Loyalty Program Partnerships: What You Need to Know

February 1, 2024
10
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Loyalty Program Partnerships

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"Are you thinking what I'm thinking, partner? Aim for the bushes." Do you remember this iconic line from the movie "The Other Guys"? If you trust your partner, you can take a bold leap, sometimes without knowing exactly where you’ll land. What’s more, “two heads are better than one.” In today’s competitive market, loyalty programs have become a staple for businesses seeking to retain customers and encourage repeat purchases. As customers' expectations evolve, loyalty programs also evolve. Today, modern companies and marketing professionals are recognizing the importance of partnerships in providing greater value to their customers. 

In this article, we’ll explore the benefits of loyalty partnerships, examining how businesses can effectively align, leap together, and land in a place that benefits them and their customers. The right collaboration can turn a leap of faith into a journey toward mutual success. 

Here’s what we are going to cover: 

  • What are Loyalty Program Partnerships?
  • Benefits of Loyalty Program Partnerships for Businesses and Customers
  • The Difficulties in Managing Loyalty Program Partnerships
  • How to Select the Right Partner for your Loyalty Program? 
  • Loyalty Program Partnerships Example: Starbucks Rewards and Delta SkyMiles

What are Loyalty Program Partnerships?

Imagine, you’re walking through a lively city park, your footsteps syncing with your favorite tunes streaming from your smartwatch. Each step not only improves your health but also earns you points at your local music store. Now picture this: It’s movie night, and you’re about to watch the latest blockbuster. The twist? The popcorn in your hand and the movie ticket were both discounted thanks to the points you earned while shopping for groceries. It's not just a win for consumers; it's also a clever way of doing business. It’s about adding a little sparkle to everyday events and turning them into enjoyable experiences for customers. Remember, customers are the main reason why you started your business in the first place.  Their preferences and needs are constantly evolving, which is why it’s crucial to continuously adapt your loyalty programs to meet these changing demands. What worked yesterday may not work tomorrow. More and more companies are turning to loyalty partnerships. This strategy, while not new, has recently gained popularity and proven to be effective. The ability of customers to access a wide range of products and services from one source highlights the significance of partnerships. This approach is essential for maintaining relevance, offering value in a more complex manner, and remaining competitive in today’s ever-changing world. Loyalty partnerships can add an extra layer of engagement and satisfaction. 

What is a Loyalty Program Partnership? 

A loyalty program partnership is a collaboration between two or more businesses where they work together to offer shared benefits to their customers, typically through a combined or linked loyalty program. These partnerships can be between companies in similar or completely different sectors.

Benefits of Loyalty Program Partnerships for Businesses and Customers

Loyalty program partnerships offer brands new opportunities to foster customer loyalty. These partnerships are gaining popularity because they offer mutual benefits to the partnering companies and add value to their customers. 

So, what are the benefits of loyalty program partnerships for businesses? 

Benefits of Loyalty Program Partnerships for Businesses 

Expanded Customer Base

By partnering with another company, businesses can gain access to a new and larger customer base that they might not have been able to reach on their own. This enables market expansion and cross-promotion opportunities. This collaboration can enhance brand visibility and reputation, attracting new customers from different market segments and geographic locations. Imagine a local bookstore partnering with a cozy coffee shop. This collaboration would attract coffee lovers who enjoy reading with a cup of tea. The bookstore can offer special discounts to customers of the coffee shop, and vice versa. This partnership not only broadens the customer reach but also gives a competitive edge in the market. 

Cross-promotion Opportunities 

Leveraging the established trust of a partner can help both companies cross-promote their products or services to each other’s customer bases. This can be particularly effective if the partnering companies offer complementary products or services. This cross-promotion boosts the brand’s visibility and reputation and builds trust and credibility with your customers. 

For instance, the athletic wear brand introduces a new line of fitness clothing that includes a QR code. When customers scan this QR code, they receive a free 3-month premium subscription to the fitness app. By fusing fashion and fitness, this partnership helps both businesses by incentivizing app users to purchase sportswear and sportswear buyers to use the fitness app more frequently. This symbiosis not only broadens the customer reach but also provides a competitive edge on the market. 

