Lifestyle data 'a key weakness' in many loyalty platforms
Following a comprehensive benchmarking study of forty customer loyalty solutions and platforms from around the world, covering sectors including grocery, fashion, fuel retailers, telecoms, airlines, financial services, and coalitions, the major weakness in most platforms is the collection of lifestyle data, according to Mike Atkin of MJA Associates.
Apart from evaluating the platform capabilities based on a detailed benchmarking checklist, Atkin also reviews and scores other features and functionalities, including front-end and back-end links, loyalty programme management tools, quality assurance processes, and any relevant accreditations that may be required for the vertical market in which the provider operates.
Among his many findings, the platforms examined come from all parts of the world, and their original location has generally been found to reflect the maturity of the customer loyalty market in each region.
At the same time, apart from focussing on the technical aspects of each solution, Atkins also benchmarks the marketing capabilities of providers that are aiming to develop in other geographical regions - for example, as a SaaS (software as a service) vendor or ASP (application service provider).
The standard capabilities provided by all platforms include a points engine (to increment and decrement the currency of a programme), and some have limited bonussing capabilities.
The majority of the benchmarked platforms are only suitable for single-operator programmes and would require significant enhancement to meet the necessary requirements of a multi-partner loyalty scheme.
All platforms have links to member web sites, fulfilment houses, and are mainly database agnostic (i.e. most common database engines can be used), and most can link to most EPOS and terminal hardware.
One of the most significant weaknesses in most of the platforms is the ability to collect lifestyle data, as most can collect only transactional data. However, if marketers do not track members' lifestyle changes (e.g. getting married, having children, moving house, and so on) they cannot effectively build enduring customer relationships and therefore strong loyalty. This lack of data collection creates weak member data files and does not enable loyalty practitioners to identify both 'best customers' and 'best potential customers', and to focus their marketing spending accordingly.
Another major weakness in 80% of the platforms benchmarked is the lack of technical documentation of the platform capabilities, with very few having an enhancement or upgrade schedule to help ensure that the software is kept up to date (i.e. so-called 'future-proofing'). In fact, many of the retailer-focused loyalty platforms had not been upgraded since their original programme launch, or they were very expensive to enhance due to legacy hardware and software issues. Many of these platforms are not very scalable, and represent a significant part of the operating cost of a loyalty scheme.
Only a handful of the benchmarked platforms had the functionality needed for operating a coalition loyalty programme. For example, managing partners and points is crucial for this type of programme because points are earned and burned at various costs and rates, and the system often needs to account for pre-pay and post-pay arrangements. It is also important that points are managed by date of issuance and redemption in order to control the liability of both the sponsor and the partners. Very few of the platforms have FIFO (first in, first out) points management.
But there are some clear winners among the forty platforms examined. Some of the best have auction capabilities, and several can manage highly sophisticated bonussing based on time, date, member, tier, location, product, payment type, and partner, and two of the platforms had clever applications that enable programme managers to set-up complicated bonus offers via a simple 'point and click' process.
In particular, one platform enables the operator to determine the bonus objective and measure the performance of the offer in real-time. Some of the platforms are available for licencing elsewhere, although most US-based providers seem reluctant to allow their software to be hosted outside the US, and some provide full support services for external programme solution providers.
"There are several that I would call real 'loyalty applications' that are suitable to work with loyalty software to add value by providing data analytics services with dashboards for remote programme management," explained Atkin. "But this benchmark clearly shows that the licencing of developed software is still far cheaper than trying to build from scratch or even improve existing legacy software."
Licenced software is usually based on a fixed 'cost per active member, per annum' basis, which enables programme operators to budget for their programme more effectively. However, in recent months, Atkin has also encountered several vendors offering solutions on a performance-based agreement, whereby member fees are increased if the programme creates incremental growth.
The benchmark study provides scoring against MJA's 'Best Practices Checklist', complete with recommendations and a weighted spreadsheet to help vendors grade the importance of various platform capabilities (e.g. partner and points management options are more important for a multi-partner programme than for a standalone loyalty scheme).