Loyalty — that magical blend of habit and preference — is the Great White Whale of Commerce. It’s tantalizing, it’s obvious and it’s out there, swimming around the horizon just begging to be reeled in.
And, like Moby Dick, in an age of technology that makes consumer choice an app or a click away, it’s nearly impossible to catch, driving many a modern day Ahab to distraction. As a result, the shores of digital and physical commerce are littered with the wrecked remains of loyalty plays gone wrong.
And, there are sure a lot of ways for loyalty to go wrong — bad data that delivers bad targeting and messaging, “blunt instrument” loyalty programs that treat all customers the same — even the very, very loyal ones.
It is also apparent in the degree to which companies in the loyalty space are, in fact, innovating. Earlier this year, PYMNTS.com released The Payments Innovation Index – the very first quantitative assessment of the degree to which the 100 largest companies in the payments space are innovating.
Loyalty, as a segment, came in dead last.
American Express thinks it can change all of this – and its vehicle for driving loyalty forward is a program it released about eight weeks ago called Plenti. And, Plenti, at least so far, is racking up plenty of kudos from the consumers and merchants who are a part of it, Abeer Bhatia, chief executive of U.S. Loyalty at American Express, told MPD CEO Karen Webster in a recent interview.
“I think the performance of the program has exceeded our expectations; the sign up is far higher than we had planned and thankfully the typical operation headaches that you see when you launch something new across such a wide number of merchants have not come up,” Bhatia said.
In some ways Plenti should sound familiar to those who are students of loyalty programs – consumers rack up points, but Plenti points, when they shop at participating merchants.
And yet Plenti is also unique. It is a coalition loyalty play among several merchants, including Macy’s, Rite Aid, ExxonMobil and AT&T, – each of whom are the exclusive merchant in its category. Points are redeemed in thousand-point amounts at a rate of $10 per a thousand at any Plenti merchant. And though American Express acts as the program’s North Star, Plenti is not only for Amex cardholders. Anyone, using any payment method, including cash, can enroll and accrue points with purchases.
“It all boils down to our philosophy at American Express which is that we want to be a welcoming company and we want to help others to enjoy the products and services American Express provides and we didn’t really want it to be limited to the payments card or credit card population,” Bhatia told Webster.
“We want to talk to a broader audience than we would with our payments product and we saw the coalition space is a big opportunity to do that. It allows us to zone in on what we do because loyalty is a big part of our core payments business and so we can leverage that to build a better experience.”
And yet, Webster wondered, how hard was it to talk merchant partners into joining into that experience? While coalition loyalty plays are a popular concept, she noted, in practice retailers often look askance at them because they essentially fear points — freeriding — where other players get all the sales and they get all of the redemptions.
Bhatia had two answers.
Part of squaring the Plenti circle is in the program’s exclusivity component. Any consumer can sign up to be a Plenti member – but not just any merchant can, as the program does not allow direct competitors to participate, so that no one has to feel they are literally subsidizing their competition.
“Though there are categories where we have no exclusivity for a variety of reasons. For example, we look at an extremely segmented category like grocery where it is so fragmented it would be impossible to make it exclusive and also have meaningful participation.”
However, part of the challenge in building Plenti, Bhatia said, was in leading merchants to a new mindset when it came to the merits of combining resources.
“It is a very different set for merchants that participate in a program like this. From their point of view, the value is whether they are attracting more points than they are paying out, and are they engaging consumers in a better way and are they encouraging consumers to come in more,” Bhatia told Webster. “In some cases we did not have merchants join the coalition because they couldn’t get over that and couldn’t get to that idea.”
But at base, Bhatia thinks it is the necessary idea to come for really building that next generation loyalty program.
“There are two purposes for a loyalty program. One is to reward loyal users, and that is the part many programs do quite decently,” Bhatia noted, though it is often surrounded by questions about whether consumers are essentially being rewarded to do things they were likely to do anyway. “The other part is using loyalty programs to attract new consumers to try new products and services. And that is the part that loyalty programs in the U.S. fall flat on.”
And this is where Plenti thinks it has the right recipe. Maybe consumers were already going to shop at Macy’s that day, but the fact that they build points gives them a reason to get gas at Exxon on the way home and pick up Band-Aids at Rite Aid. Plenti’s power is that it has the habit to leverage consumer preferences to influence consumer habits by allowing rewards to accrue across commerce categories.
“You really want merchants to have this mindset,” Bhatia said. “It takes a lot to get over being very inward in your approach and instead decide to collaborate with a group of merchants and create something that is uniquely valuable.”
That doesn’t mean the arrangement erases their privacy, Bhatia said.
“We don’t share one merchant’s data with another merchant,” he said. “If you go to Exxon we don’t share that with AT&T or Rite Aid or any other merchant in the program. We do not sell the data to third parties at all.”
And the partner merchants are allowed a fair amount of autonomy as to how they award points and customize the program to their use.
Because ultimately, the program is hoping to expand and tap into what Bhatia described as an explosion of interest shortly after it launched publicly a little over a month and a half ago.
“I’m quite hopeful later this year or early next year you will see the next set of merchants being announced,” Bhatia noted. “There is no limit to the number of merchants we can add, except for the limitation of exclusivity by category.”
It is of course too early to see if Amex’s coalition play will really be able to slay the white whale that is loyalty. But if it does work, perhaps the ecosystem will have its answer about why it has been so hard to slay before now. A bunch of individual Ahabs have kept going out in search of the Great White Whale of Commerce, when it was really a job for a team all along.