In our 2016 Predictions post, we wrote about the struggles American Express was having with the launch of the Plenti coalition loyalty program. Do not be mistaken, AmEx’s achievement in getting Plenti off the ground was extraordinary. Putting the full weight of their brand behind both the efforts to acquire participating brands and the full-on marketing blitz that accompanied the launch of the program, Plenti represented the most viable effort to launch a new, nationwide, full-scale coalition program since the 1970s. And despite all of this, despite a strong financial partner to bankroll the program, an interesting and leading stable of national brands, a highly successful marketing campaign, and the acquisition of tens of millions of program members, Plenti has, by all accounts, arrived at a crossroads that seems will lead to its inevitable demise.
What went wrong? What has led to the withdrawal of Plenti partners including Macy’s, Chili’s, Direct Energy, Hulu, Nationwide, Enterprise Rent-a-Car, Alamo, Expedia and AT&T? Well, it’s complicated. Below are five areas in which Plenti (and other coalition attempts in the U.S.) failed to succeed or evolve, all of which have contributed to its status today:
- A market that’s just too big, and mature: Leading U.S. brands, the kind of brands that Plenti wanted to sign-up, already have scale. They don’t need a coalition to achieve coverage or cost absorption. If a coalition program was to succeed in the U.S., it would have to deliver exceptional results for partners—much better than those they could achieve on their own. And while consumers frequently cite interest in these types of programs, their long-term success on a national level seems to hinge on the pervasiveness of the brands included. Plenti did sign up a number of national brands, but in a market like the United States, the sheer size and number of choices available to consumers make it nearly impossible for an overwhelming number of the program’s brands to be available to consumers. In addition, coalition programs often need to offer exclusivity to brands in certain categories and regions in order to get them to sign on. Unfortunately for Plenti, while exclusivity helped them enroll an impressive roster of brands, the highly competitive nature of many industries in the U.S. led to a disjointed value proposition for many consumers.
- It just wasn’t a good deal for consumers: In 2016, we predicted that while Plenti’s initial launch success was impressive, the tailing off of consumer penetration and the lack of increased participating brands foretold of a tough road ahead. Our read was that the consumer value proposition wasn’t working. In order for Plenti to survive, they would need to “improve the deal.” They didn’t. Of course, consumers only care about a loyalty program when the benefits are interesting and are perceived to be attainable and valuable. Media reports have indicated that Plenti members were not redeeming for awards. And consumer redemption rates are an important indicator of program health. With the program’s growth and engagement trailing off, Plenti’s viability continued to be in question.
- It wasn’t a good deal for brands, either: At a high-level, a coalition program is fundamentally based on an economy where program participants buy points from the program and are compensated for redemptions. For many brands, loyalty is a cost that can be justified because of the consumer insights and relationships the program allows them to cultivate. But a coalition program significantly limits a brand’s ability to own the relationship with its customers—the coalition moves in while the partner takes a back seat. And beyond branding, consumer insights are typically held by the coalition, not by the individual partners. With the U.S. already being the world’s most mature loyalty market, many of Plenti’s brands already had their own programs. And there’s a reason they didn’t eliminate them—they were still necessary. Between paying for their own programs and paying for an additional program that wasn’t bringing in very many new customers and wasn’t providing much by the way of customer insights, it’s easy to see which got the axe.
- The customer experience was unavoidably clunky: Technological, branding and operational challenges made the experience of the Plenti program a bit cumbersome for consumers. Between needing to carry a physical card, having to remember that you were earning in two programs in some cases, and needing to remember which brands were and weren’t Plenti brands, the program put a lot of demands on consumers at a time when many brands are striving to eliminate friction and complexity. Consumers are busy and distracted and many just didn’t have the time and attention for Plenti.
- Marketplace trends were never in Plenti’s favor: The loyalty model is changing. While points still matter, today it’s about point and treatments/experiences. Coalitions can’t deliver here in the ways that the brands themselves can. And these trends are not limited to the United States. While coalition programs have had highly successful runs in the EU, UK and Canada, in those countries and regions, there are also major changes afoot in the loyalty market. Just within the past month, Aimia, the world’s leading operator of coalition loyalty programs, sold its stake in the UK’s Nectar program to its largest partner brand, Sainsbury’s. And in addition, Air Canada announced last year that it was withdrawing from Aimia’s Aeroplan, Canada’s leading coalition loyalty program and originally a creation of Air Canada itself.
In the end, the failure of the Plenti program was predictable. AmEx deserves credit for the commitment they showed to the program and their achievement in bringing onboard the brands and members that they did. Many have tried and many have failed without ever awarding a single point. Still, the failure of Plenti does not foretell the death of the loyalty business. In fact, we believe it signals not only the strength of the brand loyalty model, but also the future of loyalty itself.