(This is the third in a three-part series on shifts that occurred in 2017 that will have long-term impact on the loyalty industry. Part 1: Liquid Currency covered the adoption of pay-with-points solutions and Part 2: Loyalty Program Fraud covered the increasing awareness of program hacking risks.)
Shift #3: Coalition Loyalty Programs Stumbled
If you were one of the many loyalty experts predicting the likely failure of any coalition loyalty model in the US, you might have ended the year enjoying a bit of schadenfreude.
2017 was simply a tough year for coalition loyalty to catch a break.
While the dominant form of loyalty program outside of the US — one wherein members can earn and redeem points freely across a defined network of complimentary brands (the coalition) — a large-scale coalition loyalty initiative has never succeeded in the US. That seemed about to change when American Express announced the launch of Plenti almost three years ago. But since then we’ve witness not just the multiple stumbles experienced by Plenti, but challenges with both of its Canadian-based counterparts:
- Plenti – While boasting more than 30 million members and the support of Amex, Plenti has struggled to attract and retain key partners to maintain a strong coalition. And it ends the year seeing the exodus of more partners and declining support from their parent entity.
- Air Miles – the Canadian-based coalition program owned and operated by LoyaltyOne suffered a significant PR hit starting late in 2016, when Canadian media began to cover the upcoming first-time expiration of Air Miles points. Due to overwhelmingly negative public reaction that continued into this year, Air Miles reversed their decision and agreed to reimburse members who had already dumped their points. That decision resulted in a multi-million dollar loss, much of that in unrealized breakage. The incident pushed some Canadian legislators to pursue legal restrictions on loyalty point expiration policies. AirMiles subsequently announced other changes to their program in an effort to gain back some of the member good will lost over their point expiration issue.
- Aeroplan – the Canadian-based coalition program, owned by Aimia, was jolted earlier this year when its key partner, Air Canada, announced it was leaving the relationship by June 2020 to establish its own proprietary loyalty program, a move that could potentially cost Aimia millions of dollars in lost revenue and leaves their coalition program without an airline anchor brand.
So, as I noted — a tough year for North America coalition loyalty schemes.
Its the Consumer, Stupid
When I first wrote about Plenti back in March of 2015 I asked, “Is Plenti the holy grail of loyalty?” I outlined my rationale for being skeptical that a coalition could succeed in the US, while expressing optimism that if any entity could pull it off, it was Amex. My main concern was whether US consumers would actuality understand and embrace a coalition loyalty program.
New data from a Maritz 2017 consumer study only reinforced my concerns:
- 50% of surveyed consumers said they were not familiar with Plenti at all (although of those who were, a majority had a positive or neutral view of the program).
- Less than half of self-identified Plenti members said they have ever redeemed for a reward through the program.
- The majority of members said they only purchase from one or two coalition members (defeating the main value prop of the coalition model)
Amex might still put it out, but its just as likely that the stumbles experience by Plenti and the significant challenges with Aeorplan and Air Miles portend an inevitable decline of the coalition model the US.
Implications for Loyalty:
When Plenti debuted it was considered a potentially serious threat to proprietary loyalty approaches. Coalitions offer brands the allure of participating in a loyalty scheme without the up-front costs and commitment that can come with launching their own program. But the last year has shown the weaknesses of the coalition model, particularly in its inability to engage US consumers. And when you take into account the challenges with Canadian coalition schemes, it seems that many companies are making the calculation that they are better served by owning their own program where their brand rules supreme. Moving into 2018, its a safe bet that proprietary loyalty will continue to have strong hold over the US loyalty market.
Thanks for following along with our 3-part series – Maritz Loyalty wishes you a Happy New Year!