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Benefits of a fortress currency:  There have been jokes that the most universal global currency is not the Euro, Yen or Dollar, but the frequent flyer mile. There is still some truth to that despite the decline in the value of the legacy airline programs’ currencies. There is no doubt that the first carriers to add car, hotel and other partners created fortress currencies so that in some cases the brand name of the program was stronger than the brand name of the carrier. For at least 10 years, Industry Traveltrak surveys by Plog Research indicated that one of the major carriers would have lost as many as 5 share points to the other major carriers without their award-winning program.

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Creating a profit center:  Finance and accounting typically view loyalty programs as liability generators. While everyone repeats the maxim that keeping a customer is more profitable than acquiring a new one, it is difficult to discipline the tracking systems into providing definitive proof as to which purchases were incremental and which customers would have otherwise churned. Selling the program’s currency is a direct journal entry to the bottom line.  In that environment, the diminishing returns of adding ever more partners simply do not show up.

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Reciprocal access:  The accounting and tracking systems are generally set up to recognize the average value of a customer whenever a new customer is acquired. This leads marketers on a merry chase for new warm bodies. The contract for adding a partner invariably includes a clause allowing the program selling the currency to send acquisition offers to the partner’s customer base, and vice versa, so that both partners can claim that they have free list access, which improves the ROI of their acquisition campaigns.

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Brand image by association:  Often a brand will seek to re-position itself in the market by choosing partners that already have a following with the desired target. If stodgy Brand X wants to appeal to a younger demographic, they seek partners known as youth brands. Or Brand Y wants to be perceived as a luxury item, they seek luxury partners. The luxury by association strategy tends to work more often than the youth strategy, but that is story for another day. It must be noted that the association strategy only works if the core brand has already completed changing their customer experience to engage the new target – partners cannot perfume the proverbial pig.

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Brand dilution:  Think quickly--can you remember which airline has Teleflora and which has 1-800-Flowers?  Or did that flower offer come from your frequent stayer program?  Or was it a credit card?  Or was it from NASCAR? Or Cabela’s? You might know but only if you are a confirmed loyalist, which is a rarity among consumers who belong to an average of 12 and actively participate in 4.7 programs (Wise Marketer 2006 Loyalty Guide).  If you estimate that each program has at least 10 partners, any one brand will have difficulty standing out from the dazzling array in front of any one member’s eyes.  The point is that the more categories and brands associated with your brand, the less likely it is that your members will remember your unique brand message.  Your brand must have and maintain a very well established image and message through other channels if it is to be the unifying factor for your portfolio of partners.

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Logo Land:  Logo Land, that page of partner logos on shopping portals and loyalty program communications, is not to be confused with LegoLand, except perhaps the common presence of many pieces of approximately the same size.   Your partners expect you to include their logo, tagline and perhaps some branded messaging.  Just look at the competition for space on any frequent flyer card: there you will likely find the Visa logo, the bank’s logo, the airline’s logo and the airline program’s logo plus phone numbers on the bank for the bank, airline reservations and the program’s customer service line.  The issue is that no one logo stands out and that is but another expression of the previously mentioned issue of brand dilution.

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Junk status:  Becoming spam is the dark side of becoming the fortress currency based on a shopping portal.  It is not a good sign if you need to put “statement enclosed” on an envelope so your member customers don’t confuse it with your up-sell, cross-sell or partner mailings.  It’s even worse if your members consider it a service when you do so.  Email studies show that open and click-through rates are following the same downward curve of direct mail rates when customers feel overwhelmed by the volume in their inbox.  You do not want your valuable member to cut off all communications from your brand because it was easier to ramp up their spam filter than to alter their preference profile with you and the other 11 programs they belong to exclude partner offers.

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Looking uncoordinated:  We often receive solicitations to join programs where we have been Valued Members for many, many years.  The solicitations are being sent to the member lists of the other programs to which we belong.  It is a rarity to see even an acknowledgement of the possibility that you might already be a member and it is hard not to resent attractive offers available only to new applicants.  It is obvious that no one ran a merge/purge on the lists or thought to include a consolation offer to stimulate incremental purchase for members “inadvertently included in this mailing.”

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Competitive parity:  Your mother was right when she told you, “Just because everyone is doing it, doesn’t make it right for you to do it.”  Maybe your mom didn’t say it, but it is likely that you’ve heard the concept given how often it shows up on kid’s shows.  The problem is that we forget to apply Mom’s wisdom in the marketplace – if our fiercest competitor just added a new category of partners, we know that we will have to justify to our bosses why our program didn’t do it first.  Some categories or some brands within a category just don’t make sense with your brand no matter what your rival did.  And as soon as you match your rival, you are back to parity, and so competition tends to revert to price.