Peter Guidi's Blog

Coalition Marketing; The power and opportunity of developing an “alternative currency”

In loyalty, merchants on September 7, 2010 at 2:54 pm

Loyalty marketing in the convenience/petroleum retail business is rapidly evolving.  Looking back five years, today’s landscape is hardly recognizable. The confluence of two major trends, IT advancement and marketing strategies have changed the way retailers allocate resources and measure ROI. At the convergence of these two trends is the loyalty program. What was a simple punch card fraught with liability, is now a complex real-time database capable of tracking and measuring every dollar spent and earned. Today, many smaller retailers have modern POS and Internet services allowing them to launch complex loyalty programs that had previous been available only to the largest most sophisticated retailers.

There are numerous types of loyalty programs, clubs, instant discounts and others. In the c-store space, one of the most significant questions being asked is: what type of loyalty program to launch? The more sophisticated loyalty programs are based on “platform” economics and work to develop networks of consumers and retailers. In the c-store/petroleum space there are two popular programs available; “Coalition and Community”

Recently, the industry has been “a buzz” with news of “Community” loyalty programs linking major oil companies and gargantuan grocery chains together in “cents off per gallon” promotions. In these programs the c-store/petroleum retailers are a “redemption center” for the program. The question is; are “Groceries for Gallons” a good deal for the c-store retailer? The answer requires an understanding of the difference between coalition and community programs. The importance of this distinction is critical.

In a community program, the retailer is a “redemption depot”, storing the reward (gas) while the grocer sells groceries by giving away gas. These programs move a lot of gallons, but how do they motivate the consumer to purchase other products from the c-store?

In a coalition program the c-store is the owner of the alternative currency (points) both “issuing and redeeming” the currency. In a coalition program, the c-store is “selling” points to coalition partners. Each point is sold at a profit. The c-store earns a profit when the point is sold, rather than redeemed.

Coalition programs put the c-store at the center of a powerful marketing program designed to build profit for all members. Coalition programs motivate consumers’ to purchase more products with greater frequency from both the c-store and the coalition members. 

Summed up, in a Community program the c-store retailer is building someone else’s business, with coalition programs the c-store is building their business. The choice seems clear; coalition is the path to growth and profit. (http://www.linkedin.com/in/peterguidi)

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