Loyalty coalitions, which target a demographic or affinity group-like moms or Scottish-Americans-are proving successful for financial firms. Designed to tap consumers' emotions, they're often associated with a lifestyle or life stage.
Loyalty coalitions allow multiple merchants and brands to participate in rewards programs, spreading marketing costs while extending reach. Examples include ClubMom, which launched nationally this Mother's Day, Tartan Thistle Privilege, which appeals to people of Scottish decent, and Upromise, aimed at those saving for a child's college education.
As merchants of all kinds sign up, Citigroup, NetBank and Wachovia are taking advantage.
Companies that join Upromise, for example, reward consumers for buying products and services by contributing to a Vanguard-run 529 college savings plan. "The emotional connection really revolves around the value of education and the fact that families want to do the best they can for their children," says Evan Weisenfeld, director of partner services at Upromise, which claims five million members. Citigroup offers a credit card linked to Upromise rewards. Chase Home Finance, American Express Financial Advisors, NetBank, CitiMortgage, Wachovia Corporate Mortgage Services, New York Life and State Street Bank all participate.
New entry NetBank became involved because Upromise members are a good fit, says Eve McDowell, managing director of marketing. They're Internet savvy, are focused on financial planning and have above-average incomes and education. NetBank rewards Upromise members with $15 to $25 in college-savings plans when they open different checking or money market accounts, or a combination. The bank contributes monthly for up to a year, donating between $55 to $90 per account.
Travel, grocery, fuel and financial services are the top four types of companies loyalty coalitions target, because they prompt frequent spending-and constant rewards- earning potential, says Rick Ferguson, editorial director of Colloquy, a loyalty-marketing newsletter. "Getting a financial services partner, particularly one that offers a credit card associated with the program, is almost mission-critical for any coalition marketer. And all of the big coalitions in North America have a bank partner."
A major advantage to joining coalitions is that marketing and operating costs are spread among partners. Plus, the firm running the coalition assumes liability for reward "currency," Ferguson says. And member firms pay for the reward "currency," and usually an administration fee.
New York Life, which partnered with Upromise in March 2003, deposits $25 into a 529 savings plan for members who buy a life-insurance product and $40 for those who buy an annuity, says assistant vp Michael Battaglino. "We are getting the opportunity to approach these consumers when they are thinking about college savings, which is at the exact moment in time that we want to be talking to them," says Patricia Spencer Favreau, first vp and CMO of life insurance and annuities.
Vesdia Corp. of Atlanta focuses on rewards for college education, too, but takes a different approach. Members can choose virtually any savings account at any financial firm to funnel rebates from 500-plus merchants. NestEggz, which funds retirement accounts, is used by NetBank, State Street Bank and Greenpoint Mortgage. BabyMint, which focuses on saving for college, features Prudential and Merrill Lynch as providers. A third program, StockBack, aims at saving to buy stocks. Vesdia also runs private-label loyalty coalitions for MBNA Bank and State Street Bank.
Since the audience is a captive one, the marketing potential is huge. "Because we have this very direct and close relationship with millions of consumers, we're able to capture data that no commercial entity captures. We use that information to personalize offers on behalf of our partners," says Michael Sanchez, CEO of a coalition called ClubMom, which claims 1.5 million members who earn rewards for indulgences like a day at the spa. Sanchez hopes to hit 10 million in two years focusing on American moms, who wield $1.7 trillion in purchasing power. Partner companies report the program consistently provides a 10 percent lift in sales, Club Mom research shows.