Increased Brand Exposure 

Loyalty program partnerships expose a brand to the partner’s customer base, increasing brand visibility. By doing this, the company can reach new audiences and create brand awareness among customers who otherwise might not have heard of the company. Additionally, by offering rewards or benefits through the partner's loyalty program, the brand can generate interest and attract new customers.

Access to Robust Customer Data

Loyalty program partnerships between businesses can be an effective way to collect and share customer data. When companies collaborate through these programs, they can access a broader range of customer information, including purchasing habits, preferences, and behaviors across different sectors or services. This enriched data pool enables both partners to refine their marketing strategies, personalize customer experiences, and predict future trends more accurately. Additionally, by leveraging shared insights, businesses can create more targeted and appealing rewards, increasing customer engagement and loyalty across the partnered brands.

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For instance, Uber has partnered with Marriott Bonvoy, allowing users to earn Marriott Bonvoy points. They can now accumulate points for future vacations even when they’re not traveling. This partnership is beneficial for members because they can earn rewards in both programs. It also greatly increases the amount of data Uber collects from new areas.

Increased Customer Trust

If one of the partners has already established a strong trust with their customer base, this trust can be leveraged to introduce new products or services from the partner company. This partnership allows the partner company to benefit from an already loyal audience, effectively reducing the barriers to entry and skepticism often associated with new offerings. Furthermore, customers feel more confident trying new products or services when they come from a trusted, familiar source, thereby enhancing the effectiveness of the loyalty program partnership. 

Benefits of Loyalty Program Partnerships for Customers

Enhanced Value Proposition for Customers

One of the main benefits of partnerships in loyalty programs is the increased value they offer to customers. When two brands come together, loyalty programs offer a diverse range of rewards and redemption options. This variety caters to the different tastes and preferences of customers, increasing their engagement and satisfaction. Customers can select from a wider range of options, which would not be offered in a solo loyalty program, such as unique experiences, trip upgrades, special offers, or personalized items. 

Exclusive Access

The integration of customer data across partnering companies in a loyalty program allows for a more comprehensive understanding of customer preferences and behaviors. This deeper insight enables the creation of highly tailored rewards and offers, ranging from customized product recommendations to special deals that align with individual customer interests and purchase histories. Such personalization not only improves the customer experience but also fosters a stronger emotional connection with the brand, as customers feel recognized and valued for their unique preferences and needs.

For example, Nike and Spotify teamed up to offer a cool deal. When customers made a playlist for running, they got to try Spotify Premium for free for a week. This was great for runners who enjoy both tracking their fitness and listening to music. Using just one app for both made things much easier for them.

The Difficulties in Managing Loyalty Program Partnerships

While loyalty partnerships offer various benefits to customers and businesses, they also come with challenges:

Integration Difficulties

This challenge involves aligning different technology platforms and systems used by the partnering companies. Each partner has its own customer database, points system, and redemption process which needs to be integrated for a seamless customer experience. Technology-wise, this integration can be expensive and sophisticated, requiring a large investment in software creation, testing, and maintenance. 

Data Sharing and Privacy Concerns

Loyalty programs often involve collecting and analyzing large volumes of customer data. When companies join forces, they may need to exchange this data. This raises concerns about customer privacy, data security, and compliance with laws like GDPR or CCPA. Partners need to make clear agreements concerning the sharing, storing, and use of data, and ensure that these agreements are transparent with customers about these practices. 

Balancing Rewards

It might be difficult to create a reward structure that benefits all parties involved and appeals to customers. The rewards must be valuable enough to entice customers to participate. There can be complexities in determining how points are earned and redeemed across different companies, ensuring that the value of rewards remains consistent and fair. 

Brand Alignment 

Each company involved in a partnership probably has its own values, expectations from customers, and brand image. It’s crucial to align these different brand identities in a way that makes sense to customers. The collaboration shouldn’t feel off-brand or confusing, rather it should feel organic and advantageous. To guarantee that the partnership improves brand’s image rather than lessens it, cautious marketing and communication tactics are needed.

When it comes to loyalty program partnerships, the biggest challenge lies in finding the right partner. In this process, a number of factors must be carefully considered. 

