Loyalty Truth

The launch of Plenti has gotten the attention of many people. Besides the 5 Million consumers that are reported to have enrolled in early-days post launch, the crowd most fixated on the new coalition loyalty program could be the professionals that compose the loyalty marketing community.

Over recent years, the common response to a suggestion that a US based coalition loyalty program was going to become a reality has been somewhere between outright disdain to a smug grin that communicated “nice idea boys, but it’s not going to happen here”. Even though there are 10 such programs that have been operating in markets outside the US for more than 15 years each, accepted logic was that the US had distinct characteristics that made a multi-partner program nearly impossible to pull together.

Knowing that Plenti was on the way and that more coalition growth is almost certain, I was confidently part of a group that proposed to talk about coalition loyalty at an industry event this past April. To my surprise the conference organizer stated that brands polled on topics for the event didn’t show enough interest in coalition loyalty to merit time on the podium.

Really?

At that point, news had already leaked about Plenti and I’ll bet the principle competitors to Macy’s, ATT, Rite Aid, ExxonMobil and others were more than interested to learn more about the impact of the Plenti program. In fact, one would think that the thought process of every brand in the US today regarding customer loyalty has been impacted by Plenti. In the post-Plenti world, it is not just a matter of deciding which flavor of proprietary program should be adopted. The decision set has to include whether a proprietary or coalition model is a better choice.

Coalition is not right for every brand, and I don’t think we are heading towards a world where we have the equivalent of three airline alliances (Skyteam, OneWorld, and Star Alliance) that link all large US retailers together. We are in a world where responsible CMO’s and their teams need to evaluate how to best deliver on customer strategies in the most efficient cost structure. They should also evaluate the impact of competitors participating in coalition programs against their own customer loyalty efforts.

Coalition has arrived in the US and is not going away. There is a lot to learn for most consumers, including those in the news media which apparently don’t understand that Plenti is not the first coalition program to be launched in the US. KickBack Points has been operating successfully for several years with a real-time customer engagement model that works in convenience and fuel retail as well as other complementary merchants. Thanks Again has grown to coverage of about 140 airports across the US serving frequent travelers through a registered-card, cash-back structure.

Despite evidence to the contrary, the coalition concept is not without doubters. Some of my colleagues have pulled the ejection handle from Plenti due to the fact that no grocery partner was announced among the first wave of partners. Failure to land a grocery partner killed two previous attempts to launch a coalition in the US, so common logic is that if a grocer is not among the pillar brands, future prospects are dim.

The criticism of Plenti revolves around claims that members can earn points while grocery shopping, when those points are generated through an exchange plan with grocery coupons and don’t represent a direct relationship with a specific grocery chain. For now, we should give the people at Loyalty Partner the benefit of the doubt. This subsidiary of American Express is staffed with smart people who have tremendous experience operating coalition programs in other markets, notably the Payback program in Germany.

But I’m not as interested about whether Plenti will land a grocer as I am about another element of the program. What’s missing from Plenti? At the moment, it’s American Express itself.

In a dressing room at the Men’s Department in Macy’s this week, I was eye-to-eye with a Plenti sticker on the mirror. I scanned the brands on the advert and noticed American Express was nowhere to be found. Though Amex did announce a new Plenti / Amex cobranded credit card as part of the program launch on May 4, I was surprised to see the Amex branding missing in this promotional material at an anchor partner.

By the way, American Express also allows its Membership Rewards participants to exchange “MR” points for Plenti points. Connecting its flagship loyalty program to Plenti is a big move for Amex, and opens up new opportunities to manage the accumulated financial liability at Membership Rewards. With a stepped down exchange rate, Membership Rewards participants can swap 500 MR points for 400 Plenti points. In turn, these points can be redeemed at partner locations, giving Amex potential relief of up to 20% on reward redemption costs.

How American Express influences future development of Plenti will be interesting to watch. Will the Amex brand become more prominent in promotional materials? And, how will Amex rationalize its own interests with those of its key retail partners?

Most coalition programs with long tenure in markets outside the US are operated by independent third parties. That’s not the case here. Given the inherent conflict over merchant processing costs between card issuers and merchants in the US, integrating program features that benefit American Express while keeping merchant interests in balance will be a delicate operation to execute.