6/26/2014
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`Home › Newsroom › Newsletters › Edition 2 - Sep09 › Coalition loyalty
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`Marketing practitioners understand that the extent to which they can control their customer relationships is a significant
`driver of long-term stability and profitability for their companies. A loyalty programme is an obvious way to achieve this but
`which type of programme should a marketer choose - a traditional proprietary programme or a coalition programme?
`
`Independent loyalty vs. a coalition programme
`
`The former is the most frequently implemented loyalty programme; initiated and fully controlled by the brand owner. The
`second, a coalition programme is different. It allows customers of various participating partners to become members of a
`single programme and accumulate a single reward currency through transacting with these partners which can be
`redeemed for a variety of rewards.
`
`Usually the programme is managed by an Independent Programme Operator (IPO) whereby participating partners are
`contracted with the IPO to gain the ability to issue and redeem the reward currency with its members.
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`Coalition programmes have cropped up all over the world. i-mint is India's largest coalition loyalty programme, with
`approximately 5 million members. Australia and South Africa have well-established programmes in Fly Buys and eBucks
`respectively. Yet perhaps the most famous one is Nectar in the UK which has almost half of the 22 million households in
`the UK. Following the success of this model, Groupe Aeroplan has recently announced that it is to launch a similar
`programme in Italy. However, not all countries have accepted and adopted coalition programmes with the US and China
`not having any significant programmes of note.
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`Advantages and disadvantages
`
`There are clearly some notable advantages of a coalition programme, the most significant being the increased ability to
`collect points through a wider network of partners - this is good news for members as they can start to redeem and enjoy
`the rewards more rapidly. The IPO benefits hugely from controlling the initiative and charging business partners to
`participate.
`
`However, the benefits for the business partners and their brands are not always as obvious particularly as it is not clear
`whether the customer's loyalty is to the programme or to the partner. And so brand owners need to fully understand their
`objectives for joining a coalition, the implications it would have for their brand and their ability to build a direct relationship
`with the customer.
`
`A significant disadvantage is that insight into consumer behaviour, fundamental to the success of any loyalty programme,
`is compromised for partners. As the coalition programme database is owned by the IPO, access to customer data and the
`use of this data by partners can be limited.
`
`Another major disadvantage is the ability of partners to fully control the direction of the programme and the speed it can
`react to changing marketing and economic forces and customer needs.
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`Choosing the right approach
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`That said for some brands, coalition programmes can give them access to a loyalty scheme very cost effectively. It can
`provide them access to a greater customer base which was previously unavailable whilst also allowing them the ability to
`tap into the experience of seasoned loyalty marketers.
`
`Brand marketers need to decide very carefully in which direction to go. There are clear advantages and disadvantages that
`any company will need to evaluate in line with their commercial objectives. However the ultimate goal should be the
`possession and ownership of a unique and direct relationship with customers as part of a customer-centric loyalty
`approach.
`
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