There are two main types of loyalty programs that retailers can offer: a coalition program that brings together multiple businesses – and their customers – and offers a common loyalty currency, or a program for a single brand that offers a stand-alone loyalty currency, some of which include cash back.
When deciding on the best option, businesses need to consider which will deliver the most benefits, including attracting and retaining customers and maximizing the ROI of offering the program. For a lot of businesses, coalition programs are their preferred choice, because they provide so many drivers for customer loyalty and sales.
Coalition Loyalty Programs Have More Data
Coalition programs encourage members to engage with the program more often by prompting them to focus their spending with program partners, rather than their competitors. As a result, members remain over a longer period of time. Additionally, coalition programs give retailers access to a larger pool of customer data as members share their shopping preferences across a wider range of products and services, creating a better understanding of their wants and needs. Armed with these data insights, program operators and partners can design personalized offers, rewards and experiences, which further enhances the loyalty, engagement and spend of program members.
Coalition Loyalty Programs Have More Lift
A more engaged member means more interactions with partner companies, either in-store or online. It also means bigger baskets and greater variety of items in them. Partners can also work together to create unique and highly tailored experiences for members to earn and redeem points or miles they wouldn’t be able to do if they were operating on their own.
Coalition Loyalty Programs Have More Reach
By partnering in a coalition loyalty program, businesses can reach a much wider audience and more easily target new customers by marketing to members in the program at a lower cost than traditional marketing.
Coalition Loyalty Programs Have Lower Operating Costs
Coalition loyalty programs cost less to operate than proprietary ones. From marketing and communications activities to platform management, program enhancements, and loyalty management resources, the costs for running coalition programs are shared across the partner network.
Coalition Loyalty Programs Have More Rewards Options
Customers understand the principle of sharing data in exchange for something they value. (That’s why loyalty miles or points are “earned.”) According to the 2016 Aimia Loyalty Lens, customers know they are sharing more and more data with companies every year, with many – especially younger consumers – recognizing that this data exchange is an integral part of doing business. But they also expect better experiences with those companies in return for sharing their data. In fact, 45 per cent of Canadians get annoyed when companies don’t use what they know about them to offer better products and services.
Being able to choose the rewards that mean the most to them is another advantage of a coalition loyalty program – unlike with a cash-back program, which awards cash automatically at the end of a pre-defined period with little or no fanfare. This is a missed opportunity to build emotive connection between the program and the member. Whereas coalition programs such as Aeroplan allow members to be actively engaged in the reward process. Members know when they’ve been awarded something, because not only have they planned and saved for their reward, they’ve had the opportunity to choose it.
Coalition Loyalty Programs Have More Value
This increased emotional payoff is part of what keeps members engaged with a coalition program – and that translates into more value for them, and more value for the businesses that partner in the coalition.