Networks, alliances and loyalty programs in Australia : power not passion drives the affair

Previous research on loyalty programs in Australia has shown the benefits gained by partners in these programs. This paper develops this research and introduces the concept of network development in loyalty programs. It builds on the theory of network development (Hertz and Mattson, 2004) and uses the role of strategic alliances to explain the implications of networks for the success of loyalty programs. The loyalty program utilised in this paper is FlyBuys which is run by Loyalty Pacific, a joint venture formed by National Australia Bank, Shell Australia and the Coles Myer Group. The initiators of Pacific Loyalty recognised the need to increase and improve their individual customer databases. The development, maintenance and usage of a data system that size, requires special skills and a large financial commitment. A sophisticated hardware and software solution is essential in order to track and manage the growing amount of data, transactions and services offered such as statements, service call centre and point collections. As the computer system plays a vital and ongoing role in the survival of this consumer loyalty scheme, a strategic alliance with HP/Compaq services was formed. This paper highlights the importance of HP/Compaq as the provider of the information technology platform which drives the program and shows how their role has developed and been expanded overtime.