace with rapidly changing technology and rising customer expectations. A current example is Flybuys New Zealand, which recently closed after nearly three decades of operation.
According to Lizzy Ryley, CEO of Loyalty NZ, which ran the scheme, the closure was partly driven by the fact that businesses now have greater access to technology and capabilities that allow them to create their own proprietary loyalty programs, rendering the traditional coalition model less relevant.
This trend signals a critical challenge: coalition loyalty programs that fail to adapt to the changing landscape are at risk. While the focus used to be on building scale by adding more “earn and burn” partners, today’s consumers expect more, including personalised and timely rewards that reflect their individual preferences.
In addition to better personalisation, the rise of modern loyalty technology platforms available at low cost signals that sustainable coalition loyalty programs won’t just be the domain of juggernaut brands, but could perhaps become available to many more.
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The Shift from Scale to Strategic Partnerships
In Australia, an example of a well-known large coalition loyalty program is Qantas Frequent Flyer (QFF). What started as an airline loyalty program has evolved into a massive ecosystem with hundreds of partners spanning retail, banking, accommodation and electronics.
The QFF program is an example of the massive scale of brand relationships some loyalty programs can achieve with considerable weight behind them. It’s a huge marketplace where Qantas points can be redeemed for transactions with many participating brands.
However, the evolution of customer expectations and modern technology stacks are motivating some coalition programs to shift focus, prioritising personalisation and strategic partnerships over scale.
Rather than just increasing the number of participating brands, coalitions are aiming to enhance the overall customer experience and add tangible value to their offerings.
Strategic partnerships are being formed based on shared customer segments and complementary offerings, enabling brands to deliver more seamless and personalised experiences.
For instance, a partnership between a fashion retailer and a travel company can deliver curated offers that align with the lifestyle and interests of their shared customers.
To maximise the potential of coalition loyalty programs, here are three key principles to follow:
1. Data Sharing for Enhanced Personalisation
Effective coalitions rely on using shared customer data that enables partners to deliver personalised offers based on individual preferences.
Data privacy concerns remain a challenge, but programs are navigating this by using anonymised data and implementing strong data-sharing agreements between partners.
One leading example is the Nectar loyalty program in the UK, which involves brands like Sainsbury’s, Esso, and eBay. By leveraging shared customer data, Nectar tailors promotions to individual preferences, increasing the relevance of offers.
For instance, a customer purchasing groceries at Sainsbury’s might receive a targeted discount for fuel at Esso, enhancing the perceived value of the program through data-driven personalisation.
2. Balancing Immediate and Long-term Rewards
Consumers today often value a mix of both instant rewards and the option to accumulate points for more valuable rewards.
Virgin Atlantic’s Flying Club program is a good example. It balances the ability to redeem points for long-haul flights with partnerships through the Virgin Red program that allow members to use points for everyday purchases, such as snacks at Greggs, a popular convenience retailer in the UK.
This combination provides members with short-term incentives while keeping them engaged with the promise of higher-value, long-term rewards.
3. Creating Seamless Customer Journeys
Successful coalition programs can deliver integrated experiences. A good example is the American Express Membership Rewards program. AmEx has partnered with numerous travel, retail, and dining brands to create a cohesive journey for cardholders.
A customer booking a flight through the AmEx travel portal can earn rewards redeemable at partner hotels or restaurants.
This interconnected ecosystem helps eliminate friction in the customer experience and allows members to derive value at multiple points in their journey.
Market is ripe for disruption
The market is ripe for disruption across platform technology, data sharing, personalisation, and reward distribution.
As customer expectations and technology evolve, coalition programs will need to transition from broad networks of partners to strategic alliances that prioritise customer experience and shared value.
Programs that embrace this shift will drive higher engagement and foster lasting loyalty. Programs that fail to adapt increasingly risk having their partners strike out to build their own proprietary programs.
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