With AT&T dropping out of the program and Macy's focusing more on its own loyalty scheme, American Express is absorbing the first serious blows from key members in its multi-merchant Plenti Rewards Program.

Put in place two years ago as a way for consumers to earn and redeem a common reward currency at different retailers, the program's basic tenets of exclusivity — only one retailer per category is allowed to participate — may have appealed to retailers but also limited the program's scope.

Thus, any one retailer's departure equates to the loss of an entire retail category for Plenti. AT&T's decision may not have made big waves if its rivals also participated, but now any consumer who hoped to use Plenti points with their cellular service is out of options.

AT&T store
Bloomberg News

"While Plenti has grown in scale since its launch, a number of factors, including shifting priorities among some founding partners and changing competitive conditions in their industries, have led to recent public announcements from certain founding partners regarding their future loyalty plans," American Express acknowledged in a Oct. 5 statement. "American Express is in confidential discussions with a few remaining Plenti sponsors regarding the future of the program."

It remains to be seen whether those discussions will loosen Plenti's exclusivity requirements (when adding its first grocery chain with Southeastern Grocers LLC, Plenti suggested that it would allow multiple companies from that category if they focused on different regions), or if the rewards structure itself needs to be reworked. History has shown that a multi-retailer rewards model simply may not be sustainable.

The problem with any third-party rewards program is that it must compete with what the retailer already offers. In the early days of mobile payments, a company called Bling Nation tried to get merchants on board with its own loyalty program, only to find them rejecting its pitch and dropping its mobile payments service altogether — leading to the company's demise.

AT&T last week informed its customers that it was leaving the Plenti program to focus on its recently launched "Thanks" program. AT&T's final day in the Plenti program will be Oct. 31, but Plenti cardholders will still be able to use points accumulated through AT&T with the other partners in the program.

In making the change, AT&T positioned itself with a clearer focus on going head-to-head against Verizon's Up loyalty program and recent moves by T-Mobile, which has added a credit toward Netflix subscriptions to its primary mobile plan. Because those companies all have highly-marketed loyalty programs that reflect their own brand, there's no guarantee that either of them would step in to fill AT&T's spot in the Plenti program.

As the exclusive department store retailer in the program, Macy's has not announced it is leaving the Plenti program, but has clearly turned its attention to its own Star Rewards program, offering discounts and free delivery to its top customers. With all retailers in a competitive landscape that has a clear target in trying to keep abreast of Amazon, a multi-retailer rewards option such as Plenti could easily slide to a back burner.

"Coalition loyalty is a really hard thing to do," Thad Peterson, senior analyst with Boston-based Aite Group, said of the Plenti model. "The challenge is you have to have that critical mass of merchants to make it useful to the consumer when using it for a high percentage of their transactions."

If a rewards card doesn't work at many of the businesses at which a consumer might shop, it creates more friction than it eases, Peterson said. The emergence of real-time loyalty redemption at the point of sale through mobile devices or cards also puts extra pressure on cross-merchant schemes, he added.

The recent rumblings leave American Express at a fork in the road in terms of which way it should lean with the Plenti program, which seemed to get a significant boost earlier this year when securing Southeastern Groceries' Winn Dixie for the grocery category.

At that time, American Express said it could secure other grocery chains in other parts of the country, while keeping the exclusivity of the retailers in place. No other major regional grocery chain has been added in the past seven months.

"Some of these programs work well, such as some fuel rewards programs, but Plenti hasn't had that feel to it," said Brian Riley, director of card services for Mercator Advisory Group. "It is a bit ironic when you think about how good American Express has been with its rewards programs, but I don't think they got the usual pizzaz with Plenti that American Express usually gets with rewards schemes."

Because American Express has had such great success with its Delta Rewards card, it seemed that the same type of consumer experience could somehow translate to its other loyalty efforts, Riley added.

Other Plenti members currently include Chili's Grill & Bar restaurants, ExxonMobil, Nationwide, Rite Aid, Direct Energy, Enterprise Rent-A-Car, Hulu, Expedia, BI-LO, Harvey's and American Express, which has a separate branded Plenti card.

"American Express has made a legitimate effort to pull this off," Aite's Peterson said. "I applaud their effort, but this is a hard and expensive thing to do, and they may just be realizing what a big mountain it is to climb."

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