What is your model?

An important question that arises in the early stages of loyalty program design is the PROGRAM MODEL that will suit the best. Here’s a quick look at the options that are out there and see what’s working for each.

1. If a program for Brand A centres entirely and solely around the brand in terms of proposition, earn, burn – it is a PROPRIETARY program model. This is indeed a Classic loyalty program model. Works well when you have enough to offer as a brand to excite and delight the customers – and when you want to completely own the value proposition and the data
2. Let’s now say that Brand A decides to rope in some partners into its program – to increase attractiveness, choice, earn velocity etc for its members. The program now becomes a PARTNER program. It is still owned by Brand A, the currency is still the Brand A program currency – partners are roped in as either EARN partners (the member earns Brand A currency when shopping with those partners), BURN partners (the member can redeem Brand A currency at those partners) or both. Good to create variety in the program, works well in terms of monetising the currency and de-risking the financials. However, there is always the danger of diluting the value proposition and compromising on member experience if partners dont deliver
3. Let’s say Brand A above ropes in Brands B,C,D as partners in its program. Here Brands B, C and D are following the PLAYER model. Instead of their own program (or maybe in addition to their own program) they are playing in A’s program. Brands may consciously choose to do this when they dont want to invest in a program of their own – or when they want to drive new customer acquisition.
4. Now the biggie. A third party entity launches a program with a currency. Ropes in ‘sponsors’ for this program across categories/ verticals (grocery, fuel, airline, speciality retail, FS etc). The common currency is earned and burned across all the sponsors and there you have your COALITION program. And what makes it different from the Partner model above? This is an independent entity that owns and manages the program and the currency – and the data. Sponsors ‘buy’ the currency to issue it to members who shop with them – and they are compensated for currency that is redeemed by members when they shop with them. Data sharing rules are strictly guided by privacy norms. For the customers – an attractive unifying proposition that works across all their shopping needs with handsome rewards. For brands who want to drive acquisition, who want to be part of a larger readymade initiative and not create their own branded property – this is the route. However, it takes pains to get off the ground and make it workable.
5. A new model that has been taking shape recently – the CURRENCY EXCHANGEmodel. Brands which run independent programs may decide to collaborate with each other and allow a currency swap between their programs. Suddenly, the customer has a choice and earn velocity increases because they can now combine their currency earn across two programs. Independence of the programs is retained, data privacy remains – and yet, the proposition has suddenly become more attractive for the customer. A good way to monetise your program currency so to speak.

The right choice of model for a brand depends on the larger goals as well as the current priorities. There are no right or wrong solutions – and brands may choose to opt for a combination of models in play.