Take your loyalty program to the next level with a “Growalition”

How your company can partner with like-minded businesses for success

Hospitality Technology Magazine

Posted August 16, 2005

Loyalty programs have become extremely popular. So popular in fact, smart business operators know that if they design a loyalty program that is innovative, valuable and simple to use, consumers will not only make room for a loyalty card in their wallet, they’ll actually use it.

A recent survey of nearly 4,000 cardholders by Synergistics Research Corp. found that credit cards with a rewards program more than double card usage to an average of 12.6 times per month versus 5.2 times per month for a card without a rewards program. Add in the fact that today’s consumers are accustomed to handing over plastic versus cash at the point-of-sale, and those behaviors become too tempting to resist when a business is considering creating its own loyalty program.

But what do you do if your business already has a strong loyalty program? How do you take it to the next level and capitalize on its untapped growth potential?

The answer is quite simple: you form a “Growalition”.

A Growalition is a term that we use to describe a partnership between a company with an existing, successful loyalty program (the “foundation” program), and non-competing, complementary businesses. Take an airline loyalty program for example. The airline program might bring a car rental business on board as a partner company – so if a member of the foundation program rents a car through that partner company, they get extra points. This makes perfect sense, since many travelers may need to rent a car when they get to their destination.

In the Growalition, a partner company rewards foundation program members with points in the foundation “currency”. This partnership creates benefits for everyone involved: the foundation program gets increased exposure as partner companies help “spread the word”; it becomes more relevant for existing and new members who now have more avenues to collect rewards points; and it creates an environment where the new partners help fund and grow the foundation program.

The partner companies (i.e. a car rental business) benefit because the Growalition drives new customer traffic through the door. And it allows some companies to participate in a loyalty program who would not be able to carry a program on their own. A mattress retailer, for example, doesn’t exactly have enough repeat customers to warrant its own loyalty program. But joining a Growaltion that can help drive its mattress sales may make perfect sense.

Finally consumers – the end-user – have more options to earn and redeem rewards.

Overall, creating a Growalition is a great idea but there are things to think about before you decide to build one. For starters, your existing loyalty program requires the following three items:

1. Loyalty currency — if you establish a strong loyalty program, the rewards points that members earn over time eventually turn into a form of loyalty currency. Extending this currency beyond the boundaries for which it was initially intended increases the relevance of the program to its members, enhancing members’ opportunity to earn points through more locations.

2. Members — you must have a targeted, well-defined group of members who have similar values and interests.

3. Marketing — you need a vehicle to communicate your program enhancements to members and announce the new companies you’ve brought on board. And remember, using a combination of advertising, direct mail and online channels to reach existing and prospective members is not free, so be prepared to make that necessary investment.

Finding an appropriate group of merchants that complement your program is obviously a critical step. Partner companies shouldn’t be competitors to your business and must appeal to your target customers. Building your Growalition by adding one merchant partner at a time is also a key. Don’t add 20 partners at once as you won’t be able to market them equally, and managing the new partners’ expectations will be difficult.

Here are some practical steps to finding the right partner companies that make sense for your business.

1. Mine your program’s member data to learn as much as you can about their spending habits, tastes and interests.

2. Research businesses whose customers you think have similar qualities to those of your members, or who may have an affinity for the products and services you offer.

3. Determine if there’s a logical connection to the company/companies you want to bring on board: will it be by geography? Should it be the stores next to you, in your mall or in your neighborhood? Or do you target types of companies – restaurants, clothing stores or hotels?

4. Ensure your program is attractive and visible to the right potential partner companies. If the merchant partners that you select don’t jump at the opportunity to join your program, or even approach you to come on board, move on to your next potential partner. Hesitation to participating in your Growalition is often a sign that the partner might not be as good a fit as you thought.

Only once you have established a healthy group of partner businesses, will your original loyalty program evolve into a Growaltion. Remember, the core valuation of the your foundation loyalty program does not change – your members see value in this program, and by forming a Growalition you’ve given them additional avenues to build their loyalty program wealth.

In the end a Growalition can extend the value of a company’s foundation loyalty program and gives other businesses a chance to participate in a loyalty program without having to create one of their own. If your company has what it takes to form a Growalition, grow forth and prosper!

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