There are different models and value propositions in loyalty schemes. The decision of which one to implement depends on the objectives that the brand pursues when designing the strategy. Among the most common are:
- Subscription or membership model
- Proprietary model or “stand alone”
- multi brand model
- parasol model
- coalition model
In the membership and owner model, it is usually a single brand that defines the entire value proposition. In the multi-brand, umbrella and coalition models, different brands are integrated to shape the value proposition that the user will receive for being part of the program.
Multi brand model: this model is created by large business groups with multiple subsidiaries. In this case, the loyalty scheme is the same for all the different brands that are part of the group. The program has the same model for the participants, but they cover different categories within the scheme such as supermarkets, department stores, credit cards, among others. What they have in common is that these categories are within the same business group.
Umbrella model: These models are created by different brands that are independent from each other, but have a common pillar, such as being part of the same industry or category. An example of this model can be airlines uniting hotel chains and car rental companies to offer incentives to registered users. A characteristic of this model is that there is no hierarchy between them and the incentives are provided by each of the participating companies.
Coalition model: this is the model created by a single entity extending the invitation to join different brands in different categories. The owner of the program is in charge of defining the rules of participation, financial model, name, image, among other factors. Participating brands have great benefits such as the data that can be collected from participating users, new customers, the power to interact within an ecosystem with other brands to create more powerful offers and benefits than in isolation. The biggest benefit of this model is that users can earn benefits on one brand and freely use them on another.
The formation of alliances in these loyalty schemes has great value for all participants: users, brands and allies. A coalition model that includes all these actors provides a greater value proposition for all.
Users: For people who are part of the coalition loyalty scheme, there are great advantages for receiving benefits from different brands in different categories, and being able to use them where they obtain the most value according to their preferences and consumption habits.
Brands: In these schemes, brands can gain share of wallet because they have access to larger audiences by collecting more data from consumers. Acquisition of new customers may increase. The above according to the column “how partnerships fuel successful Loyalty Programs” published in “The Wise Marketer”
Allies: There are many benefits for allies that belong to these models, such as:
- Ecosystem effect when interacting with other brands of the same program
- Increase in new customers
- Retention of existing users
- Increase in average ticket and visit frequency
- Collection of more user data
- Access to user segments and audiences
- More detailed analysis of behaviors and consumption habits
- Offers and cross-brand benefits that make a better offer possible for users
I have had the opportunity to create, be part of and operate each of these models, finding the greatest number of benefits for all participants in the coalition model. Its creation and operation is not simple. The success of this scheme is supported by having a balance between all the participating brands, providing clear and tangible benefits for users and allies, transparency, and having a relevant value proposition for the different actors. A government model with clear and balanced rules is essential for long-term sustainability.
