The Rise of Coalition Loyalty Programs

Consumers are looking for flexibility in rewards, and brands are providing it

Danielle Brown Points

There's a trend rising in the loyalty space: More companies are looking to expand their earn and redemption offerings outside of their own loyalty programs -- specifically, through coalition loyalty programs. The reason? Today's consumers want more flexibility in how they can earn and redeem their points, miles, electronic gift cards, and other rewards. 

For example, Southwest Rapid Rewards allows its members to exchange their points earned in hotel programs like Marriott Rewards and Hyatt Gold Passport for Southwest miles. Or American Express' Plenti, a rewards program that lets users earn points at one retailer and redeem them at a variety of different businesses -- such as Macy's, Chili's, AT&T, Rite Aid, Exxon, and Mobil -- which has seen around 20 million members already tap into their offerings. 

By leveraging the loyalty of others, brands within coalition programs are benefiting from increased engagement, heightened value, and growing loyalty to their own programs. But while the rapid adoption of multi-company loyalty programs are a clear step in the right direction to delivering on consumer demands, there's still some progress to be made. 

Here's a roundup of reasons why brands are seeing such success behind their coalition loyalty programs, and what this strategy means for loyalty's future.

Flexible Loyalty for All

Loyalty has become an essential part of consumers' everyday lives -- so much so that it's no longer an add-on, but an expectation. Consumers not only want loyalty embedded into every transaction, but they want flexibility in doing so. An American Express study found that 72 percent of Americans prefer a rewards program that allows them to shop at many stores versus a single brand, and Collinson Latitude research found that 82 percent of consumers said loyalty programs would be better if they offered more choice. As a result, coalition loyalty programs taken the initial steps in providing this type of flexibility.  

Where consumers were once limited to earning and burning their loyalty points at one single location, coalition loyalty allows more freedom and flexibility -- providing members with choice and convenience in managing their rewards. 

Increased Program Exposure

The flexibility offered within a coalition loyalty program is beneficial for building long-term consumer loyalty. Because consumers are rewarded at locations outside of a single brand, this strategy provides all loyalty programs involved with more exposure than what would be possible on their own. Brands and retailers are able to extend their reach and get in front of a wider range of prospective customers. Not to mention, a consumer will be more likely to choose one brand over another when they know there is the opportunity to spend their points, miles and rewards earned elsewhere. By getting more eyes on their brand, as well as earning credibility when placed alongside other reputable companies, providing more flexible loyalty currencies is win-win for all involved.

Growth of Mobile Wallets 

The rise of mobile payments is also helping to drive the success of coalition loyalty programs. Because shoppers want to access their loyalty programs in whatever way is most convenient for them, mobile wallets are providing a one-stop shop for loyalty program engagement. Especially when consumers interacting with multiple brands who are a part of a coalition loyalty program, loyalty-integrated mobile wallets help to provide convenience and easy access of their loyalty rewards in one place. And by connecting loyalty with mobile, brands are able engage with customers on the platforms that are most accessible and relevant to today's tech-savvy consumers.

In addition, mobile creates an opportunity for better targeting and rewards delivery, such as geo-targeting and beacon technology. Few channels can use information (like a customer's exact location) to deliver such relevant, real-time offers and rewards that can be seen and acted on quickly. And mobile provides an additional consumer touchpoint, where targeted and personalized messaging can be sent to consumers no matter where they are. By integrating loyalty into mobile wallets, brands and retailers have the ability to tap into a new marketing channel for member engagement and interaction.

Looking Ahead to Currency Ubiquity

With partnerships made possible through coalition programs, members are provided with more flexibility, accessibility and choice in how they earn and redeem their rewards than ever before. And as we've seen, the more options a program offers, the more utility it brings -- which is increasingly important when you consider that of the 29 programs consumers belong to on average, they're only truly active in eight. 

Coalition loyalty programs have put brands on the path to offering expanded opportunities to earn and redeem rewards. But these programs still have a distance to go before we see the industry enter a future of complete currency ubiquity, or the ability to earn and burn loyalty points at any retailer. 

We see this ubiquity made possible through mobile wallets, where we imagine the ability to earn and spend loyalty points from a variety of programs while buying your next lunch, purchasing groceries or on your next shopping spree. We envision a future where loyalty members can earn and redeem currencies across almost all programs and industries - all through a single mobile wallet. 

Ultimately, the broader distribution of loyalty currencies will benefit all involved: loyalty programs receive greater exposure for their currencies, merchants can use loyalty to incentivize purchase behavior and drive sales, and consumers reap the benefits. And while there's much progress to be made currency ubiquity becomes reality, we expect to see more cross-industry partnerships and coalitions in the coming years.

Danielle Brown is the vice president of marketing at Points, the global leader in loyalty currency management. Via a state-of-the-art loyalty commerce platform, Points provides loyalty eCommerce and technology solutions to the world's top brands to enhance their consumer offerings and streamline their back-end operations.