From partnership-driven member perks to fully connected loyalty programs

Guess who's back with a brand new post? (sung to the tune of Ice Ice Baby by Vanilla Ice).

Zach is back. Tell a friend. (all right, now we're switching it up to Without Me by Eminem).

While I'll be posting about my favorite brands gearing up for the holidays shortly, let's first dive into this week's topic. Grab a pumpkin spice latte (yes, it's a tad too early for that) and settle in as we explore the marriage (I do happen to be getting married in 5 days, so the usage of this term is intentional) between brand partnerships and loyalty programs.

Getting started

This post will focus on two emerging concepts in the loyalty landscape:

1. Partnership-driven member perks
2. Fully connected loyalty programs between distinct brands

Partnership-Driven Member Perks

Think of your points-driven credit card that allows you to transfer points to various airline partners. This model extends benefits beyond a single brand's ecosystem, creating added value for consumers. Shameless, yet unpaid plug for The Points Guy which seemingly always has the best analysis of which credit card to get to maximize your benefits (hint: I have gone with the Amex Platinum because I have a deep need to be seen in the Centurion Amex Lounge at airports across the country).

Fully Connected Loyalty Programs

We'll examine how distinct brands in a wholesaler or distributor model can achieve partner synergies while maintaining their individual loyalty programs. Our case study will focus on Nike and JD Sports' innovative partnership model.

Partnership-driven member perks: a deeper dive

The goal of any loyalty program is to encourage more frequent brand interaction and increase sales in exchange for incentives. While not new, the partnership-driven model for member perks has gained significant traction in recent years.

When executed effectively, this approach allows brands to:

• Tap into like-minded audiences
• Expand their reach
• Offer more diverse and valuable benefits to members

Partnership-driven perks case study: Lululemon

Let's analyze Lululemon, which has put on a masterclass with its partnership-driven member program.

Roughly a year ago, Lululemon and Peloton announced a "five-year strategic global partnership through which Peloton will become the exclusive digital fitness content provider for?Lululemon, and?Lululemon?will become the primary athletic apparel partner to Peloton." (Source)

"Through technical athletic apparel, real life experiences, special programming, and original content" both companies are "expanding the brand awareness and reach". With almost identical target audiences for those with higher disposable income and a passion for fitness, the partnership is a genius move.

Lululemon has been pushing a digital content workout plan through its Studio program (which requires the physical product, Studio Mirror). The program has seen limited success, so this partnership with Peloton makes business sense, where Lululemon can leverage a more widely adopted digital workout platform, save costs, and give members access to a larger, regularly updated fitness community.

Fast forward almost a year and Lululemon has taken its members' perks to a new level, focused on wellness.

The brand has expanded the program, introducing wellness- and wellbeing-focused “Partner Perks,” in August. With the new initiative, Lululemon is leaning more heavily into the category by “providing guests with special access to wellness perks from a collective of like-minded brands,” according to a company statement. (Glossy)

Glossy interviewed Lululemon's SVP of Member Engagement, Jiamei Bai, about the new wellness-focused, partnership-driven member perks:

“We identified three key [well-being] pillars: Sweat, Fuel and Restore, and curated 12 great partners who shared our vision. We worked together to craft not only a compelling offer for our members but to also introduce them to other like-minded communities and experiences that could support their wellbeing goals,” said Bai. ?Participants include AG1, Oura, La La Land Café, Life and Time, Barry’s, Sweetgreen, Supergoop and Erewhon, among others.?(Glossy)

In yet another strong move for Lululemon, the brand creates great member perk value as members gain financial benefits with brands that most likely already know or are willing to try. If you have worked out at Barry's and popped into a Sweetgreen for a healthy, post-workout snack, you all have seen the Lululemon-wearing people. Now, we will see this even more.

Why this expansion into the partner benefits model benefits Lululemon and its customers:

• Customers develop a stronger brand affinity for a company that "gets" its customers and provides value through a benefits ecosystem approach
• Lululemon takes on a greater philosophical approach to its brand mission, while also tapping into partner audiences which strengthens its prospective customer pool

So to wrap up this case study, partnership-driven member perk models can add immeasurable value to a brand's loyalty offering, a win-win for both the customer and the company. But is there a way to take this to another level?

