Study shows 4 critical failures in many loyalty platforms

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By: Wise Marketer Staff |

Posted on June 20, 2005

Many of the 30+ customer loyalty platforms examined in a new study are failing to provide the functionality required to meet the demands of running an effective loyalty programme in today's marketplace, according to UK loyalty consultancy MJA Associates.

Mike Atkin of MJA Associates recently carried out a detailed investigation into the capabilities of over 30 loyalty programme platforms being used to operate programmes around the world, and came up with these surprising results.

Software solutions from New Zealand, USA, UK, Poland, Germany, India, France and many other countries were reviewed as part of the Benchmarking Study and Gap Analysis process that MJA Associates offers its clients.

Just for points?
Atkin notes that many of the solutions examined were merely "points engines" that could increment and decrement the points in a members account but were limited in the functionality required to manage bonussing, lifestyle data collection, surveys, partner management and other fundamental operations.

MJA uses a 550-point checklist for the capabilities required to operate an effective, robust and future-proofed loyalty programme (in either a multi-partner or proprietary application), which is used in a weighted spreadsheet analysis to identify the best solution for a particular requirement.

Critical concerns
According to Atkin: "Many so-called loyalty solution software platforms were sadly lacking in many areas, and should be a cause for concern to many loyalty practitioners. The most important areas that are weak in many software solutions are bonussing, partner management, survey functionality, and contact centre information screens."

As an example of some of the most important points in MJA's list of critical requirements, the following show some of the more essential features needed for a workable loyalty platform:

  • Application and member number tracking
  • Archiving of programme data
  • Audit logs including database table changes and transaction posting
  • Awards redemption and all related processing
  • Bonussing functions and flexibility
  • Card management
  • Configuration including currencies, languages and attributes
  • Correspondence processes
  • Documentation for programme operation
  • Events management
  • Interactive Voice Response (IVR) provision
  • Fees management
  • Kits and cards processes
  • Location hierarchy
  • Member services provisions for call handling
  • Member management, transaction and attributes recording
  • Partner management
  • Pending member controls
  • Points expiration controls
  • Point types abilities
  • Reporting functions
  • Security controls
  • Software development kits and APIs
  • Statement generation
  • Survey functionality
  • Tiering options
  • Financial transactions and points management

It is also important to look at the system architecture and its ability to integrate into existing data networks, how the platform will incorporate, access and update legacy system records, capabilities for high volumes (scalability) and how contact centres can be linked with it - e.g. via wide area network (WAN), local area network (LAN), etc.

MJA found that most of the platforms examined did not fully enable interaction between the loyalty programme operator and the consumer, making segmentation very limited and resulting in irrelevant offers being presented to consumers. Consequently, Atkin offers the following advice on best practice where most of the programmes fell short:

  1. Bonussing:
    Best practices in running an effective Loyalty Programme requires segmentation of customers to identify Best, Best Potential, Likelihood of attrition and lifetime value. Once this segmentation process has been done it is necessary for practitioners to allocate their funding to the relevant sector i.e. Bonussing. MJA recommends that operators should allocate at least 50% of their funding rate for targeted bonuses to reward Best customers, defend the business and create real loyalty. Platforms need to be capable of creating bonus offers by Member, by Retailer, By Region, By Branch, By Terminal, By Date, By Activity etc etc.
  2. Partner Management:
    While this functionality mainly applies to multi-partner schemes it is important that a platform can operate with issuing and redemption partners. Points are a liability and, in some countries, this requires auditable data on points issued by partners and funds sequestrated so that points awarded are paid for even long after a scheme has closed. This functionality is also important if an operator is transferring points from an existing programme to a new one and where an issuer allows members to collect other currencies e.g. Exchange points for Frequent Flyer Miles.
  3. Surveys:
    MJA believes this is a weakness in many platforms and is critical in the development of effective segmentation and the development of strong customer relationships. Whilst transactional data on members provides very useful data to identify customer spend and spend potential, the lifestyle data that surveys provide completes the picture and enables relevant offers to be made to members. Too often loyalty programme members receive offers that are not relevant to them and are ignored.  Software platforms should allow Programme Managers to create surveys for Contact Centres/Websites etc.
  4. Contact Centre Information
    Another crucial part of any Loyalty Programme is the Customer Care screens. Information should enable call agents to not only, give out points balances, but also enable them to access member activity history, process redemptions, carry out surveys, add lifestyle data and personal information. Similarly Customer Care agents should be able (with security controls) to award points to dissatisfied members. This information should also be capable of being replicated onto a Loyalty Programme website for member access.

The adage "technology enables but imagination wins" is certainly true when it comes to loyalty programmes, and the most successful ones are being kept fresh and interesting as a result of using a highly capable loyalty platform and very creative programme managers.

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