So, how do you choose the right partner? Let’s talk about it.

How to Select the Right Partner for your Loyalty Program?

Because 60-65% of strategic partnerships fail, for whatever reason - unrealistic expectations, inadequate communication, or lack of trust - it is crucial to go cautiously and thoroughly while searching for a partner. It is a strategic decision that can impact the success of your loyalty program partnership.

But the first thing you need to do is to start with your customers. You need to know what would most appeal to your target audience. This could be events, travel, restaurants, or streaming platforms that would best complement your existing offerings. 

After consulting their target audience, brands typically select partners based on several criteria:

  • Choosing a partner for a loyalty program partnership should involve selecting one that operates in a similar price segment, to ensure the attraction of business-relevant customers. This approach guarantees that the partner’s customer base aligns well with your own, leading to a mutually beneficial cross-promotion and increased customer engagement. 
  • Selecting a partner who focuses their operations exclusively within the same geographical zone. This approach leads to more effective marketing because the partner's understanding of the local market dynamics complements your own. Furthermore, it creates a sense of community among customers, enhancing loyalty and trust in both brands. 
  • A successful loyalty partnership requires the collaboration of two businesses that complement each other's offerings while ensuring they are not direct competitors. By avoiding direct competition, you can prevent conflict of interest and cannibalization of each other’s customer base. 
  • It's crucial to choose a loyalty program partner with a strong and positive reputation, as this reflects directly on the credibility and trustworthiness of your own business. If the partner has a strong and positive image, it instills confidence in your customers regarding the reliability of the rewards and benefits offered.

What’s more, launching a loyalty program with corporations where approvals take months would be inconvenient for the business. Consider this factor as well when choosing a partner for your loyalty program. 

Loyalty Program Partnerships Example: Starbucks Rewards and Delta SkyMiles

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Starbucks and Delta Airlines collaboration is an example of a successful loyalty program partnership. Starbucks has long maintained a strong presence in the world of customer loyalty programs, and Delta is another notable participant with its extensive SkyMiles loyalty rewards program. 

To increase the program’s value, they teamed up to create one of the best loyalty program partnerships. Linking a Delta SkyMiles® and Starbucks® Rewards account allows users to earn 1 mile for every $1* spent at Starbucks. To sweeten the deal, on days when flying with Delta, US customers can earn double Stars. They announced their loyalty partnership in October 2022. The collaboration was a success. It has exceeded the expectations of both brands. Starbucks has a presence in nearly every major U.S. airport, which is why its loyalty partnership with Delta Airlines makes so much sense. This loyalty program partnership is open to both new and current customers. 

How does this loyalty partnership benefit Starbucks?  

Starbucks Rewards is a successful loyalty program. The program has nearly 31 million active members, and with this partnership they can further increase the awareness of their program and offer more value to their customers to drive signups. 

How does this loyalty partnership benefit Delta Airlines? 

Compared to Starbucks, the partnership might seem less beneficial for members of Delta SkyMiles program, since they have to fly 25 000 miles to earn a free flight. But it offers a great opportunity to get a direct engagement through the SkyMiles program. Furthermore, it enhances the probability that Starbucks customers will favor Delta as their preferred airline. 

The Delta and Starbucks partnership is a prime example of how planes and coffee go hand in hand. This loyalty program partnership demonstrates how a well-conceived collaboration can benefit both parties as well as customers. Furthermore, it significantly boosts customer engagement and retention, showing that when companies align their brands strategically, they not only enhance their value but also foster deeper loyalty and commitment among their consumer base.

Conclusion

Loyalty program partnerships are an effective way to increase brand awareness and customer engagement. The example of Starbucks and Delta Airlines shows how these partnerships benefit both businesses and consumers. For businesses, they provide access to new customer customer segments and customer loyalty. Customers benefit from higher value and more rewards from their preferred brands. However, careful partner selection and alignment of brand values with customer expectations are critical to the success of these partnerships. When executed well, they can create a synergistic relationship that fosters long-term customer loyalty and business growth. Thus, loyalty program partnerships, when managed effectively, are instrumental in driving both customer satisfaction and business success.

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