Coalition loyalty programs are dead.
One more nail was recently added to the coffin when Air Canada announced it would sever ties with Aeroplan-operator Aimia—an entity it created in 2002 when it spun off Aeroplan—and launch a new proprietary program in 2020. Last year, the operator of Air Miles, Loyalty One, attempted to timestamp points and expire older ones in a bid to reduce their liabilities and improve the profitability of their program. Closer to my home, my employer and Overwaitea Food Group decided to go their separate ways with regard to collecting More Rewards points at Chevron stations in late 2016. And across the pond, grocer Sainsbury reduced the “earn rate” by half for customers at the expense of Nectar program members (Nectar is also an Aimia operated program).
The typical arc of coalition programs starts with buzz driving behavioural shifts and a period of happiness for all but eventually shifts to cost cutting by program operators, partners questioning value and reducing costs, consumers questioning whether the program is worth continuing their behaviours, and finally businesses questioning whether the program is delivering the financial outcomes they are paying for.
In Air Canada’s case, I congratulate them for taking bold action to abandon the program they gave birth to.
But what I find interesting about this coalition loyalty death rattle is not the story arc of buzz to cost cutting to disillusionment. That’s well known, at least to industry insiders. The real value of these programs was supposed to be in the data. Swiping your loyalty card was supposed to open up a world of bliss for marketers. A cornucopia of data to allow micro-targeting of advertising and promotional offers to drive highly profitable sales and increase customer satisfaction. A network of merchants aligned by a common loyalty program engendering undying loyalty. Those loyalty points are not costing you money, dear retailer! They’re making you money!
Except it’s not working so well anymore. Yes, there is still a points seeker segment. But changing the behaviour of “normal” customers is the name of the game. And if that’s not happening, then all you have is a big fat expense item as both an operator or retailer. And so, predictably we’ve seen the earn rates of programs diminished along with redemptions made more difficult.
But what ever happened with the value of loyalty data for coalition partners? I’m willing to bet very little trickles out to partners, even in the era of Big Data. Whenever I’ve seen reports come out of the major loyalty programs my impression is always “so what?”. Ultimately, they were pretty light on actionable insight.
I don’t see loyalty programs dying anytime soon. I think savvy operators will continue to use their databases to generate internal insights and drive sales. But unless the coalition programs start figuring out how to truly add insight for their customers, I think their relevance will continue to decline and we’ll eventually see some of them wrap-up.