A Look Under the Loyalty Hood

There are two sides to any loyalty program. The side consumers see includes the rewards interface (be it experience-based or via traditional, mobile, or social media channels), the physical loyalty card or app, and the earn-and-burn options available. The other side of loyalty is what's happening under the hood: the software, algorithms, and technology implementation needed to create that seamless and unobtrusive omnichannel loyalty experience. Think of a loyalty program like a car, its engine, and motorist expectations. Most drivers aren't mechanics. They turn the key in the ignition, shift from park to drive, press the gas pedal, and go.

The same applies to loyalty programs. When it comes to program effectiveness, enjoyment, and usefulness, consumers expect they will just work—and work the same way every time.

If only it were that simple.

The reality is that implementing technology solutions is much more complex. As discussed on a recent Webinar I copresented with Suresh Vittal of Forrester Research, loyalty providers who fail to keep their programs' technology first-rate risk losing their most important asset: their customers. The data is clear. According to the Global Loyalty Benchmark Online Survey, only 37 percent of loyalty marketers surveyed agreed their loyalty program has the requisite technology and analytics in place to deliver a consistent customized consumer experience across multiple channels.

Similarly, only 34 percent agreed with this telling statement: "Our campaign management system is well integrated with our loyalty platform, sharing business logic offers, messages, and customer insights and responses." Finally, the 2012 Card Forum survey found that 72 percent of marketing executives, service providers, and partners spend more than half their day dealing with "operational issues," including technology snags. With these stats in mind, the question then becomes this: If the majority of loyalty managers' time is spent fixing program issues, when do they find time to improve the actual program and offerings for their customers?

Clearly, more work needs to be done. The question is how. At the heart of most loyalty programs are their core functionalities, such as currency or point-accumulation engines. For car-speak comparisons, this is like a loyalty program's pistons. Loyalty programs also include customer member management for tiering and segmentation, multichannel tracking of consumer behaviors, and, finally, the data warehouse to store this wealth of incoming information. This is not dissimilar to a car's onboard computer and fuel system. Fuel powers the car. Data fuels the loyalty program.

Giving Your Loyalty Program a Test Drive

Whether it's confronting scaling issues, IT training/working within existing corporate frameworks, or managing the balance between manual or automatic processes, much of the above-mentioned technology pitfalls can be avoided preemptively. How? By planning each aspect of the technology implementation carefully and strategically. The more planning at the outset of a loyalty program's creation—e.g., estimating how many members will join the program (scaling to larger audiences) and the amount of transaction data they will generate—the lower the likelihood that the program will outgrow its ability to engage users seamlessly and in real time.

Careful planning helps avoid one of the main loyalty program fracture points: manual versus automatic processes and the corresponding downstream error rates and inefficiencies. To as great an extent as possible, a loyalty program's data management, processing, analysis, and action must be automatic. It's also important to note that these issues aren't a function of company size, but more related to company age and maturity.

There also needs to be a focus on real-time offers and engagement, ideally at the launch of the program versus something drafted on an ad-hoc basis. Today, most loyalty programs use what is known as a batch-oriented process. That is, they collect and process a group of file data from their members on a scheduled regimen; consumers transact today but earn and can burn days or weeks later. Batch processing has become more and more antiquated thanks to the rapid stream of data and customer expectations for being able to earn and burn in real time across multiple customer channels (think mobile and social media). Automatic processing allows program managers to move beyond transactional loyalty to engage members and drive customer behaviors on a more regular basis.

Managing consumer data in real time (versus collecting it without the ability to analyze it and take action) across channels strikes at the heart of today's data divide. Data quality, or data freshness, is also critical in effective loyalty management. Ultimately, consumers want to be asked what is the best channel or channels and frequency for their preferred level of engagement. That's why smart mobile technology has become so important—it helps keep data as recent as possible.

The Loyalty Engine Is Driven by Customers, not Computers

One of the best pieces of advice I can offer moves the conversation beyond data and back toward the human side of the equation. When it comes to creating a streamlined program, managers should not try to reinvent the wheel, but to work with it. By utilizing existing employee training assets, loyalty programs can cut down on implementation time, leveraging what already exists.

Of course, no matter how high you aim, there will always be obstacles and challenges. Loyalty programs, like the finest automobiles, break down. A few words of advice:

Avoid taking half-baked ideas to market. Instead, gain a clear view into the experience your customers want by operating on empirical customer data.

Don't assume anything. Often large-scale initiatives are cut short, underconceptualized, and implemented with incomplete business requirements, which impact the quality of data and the overall customer experience.

If manual inputs appear on the rise and error rates are mounting, gather your IT team and other support staff—fast. Then collect the data on the mounting problems and brainstorm a way in which these problems can be self-corrected back through an automatic process, not addressed on an issue-by-issue basis.

That's the same kind of wisdom operating in your mechanic's head, and it's the same type of advice that will keep your loyalty engine running in perfect order for many years to come.

Don Hughes serves as chief information officer at Kobie Marketing, leading the company's development, product innovation, and IT operations efforts. His experience spans a number of technology companies, including TSYS, Harbinger/Peregrine Systems, and Vantive/PeopleSoft. He has led large-scale customer loyalty marketing implementations for retailers such as The Home Depot and Sears. In addition, he owned and operated his own technology consulting practice, eLinkOne Inc.

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