Coalition Loyalty: What Happens When Competitors Share Customers

Most loyalty programs assume exclusive relationship: shop here, earn here, redeem here. Coalition loyalty programs invert this model: earn across multiple brands, redeem across multiple brands.

Programs like Nectar in the UK, Air Miles in Canada, and Plenti (RIP) in the US have demonstrated both the promise and the peril of shared loyalty.

The coalition model offers genuine advantages for customers and businesses alike. It also creates complexities that have killed several prominent programs.

The Coalition Model Explained

Coalition loyalty programs pool multiple brands into a single rewards ecosystem:

How It Works

• Customers earn points/miles from multiple participating brands
• Points accumulate in a single account across brands
• Redemption options span all participating brands
• A central operator manages the program and currency

The Value Proposition

For Customers:

• Faster earning across daily spending
• More redemption options
• Simpler management (one program vs. many)
• Greater perceived value from accumulated points

For Brands:

• Lower program operation costs (shared infrastructure)
• Access to coalition customer data
• Reduced liability (shared redemption obligation)
• Cross-promotion to partner brand customers

For Operators:

• Revenue from selling points to brands
• Float from unredeemed points
• Data monetization across brands
• Scale economics in program management

The Psychology of Coalition Programs

Coalition programs leverage psychological mechanisms differently than proprietary programs:

Acceleration Effect

Earning from multiple sources makes progress feel faster. Customers who might slowly accumulate points with a single brand see balances grow quickly when multiple brands contribute.

This acceleration maintains engagement that slow-earning proprietary programs struggle to create.

Reduced Waste Perception

Proprietary points often feel trapped: "I have hotel points I'll never use because I rarely stay at that chain."

Coalition points feel flexible: "I can earn at the grocery store and redeem for flights." This flexibility increases perceived value even if actual value is similar.

Mental Accounting Benefits

A single coalition account simplifies mental accounting. Rather than tracking multiple program balances, customers track one number.

This simplification increases engagement because customers know their status without checking multiple systems.

The Loyalty Dilution Risk

However, coalition programs dilute direct brand loyalty. Customers become loyal to the coalition currency rather than to specific brands.

If a brand leaves the coalition, customers may not follow. Their relationship was with the points, not the brand.

Case Study: Air Miles Canada

Air Miles, one of the oldest coalition programs, offers lessons in long-term coalition dynamics:

The Success

At peak, Air Miles had over 10 million Canadian collectors (in a country of 38 million people). Major brands including Shell, Safeway, and American Express participated.

The program achieved genuine consumer integration. "Air Miles" became vernacular for loyalty points generally.

The Challenges

Over time, Air Miles faced:

• Redemption value perception declining
• Controversy over point expiration policies
• Partner turnover as brands evaluated ROI
• Competition from proprietary programs

The Adaptation

Air Miles survived by adapting:

• Adding cash redemption options
• Creating tiered membership
• Expanding earning and redemption categories
• Improving digital experience

The longevity demonstrates that coalition programs can endure while also showing the ongoing work required.

Case Study: Plenti's Failure

Plenti, American Express's US coalition attempt, launched in 2015 and closed in 2018. The failure reveals coalition vulnerabilities:

The Ambitious Launch

Plenti launched with major partners: Macy's, Rite Aid, AT&T, Exxon, and others. The coalition concept was sound.

The Rapid Unraveling

Partners began leaving quickly:

• AT&T exited within two years
• Macy's left to focus on proprietary program
• Other partners followed

Without critical mass of partners, customer value proposition weakened. Without customer engagement, remaining partners questioned ROI. The death spiral accelerated.

The Lessons

Plenti failed because:

• Partner commitment was insufficient
• Customer awareness never reached critical mass
• Proprietary programs offered more brand control
• Economics didn't favor continued participation

The failure doesn't prove coalition programs can't work. It proves they require sustained commitment that American market conditions didn't support.

The Economics of Coalition Programs

Understanding coalition economics reveals why they're challenging:

Point Selling

Brands buy points from coalition operators at wholesale rates. A point worth 1 cent to customers might cost brands 0.7 cents to issue.

This spread funds operator costs and profit. But brands compare this cost against proprietary program costs and may find coalition participation expensive.

Liability Management

Coalition operators carry liability for unredeemed points. This creates accounting complexity and financial risk.

When partners exit, liability questions become contentious. Who's responsible for points earned at a departing partner?

