The Case Against Coalition Loyalty Program

Coalition loyalty program is a reward system that offers attractive benefits to customers of two or more businesses in return allowing those businesses to share their customer information and data. These systems create unique currency in the form of points or credits that are earned and could be redeemed across a network of different brands.

The biggest and only Coalition Loyalty player in the MENA region is AirMiles that claim to have around 1 million members with 52 participating businesses in the UAE, 44 in Qatar, and 14 in Bahrain. So with a such a members base and number of businesses, it is understandable that a business in the UAE, and the region in general, would find it appealing to be part of that network and think of AirMiles (or any similar programs) the solution for their Customer Loyalty program.

Here are a few points for business managers and owners to consider:

Your Brand

UntitledLoyalty programs are about differentiating your “brand” in the mind of the customers through different processes and tools. This relationship, if built on the right foundation, will eventually provide sustainable growth for the business. So as a customer, it is “your brand” that I have a relationship with and that I am interested in maintaining.

In the case of the coalition program, your brand is overshadowed by the brand of the coalition brand itself. So as a customer, I am really not building a relationship with your business, I might not even remember your brand at all, because my relationship is with the coalition program. In other words, I am loyal to the program and not to your brand, which is in this case owned by someone else.

So if we take AirMiles for example, as an AirMiles member, my relationship is with them, I have “their” card, I go to “their” web site, and every business I interact with I ask if they take “AirMiles” card, which means that it is AirMiles that is on my mind and not your brand.

If we take Spinneys for example, a supermarket chain in the UAE, shoppers there can gain AirMiles points but is that going to strengthen the Spinneys brand with their customers? It will actually benefit AirMiles more because to the customer it is AirMiles who is doing them a big favor by giving them points for shopping at Spinneys.

Your Customers

Here’s the deal when it comes to consumers, the question on their minds is no longer focused around if the loyalty program is going to help them save money but whether it is going to help them have a better experience with the business. So in the “new” world, a “loyalty program” that is focusing only on points and rewards is already obsolete.

As a business that is part of a coalition network, you have no way to provide your customers with the personalized experience that they now expect and demand. What happens if your top-spending customer is not a member of AirMiles? Would you even be able to tell how many of your customers are part of the Coalition Program?

The biggest drawback of the coalition programs when it comes to customers is that it treats everyone the same. It doUntitled2esn’t matter if I have been your faithful customer for years, I would get the same acknowledgment from your business as someone who just walked in and happened to be a member of the coalition program. So if I have been shopping at Sharaf DG for years and never received anything but then a tourist walks in with an AirMiles card and I see her is getting points then I will be enticed to become a customer of AirMiles. So Sharaf DG actually gave AirMiles a customer.

But let’s look at it the other way, what if that customer came to Sharaf DG because he had an AirMiles card and he wanted the points, doesn’t that mean that Sharaf DG gained a customer becaue of AirMiles? Not really, what Sharaf DG would gain from that is a transaction because the customer profile and preferences is still with AirMiles, they still “own” the customer relationship.

Your Program

Untitled3Another drawback of coalition loyalty programs is that they offer all businesses the same solution (when customers buy, they get points), which does not make sense because there is no one solution that fits all. A restaurant would have a different relationship with customers than a SPA and a different one than a supermarket would have with their customers.

This means that your customers and the customers of all of the other businesses that are part of Untitled5the coalition program are offered the same rewards and guess what? You have no control over what those rewards are. It is the Coalition Program operator that decides because it is their program and not yours.

On top of all that, your customers are not being offered a special experience, only rewards that they might or might not be interested in.

If you are still not convinced and are lured by the number of members that a coalition network has, think about those questions:

  1. How many “Active” members does the network have?
  2. How many of those “Active” members are “Relevant” to your business? (meaning how many of them are potential customers, if you are a women SPA then all male members are out of the picture, if you are a traditional family restaurant then all the young and single members are not interested)
  3. How many of those “Active” and “Relevant” members are within the same geographical area of your business? (unless you really think all members would drive for an hour to be your customer)
  4. Then the real tricky question is, how many of those “Active”, “Relevant”, and “Proximity” members are already your customers?

So “Active”, “Relevant”, and “Proximity” would give you a fairly good idea or at least a target of how many customers you might be set to gain but even then you would still need to have a system in place to help you build relationships with them to “retain” them.

 

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