Why coalition loyalty programmes are the wrong strategy for most retail groups
Coalition loyalty programmes like Flybuys, Everyday Rewards, and Airpoints have long been positioned as the smart way to build customer loyalty without the heavy lifting of creating your own programme. But this apparent shortcut comes with hidden costs that can undermine your competitive position - particularly in the concentrated local markets.
You're paying to share your best Customers
The core problem is simple: coalition programmes require you to pool your customer data with competitors while paying substantial fees for the privilege. Participation costs typically run 2-5% of sales, directly impacting your margins. In grocery retail, where margins average just 2-3%, this cost structure is particularly punishing. Meanwhile, points earned in your stores can be redeemed at rival locations, meaning you're subsidising competitor sales while losing potential redemption revenue.
Loyalty to the Programme, not your brand
When customers accumulate generic coalition points rather than rewards tied to your specific brand, they develop affinity for the programme itself, not your stores. This commoditises your customer relationships and makes meaningful differentiation nearly impossible. In markets like Australia and New Zealand where several major retailers participate in the same coalition programmes, this problem is amplified.
Lost control and strategic flexibility
Coalition models lock you into standardised rules, earning rates, and redemption options designed to serve the programme operator's interests, not yours. Want to create a new reward tier? Launch a surprise & delight offer? Pivot your strategy based on your own customer behaviour? You'll need approval, face technical limitations, or find yourself contractually constrained. Strategic agility - essential in today's fast-moving retail and hospitality environment becomes nearly impossible.
The data disadvantage
Perhaps most critically, you lose exclusive access to customer insights. In our relatively small, concentrated markets where you're competing for the same customer base as direct rivals, sharing behavioural data is strategically counter-productive. The intelligence that should inform your merchandising, marketing, and pricing decisions becomes available to everyone in the coalition.
A better path forward
Tranxactor’s platform and infrastructure makes operating your own loyalty programme more accessible than ever. While building your own programme requires investment, it delivers what coalitions never can: authentic brand loyalty, exclusive customer data, complete strategic control, and economics that work in your favour rather than against you.
- For most retail and hospitality groups the coalition model is a false economy that trades short-term convenience for long-term competitive disadvantage. The real question isn't whether you can afford to build a proprietary programme - it's whether you can afford not to. Tranxactor offers a proven platform that can deliver the programme that suits your business model, your customer base, and meet your strategic marketing initiatives.
Find out more about how Tranxactor can help you implement a powerful, meaningful and cost-effective consumer loyalty programme. Call us today!