What do Air Miles, Bumped, PAYBACK, Plenti, and the S&H Green Stamps have in common?
Although these loyalty programs come from different eras and different geographic regions, they share one common design component: instead of being offered by a single or dominant firm, the programs allow members to earn points (or stamps) by buying from a large number of businesses in the alliance.
These loyalty programs are called coalition loyalty programs or multi-vendor loyalty programs. The idea is that by joining forces, companies can offer a more appealing program to members at a lower cost while enjoying cross-selling opportunities.
How do such programs affect consumers’ purchases? What do they mean to the businesses involved?
In this article, we offer some insights to these questions based on a research study recently published in the Journal of the Academy of Marketing Science. In the study, the researchers analyzed member purchases in a multi-sector coalition loyalty program in Europe. They found the program to be a mixed blessing for participating businesses.
Before diving into the research findings, let’s first take a quick look at why a coalition loyalty program may be a mixed blessing.
Pros and Cons of a Coalition Loyalty Program
What’s good about a coalition loyalty program
Coalition loyalty programs have many attractive qualities:
- It reduces the entry barrier of setting up a new loyalty program. Businesses that join an existing coalition loyalty program can enjoy a ready-made member management platform without making substantial investments into building, acquiring or maintaining their own system.
- It offers an existing member base to draw from for customer acquisition. Assuming members of the coalition program will want to buy from multiple businesses to maximize their points, businesses can acquire new customers that already buy from other businesses within the alliance.
- It is appealing to consumers. Not only is a coalition program…