by Leo Jakobson | February 21, 2018

Last year, the "next big thing" was the coalition loyalty program, which American Express was (and is) championing with its Plenti program, combining brands like Exxon, Rite Aid, and until recently AT&T. Despite the popularity of this type of loyalty program in Canada, Europe, and other parts of the world, past attempts to bring it to the United States have fallen flat. And indeed, Plenti appears to be faltering. Incentive caught up with Barry Kirk, vice president of loyalty strategy for Maritz Motivation Solutions, to talk about why this is, and what's next on the loyalty front.

Q: What's going on with coalition loyalty? 

Barry Kirk: I feel like one of the big trends that shaped 2017 was coalition loyalty. It may not be the trend that shapes 2018, but it laid a foundation for what we'll be focusing on this year in Loyalty. I think anybody who does proprietary loyalty programs, which are most of the loyalty providers in the United States, have been watching with intense interest the developments of the Plenti Program.

Barry Kirk

When it launched two years ago, I think everyone was open to the idea that potentially this was going to be the first time that a large-scale, U.S.-based coalition program succeeded. What seems to be the case as we enter into 2018, is that Plenti is not in good shape and may not last the year. There may be ways that they pull out, but I think we're moving into 2018 with all signs pointing towards the best strategic move is a proprietary program.

Q: Why it is that these programs that work so well in Europe just keep falling flat here?

BK: A couple reasons. One is a tactical issue -- the geographic diversity of brands in the United States. The regionality of brands makes it difficult for anybody to launch a national coalition. A coalition program has to have in it two components for an everyday day spend, which is gas and grocery. You need those two elements in your program in order to get that frequency. There are very few brands that have more than a regional footprint in either gas or grocery. So, you end up not being able to create a national program, you have to create multiple regional programs, which gets very difficult to manage. You don't have that problem in Canada. You don't have that problem in England. They're not as geographically large, and their brands aren't as regionally specific. 

The other challenge is the fact that U.S. consumers don't understand the coalition loyalty model. They understand the proprietary model -- one loyalty program for one brand. To try to educate them on a completely different way to think about loyalty and how their points are earned and used was going to be very difficult. The closest analogy is in the airline and hotel programs, with their network of partners. The difference between coalition and that kind of partnership model is, it's still clear which brand is the dominant brand owning the program. [Even then] those partnership benefits are predominantly exercised by the sophisticated and more frequent traveler. For most American consumers, their notion of a loyalty program is one program to one brand and very simple interaction. The coalition model just requires too much relearning of loyalty to make it easy to embrace.

Q: Isn't a fair part of why you do a loyalty program brand building? When you do a coalition, aren't you splitting it between Exxon and Macy's and the other brands?

BK: That can be an advantage if you're the lesser known brand -- you could actually gain brand equity. For instance, Rite Aid being in Plenti, was probably helped by being in a partnership with a brand like AT&T. But if you're the premier, dominant brand you potentially lose brand equity by being in the coalition.

Another reason, potentially, that Plenti didn't succeed was that it was still mostly playing off of 1980s-based loyalty thinking. It was mostly what Maritz refers to as a "mercenary" loyalty model. It was points-, rewards-, and discounts-based loyalty. Everything we're seeing in the market today says that while that's still a useful tool set, you cannot base your entire program on mercenary loyalty anymore.
As we look at 2018, what we're seeing is a significant shift in thinking that is moving out of the mindset of the loyalty program, and into the loyalty experience. Where you're not just thinking about what's the reward or the benefit I have to use to, essentially, bribe my customer to stick with me, but what is the total experience I'm giving to best customers that's different than what everybody else gets -- to make it irresistible for them to participate with my brand. That may include points, but it may include all kinds of other things that we had just not thought of traditionally as being part of loyalty.

Q: Like I'm pretty loyal to American Airlines because even without Platinum status I still get to board in an early group, and I get to check a bag free -- for me, that's more important than the points in a lot of ways.

BK: That's a great example. I would say the hospitality industry, the airline industry, is really attuned to this concept of loyalty experience. I think if you surveyed travelers who are engaged in those programs, they would say it is more about the status benefits they get than it is about the points that they earn. Just the feeling that travel was made easier for me because I'm a loyal customer is way more important to many consumers than how many points they have and what they can redeem them for.

Q: Would gamification help?

BK: I tend to believe that gamification is a technique that could help a brand shift from pure mercenary into more of an experiential loyalty. You could basically use gamification to elevate your point-earning component, so it feels more engaging, and perhaps more competitive, more surprising, or more challenge-based. Once you've added that gamification layer onto your points system, you're building out an experience, something that the participant will find more interesting.

Sometimes people want to start from scratch. I say, no, start with what you have that isn't particularly interesting -- and that's probably your points system -- and then turn it into a game of its own. Make that more interesting with game mechanics and you've changed the quality of the experience and thereby probably driven stronger loyalty.