Fully connected loyalty programs: the next frontier

While partnership-driven member perks offer significant value, they can present challenges:

• Data sharing and potential spam
• Inconsistent customer experiences across brands
• Limited transferability of accrued benefits

Fully connected loyalty programs aim to address these issues, but they come with their own set of complexities:

• Technical integration
• Data sharing and privacy concerns
• Revenue attribution
• Brand control
• Profit margins
• Fraud prevention
• Competitive considerations
• Customer experience consistency
• ROI uncertainty
• Operational complexity

If you can overcome most of these hurdles and you have a plan for creating a seamless customer experience, then you might have found a cash cow.

Connected loyalty programs case study: Nike & JD Sports

While not 100% connected where points can be earned and burned at either brand, Nike and JD Sports are on the pathway to an approach that we'll most likely see several brands take.

While everyone universally knows Nike, fewer people may know about JD Sports. JD Sports started as a single retail store in North West England in 1981. Since then, the brand has exploded, becoming a leading omnichannel player for sports fashion and outdoor apparel. According to their website, JD Sports operates in 38 countries, has brought in $10.5 billion in revenue in the last fiscal year, and has 4,500 stores. For the US audience, the name JD might just be getting around, but most consumers will most likely know two of JD Sports' recent acquisitions, Finish Line and Hibbett.

Back to Nike. As a global behemoth and one of the most recognizable brands worldwide, Nike has always paid attention to the customer experience through its owned channels (traditional D2C through online and retail) and its distribution network. As the market has become increasingly more competitive, especially during the height of the pandemic, Nike has seen its D2C business shrink, requiring the brand to pay more attention to its role as a wholesaler.

To help guide the customer experience with retailers, Nike invested heavily in a partnership model to create connected programs with key retailers. In September of 2022, Nike announced its first connected loyalty program with JD Sports throughout Europe. According to Nike's press release, "Nike is made better when it works with like-minded partners to serve those who love sport. The partnership reflects Nike’s goal to create the future marketplace of sport through meaningful relationships that serve and inspire sport lovers everywhere." (Nike Press Release)

This move made sense on Nike's part for various reasons:

• Nike would glean crucial insights on its consumers who were Nike fanatics but never purchased directly through the brand
• Nike could better control and influence the end consumer customer experience even without being the transacting partner
• Nike had the opportunity to create new brand connections, educate consumers about the brand, and surprise and delight consumers with exclusive benefits through specific retailers

JD Sports also benefitted:

• Increased zero and first-party data capture improved insights into what brands consumers were interacting with
• Increased sales and loyalty membership to its STATUS program
• The immeasurable benefits of connecting the JD brand to the legendary Nike brand
• Creating awareness with existing and future customers that JD Sports has the best selection of Nike goods and apparel plus the opportunity to get exclusive access

Fast forward a few more years, Nike and JD Sports have now expanded, making JD Sports the first global partner of Nike's connected program. RetailDive (@) highlighted this new expansion in an early August post: "the joint loyalty program, which requires customers to connect their JD Status and Nike Membership accounts, offers customers access to members-only Nike footwear and apparel, early access to certain Nike member products, exclusive experiences and other benefits through the JD app and website." (Retail Dive)

For all the reasons above, Nike can expand its footprint with key retailers on a global scale and understand what does and does not work to influence its partnership strategy and its retail strategy for the next few years.

For JD Sports, being the first global partner in Nike's connected program provides a boost for the brand as it expands throughout North America.

Tying it all together

The partnership model significantly enhances the value of loyalty program benefits. Whether brands opt for a more "connected" version depends on various factors, including technology, contractual obligations, and customer experience considerations.

I can't solve all of the problems brands face, but I do know where to start with the technology.

Ambitious brands who want to take their loyalty programs to the next level with a partner-connected ecosystem need:

• A platform designed for peak performance
• Front-end customer experience management capabilities
• API-first architecture
• Integration flexibility with current and future tech stacks

This is where Talon.One comes in. Our-opinionated, API-first incentives platform offers:

• Customizable earning rules
• Reward ledger management
• API-driven notifications and workflows
• Flexible rule engine for diverse incentive campaigns
• Multi-brand support
• Capability to connect loyalty schemas between brands

If you have thoughts about this post, I would love to hear them. If you have suggestions of companies I should check out as we gear up for the holiday season, please pass them along.

Stay tuned for my future posts on a brand that I spend too much money with :)