Has Coalition Loyalty’s Time Arrived?

Coalition loyalty, an evolution of standalone loyalty programs that reward customers for their patronage with points, miles, discounts and other perks, is a concept that has worked well elsewhere but struggled to find footing in the United States.

Around the world, especially in Europe, Canada and Australia, brands have recognized the advantages of coalition loyalty programs with successful ventures that include Nectar in the U.K. (500 participating online retailers, 1.9 million members), FlyBuys in Australia (10 million members and more than 30 participating retailers) and AIR MILES Canada (dozens of participating partners).

After years of lackluster results and lack of success for coalition loyalty, the U.S. retail landscape finally has all the pieces in place for a nationwide program that gives participating merchants and retailers all the benefits of the power of coalition.

Such a program gives its members opportunities that match their stated needs for true coalition loyalty: the ability to earn valuable rewards on everyday purchases from a variety of participating partners and redeem them frequently for something of value. In one scenario, value is delivered as rewards they can redeem as cents-per-gallon savings on the cost of fuel, a universal currency for an everyday commodity.

Why savings on gasoline? For retailers and brands, fuel as a loyalty currency ties directly into the customer lifecycle. Brands can deepen customer relationships and increase mindshare by aligning on a simple-to-redeem currency that is earned from a range of merchants, including convenience stores (nearly 84 percent of which sell fuel), dining, apparel, travel, entertainment, telecom, electronics, toys, pet goods and other key sectors.

Fuel-centric loyalty also solves the geographic issue that has plagued coalition loyalty adoption in U.S. fuel stations, which have one of the highest densities of retail locations nationwide, enabling everyday earning and redemption opportunities.

Members of fuel savings programs redeem 78 percent of their issued rewards within 20 days, compared to only 35-percent redemption rates among U.S. loyalty programs overall, according to Forrester Research data. And the growing adoption of mobile payment technologies makes earning, tracking and redeeming rewards from consumers’ smartphones easier than ever.

BENEFITS FOR RETAILERS & BRANDS

Benefits abound for retailers and brands that participate in a coalition loyalty program, including:

Economies of Scale — Coalition loyalty partners can span any industry: dining, entertainment, grocery, apparel, footwear, department store, travel, electronics, sporting goods, retail, pet goods, hobby/crafts, etc. Having a broad base of participating brands ensures the sharing of the costs, marketing and data that a program generates.

Proven “Earn and Burn” Sales Growth — As more brand partners join a coalition, consumers benefit from more ways to save on fuel. In one fuel savings program, brand partners have seen 4-percent to 6-percent increases in same-store sales and 70-percent to 200-percent increases in sales of products that have a fuel discount directly tied to them.

Value Perception — For many consumers, fuel is a necessary commodity, and the ability to save on fuel has high perceived value; coalition partner brands directly benefit from that value perception. Because fuel-savings incentives are highly relevant and frequently redeemed, coalition partners can ride the coattails of consumers’ heightened brand sentiment.

Richer Data — As customers earn and burn fuel-based savings frequently, the real-time insights gathered from their transactions provide brands with key data for comprehensive customer profiles: How much do they spend on travel? How does one geographic region compare with another? How frequently do they dine out? Armed with granular customer insights, brands can create curated offers based on behavioral, transactional and other criteria to improve the customer experience.

Marketing Efficiencies — Coalition loyalty programs can result in a better use of marketing dollars — or justify the reallocation of existing dollars — because they provide immediate access to a larger, built-in, already-engaged customer base.

Heightened Brand Awareness — Partnering with other brands not only provides access to a broader pool of potential customers, it also enables brands to increase their reach and visibility by taking advantage of co-brand advertising and marketing opportunities and piggybacking on other partners’ popularity, perceptions and levels of awareness.

In a fuel-based coalition loyalty program, brands benefit particularly from significant exposure and impressions consumers gain from seeing advertising for the program at thousands of fuel sites (provided the fuel brand is national in scope) where rewards are redeemed, providing unparalleled out-of-home media exposure for participating brands.

BENEFITS FOR CONSUMERS

Consumers who join coalition loyalty programs benefit in many ways, too. For instance: 

Immediate gratification — Even in small amounts, cents-per-gallon savings allow brands to deliver an immediate, emotional reward to consumers who watch fuel prices roll back at the pump.

Frequent Redemption —The immediacy, frequency and value of fuel savings programs keep customers engaged, always looking for ways to patronize or buy more from participating brands so they can earn the rewards that allow them to save even more money at the pump.

Everyday Relevancy — Coalition loyalty members can earn fuel savings from everyday purchases, including food, clothing, home improvement or pet supplies, etc. Fuel savings transcend gender, income, location and consumer interests, and have popular word-of mouth value that can be communicated easily.

Purchasing Power — Fuel is a recurring, regular expense in most household budgets. NACS, the Association for Convenience & Fuel Retailing, points out that two out of three Americans will drive five minutes out of their way to save as little as five cents per gallon, regardless of fluctuating market prices. When fuel is a regular part of the household budget, consumers will seek ways to save money regularly to keep the budget under control.

Now is the time for U.S. brands to embrace a coalition loyalty model that has proven its success and delivers on what it promises: satisfied, engaged members and participating brands with more foot traffic and customers, more sales, more data and more opportunities for success. 

Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.