Posted by Ajay Kelkar on Sat, Dec 25, 2010
i Mint has been the first Coalition loyalty program in India & its success has been muted. ICICI bank supported this initiative & it did give the program the numbers that are needed for rapid market penetration.
Does Coalition loyalty work in India? Will marketers cooperate & align together or will multiple program partner interests be too complex too manage. Or will the Indian crab syndrome come in the way! It is said that Indian crabs, if left in a basket, are never able to escape. Each time one crab tries to get out of the basket another one would pull him down! This is the Indian crab syndrome!
There have been attempts earlier by Venture Infotek & by Tata’s but none have been able to cross the rubicon!
I feel that the following need to be considered in India for Coalition loyalty to be successful:
- India is a very heterogeneous market. Coalition loyalty has worked well in strongly homogenous markets like Canada, UK or Germany. Fragmented consumers are like a jigsaw & coalition loyalty has to be thought through differently to service markets like India. Much more innovation needs to drive both the consumer proposition & the communication efforts.
- Organized retail has low penetration in India. This impacts the largest “success criteria” for a coalition, the high frequency supermarket category. Consumers build points fastest with high frequency categories like supermarkets. But in India, organized Retail is less than 2-3 % of total retail spends. That makes it harder to effectively bring in a large number of smaller Retailers into a coalition program. Maybe the innovation required for India is that a consumer goods company leads such a Coalition & brings in its distribution muscle across small retail. Now that would be a game changer in India
- India needs many Coalitions but programs need to be far more focussed about consumer proposition. Coalition programs need to tap into a consumer need which is compelling & then build on that. Education & how it can potentially change the life of a young person could be one potential need that a program could tap into. Look at Upromise, it is an example, in the education niche, of the power of the coalition model. More than 10 million participants in the Upromise program aspire to improve on this compelling statistic – just 28% of Americans graduate from a 4-year university
Fundamentally the logic of Loyalty marketing is that it is profitable! For Marketers in India to make this come alive, there needs to be far more innovation!
Interestingly I Mint has recently been bought by Payback & ICICI has reduced its involvement to a 10% stake. And just a few days ago, American Express announced the acquisition of Loyalty Partner which is the parent company of Payback. The EU based company, which owns and operates Payback in Germany is one of the crown jewels among established coalition loyalty programs worldwide. So it would be interesting to watch how American express would run i Mint!!
Just about one year ago, LoyaltyOne acquired a 29% interest in Dotz, the leading coalition program in populous Brazil. With just 200,000 members in a country of 190 Million, the growth potential for Dotz is formidable. Founded in 2000, dotz is a Brazilian-based loyalty program with more than 200,000 active participants, 50 online sponsors and a rewards catalog featuring more than 6,000 products and services. LoyaltyOne is an Alliance Data Systems Corporation (NYSE: ADS) company. LoyaltyOne’s AIR MILES Reward Program in Canada, which currently has more than 70 percent of Canadian households participating and more than 100 leading brand-name sponsors.
While LoyaltyOne was busy in Brazil, Aeroplan announced its acquisition of Carlson Marketing and launched a new program in Italy. Aeroplan also made a strategic investment in Club Premier, the newly spun-off frequent flyer program associated with Aeromexico.
Apart from Aeroplan and LoyaltyOne, it now seems to be a 3 way war between the Coalition loyalty giants. Wonder who will win in India!! Also what about an Indian company developing a unique Coalition initiative-maybe Future group could be well positioned to incubate such a venture! HDFC bank could be another contender!
I wrote about Coalitions in Retail in an earlier post-have a look:
http://blog.cequitysolutions.com/Customer-Management-blog/bid/13432/Partner-or-Perish
Posted by Ajay Kelkar on Sun, Sep 26, 2010
Managing Power customer not Power brands!Many companies talk about Power brands! Power brands are those few brands which the company focuses its strategy around. I have always wondered why companies do not focus on “power customers”. Looking at the 20% of customers who give you disproportionate revenue seems only logical to me! And yet there is a lot more “lip service” than focussed marketing action around power customers.
Often company structure comes in the way, no one really owns a "Customer segment".
Here are some thoughts about Creating Power Customers not Power brands!