The Convergence Quotient

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COLLOQUY has spoken often of the power of the coalition, to the point where we’ve given it a name: “The Atlas Effect.” A coalition program allows members to earn currency from a range of merchants—such as a grocer, a fuel retailer, a drugstore chain, and so on. With these multiple opportunities, members accrue points more quickly than they can with individual programs. As we once wrote, “It’s the marketing equivalent of Atlas, the mythological Greek Titan who supported the Earth on his shoulders. The coalition supports a world of customer loyalty. . . . Companies with common customer retention goals unite to become partners in a joint network currency program. They share acquisition, marketing and administration costs and reap the benefits in terms of increased share of customer, better customer information and lower operating costs.”

Well, that was in early 2001, and though we’ve seen coalitions continue to flourish around the world, no true U.S. coalition has emerged—yet. But we’re approaching the tipping point for a new type of alignment and cooperation among companies given the overabundance of loyalty programs converging with the cost of maintaining programs, especially in tough economic times. Other factors include:

* Program anesthesia. While membership numbers fly high with 14 memberships per household, consumers actively participate in only 6.2 programs. This figure is symptomatic not only of too much program choice, but also of fairly weak value propositions, in essence putting the customer to sleep. Something bigger must come along to capture the imagination of customers in this sort of environment.

* Busy wallet—busy schedule. Who has time to wade through those 14 cards to select the right one for the right situation each time?

* The continuing demand for value. Our economic woes may be subsiding, but they certainly won’t disappear soon. That means consumers will cherish faster earn rates and richer redemption possibilities.

* Increasingly high antes. In light of tight budgets and a saturated marketplace, a good value proposition can require more investment and bigger, more expensive offers than any one company can afford. Joining a coalition allows marketers to entice consumers with big offers, but split the costs among partners.

* The atmosphere of consolidation. Mobile and smartphones are popular in large part because they consolidate. In the palm of your hand, you have access to voice, written and video communications, and to music, movies, TV shows and games. Gathering (and simplifying) is a sound business practice—a total solution. By gathering multiple earning opportunities onto one card, coalitions provide such a consolidated solution.

* Increased partnership momentum. Companies have been experimenting with alliances that rise above simple partnerships, such as merchant-funded networks and non-exclusive manufacturer-funded bonusing. Such models haven’t yet risen above the experimental stages, but experimentation signals growing interest. The coalition is the likely final stage of the experimentation, offering greater power in exclusive reach to consumers.

Whatever form the new loyalty-driven strategic alliances will take, there are three key considerations when trying to leverage the coalition-effect for your company:

* Trust. And be bold. To become a coalition player, a company must be willing to see the opportunities beyond what they perceive as the risks of getting in bed with a series of companies under one currency umbrella. Marketers have been too conservative, clinging too hard to the fear that such partnerships means losing control of their branding—or their customer information—or both.

* Party with the team. Ensure that the coalition’s structure is structured to benefit all the partners, truly addressing the individual companies’ needs. Oftentimes, that requires a third-party umbrella, with an account-management team that tests offers and puts new initiatives in the marketplace that benefits all members. Such a partnership can’t be put on autopilot if you expect it to drive results.

* Look over your shoulder. That may be the coalition’s footsteps you’ve been hearing for the past ten years.

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