Data Sharing

Coalition data spans customer behavior across brands, but sharing this data creates both value and concerns:

• Brands want insights into coalition customer behavior
• Brands don't want to reveal their customer secrets to competitors
• Privacy regulations increasingly restrict data sharing

Cost Allocation

Fairly allocating costs across coalition partners proves contentious:

• Customer acquisition costs
• Program marketing expenses
• Technology platform costs
• Customer service overhead

Partners often believe they're subsidizing others.

When Coalition Programs Work

Certain conditions favor coalition success:

Market Concentration

In markets with few dominant players per category, coalition programs can assemble compelling partner rosters without direct competitor conflict.

Canada's concentrated retail market (few grocery chains, few gas companies) enabled Air Miles' success.

Non-Competing Partners

Coalitions work best with complementary, not competitive, brands:

• Airlines + hotels + car rental (travel coalition)
• Grocery + gas + pharmacy (convenience coalition)
• Bank + retail + dining (everyday spending coalition)

Direct competitors rarely join the same coalition.

Strong Operator

Successful coalitions require operators with:

• Technology platform capability
• Marketing execution excellence
• Fair partner relationship management
• Financial stability for liability management

Weak operators create partner and customer problems.

Long-Term Partner Commitment

Coalitions need partners committed beyond short-term ROI calculations. Partner exits damage customer proposition and trigger further exits.

Regulatory Favor

Some markets (particularly outside the US) have regulatory environments more favorable to coalition programs and data sharing.

Designing Coalition Partnerships

For brands considering coalition participation:

Evaluate Brand Fit

Does coalition participation fit your brand positioning? Premium brands may be diluted by association with mass-market coalition partners.

Assess Customer Overlap

How much overlap exists between your customers and coalition customers? Low overlap means coalition brings new customers. High overlap means you're paying for customers you already have.

Model Economics Carefully

Compare coalition costs to proprietary program costs:

• Point purchase costs
• Marketing contribution requirements
• Data access fees
• Customer acquisition attribution

Negotiate Exit Terms

Coalition exits prove contentious. Negotiate exit terms clearly:

• Notice periods
• Liability handling
• Customer communication
• Data handling post-exit

Maintain Brand Presence

Don't let coalition branding overwhelm your brand. Customers should know your brand, not just the coalition.

Plan for Coalition Failure

If the coalition fails, what's your customer loyalty backup? Dependence on coalition creates vulnerability.

Alternatives to Full Coalition

Partial alternatives capture some coalition benefits with less commitment:

Point Exchange Programs

Allow point transfer between programs without full coalition merger. Customers gain flexibility; brands maintain control.

Partnership Earning

Specific brand partnerships for earning (airline + hotel partnerships) without broader coalition.

Coalition Redemption Only

Participate in coalition redemption catalog without coalition earning. Provides redemption options without full integration.

White-Label Coalition Participation

Participate under your own branding while leveraging coalition infrastructure.

The Future of Coalition Loyalty

Market trends suggest coalition evolution:

Super-Apps Creating De Facto Coalitions

PayPal, Apple, and Google payment platforms increasingly incorporate loyalty across merchants, creating de facto coalitions without formal program structure.

Blockchain Loyalty

Cryptocurrency-based loyalty programs could enable peer-to-peer point exchange, creating open coalition effects without central operators.

Data Regulation Impact

Increasing privacy regulation may favor coalitions (single consent covers multiple brands) or hinder them (data sharing restrictions). The regulatory trajectory remains uncertain.

Direct-to-Consumer Brands

The rise of DTC brands creates potential coalition partners who lack proprietary program scale.

Application to Events

Event coalition concepts offer interesting possibilities:

Industry Event Coalitions

Multiple events in an industry could share loyalty program, with attendance and engagement across events earning toward shared benefits.

Vendor Coalitions

Event vendors (hotels, airlines, services) could form coalitions where event attendance earns broadly usable points.

Association Coalitions

Professional associations could coalition their events, with members earning across association activities.

Cross-Event Recognition

Even without formal coalition, events could recognize engagement at partner events, creating coalition-like benefits.

Sponsor Coalitions

Event sponsors could form coalitions where attendee engagement with sponsors earns points redeemable across sponsor brands.

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Coalition loyalty programs represent a compelling idea that has proven difficult to execute at scale. The customer value proposition is clear: earn faster, redeem more broadly. The business challenges are equally clear: maintaining partner commitment, managing economics fairly, and avoiding the death spiral when partners exit. Coalition programs can work, as Air Miles demonstrates. But they require sustained commitment that many markets and partners struggle to provide.