WHY DON’T WE JUST CUT THE LOYALTY PROGRAM BUDGET?

By Professor Ko de Ruyter and Dr. Debbie Keeling - Motivforce R&D

This is not a question you should be afraid to answer. Company honchos from marketing, sales, operations and finance often underestimate the amount of effort and expertise it takes to run incentive programs. The work required to execute these programs at both strategic and operational levels is substantial, as we all know. We are constantly working to justify and communicate this, at prospect sales pitches, client forums and annual review meetings. More often than not, we need to spend more time discussing things with internal companies instead of the company’s business partners for whom loyalty programs are designed.

Internal misalignment often begins with a lack of a strategic vision, while clarity starts with a clear sales, marketing and loyalty strategy. Developing a cohesive strategy educates the entire company on the expectations. A clear and complete vision of the program will pre-empt a “let’s-slash-the-loyalty-budget” attitude. Educating company stakeholders is an ongoing process. Like anything else, if they don’t understand its value, you are not going to get their buy-in.

A good place to start is to identify a number of common misconceptions;

1.    Program design is a piece of cake – yet, we know that the volume of content required by today’s incentive and enablement programs is overwhelming and presents significant challenges; the number of campaigns, the number of SKUs, the synchronization to different stages of the buying process, complicated distribution and delivery chains, the integration with other partner or channel programs, the list is virtually endless.

2.    Programs lead to spurious loyalty – unfortunately loyalty programs continue to take the blame for a lack of revenue growth; “they’re in it for the points, not for the business”

3.    Program tiers are not rocket science – but business partners are constantly shifting their behavior, as micro-segmenting is emerging, broad categorization in program tiers is becoming obsolete.

4.    Program ROI cannot be demonstrated – it may seem easier to discern a picture of Mona Lisa in Big Data patterns than to make a solid business case, but advances in analytics show that ROI is a necessary and actionable reality.

5.    Social loyalty programs are a fad – have you heard the one about? … business partners do not need the chit chat, these are professionals who can make better use of their time.

From here, we can start to explore solutions to these common misconceptions:

1.    Program design is a sophisticated skill – the devil is always in the detail. Create a content map by campaign, highlight the time, frequency and alignment with the buying process and sales cycles. Sharing this with internal stakeholders will help them understand the scale and scope of program design.2.    Programs lead to true loyalty – this stems from a legacy perspective that program managers struggle to overcome. It’s not just about the Gucci bag prize … personal development and enablement through programs ensures business partner success at both company and personal levels. Certification has begun to outperform expensive business school MBA diplomas.

3.    Program tiers can be actionable – programs are realigned and changed constantly. Best practice micro-segmentation based on performance indices ensures programs are in sync with business partner performance. Predictive analysis, based on behavioral data, assists in targeting specific partners and segments.

4.    Program ROI can be performed – analysis of program member (and non-member) hotspots yields a detailed insight into program related benchmarks and ROI analysis can be performed to show how much revenue boosting can be attributed to program membership.

5.    Social loyalty programs are a must – business partners do take social channels serious and wish to learn and earn via a channel of their choice. Social media are an essential element of the total program experience and can no longer be ignored. Competitors are either there or building these capabilities at this very moment.

This is just some of the ammunition that helps you answer that dreaded question. Stop and think about what you have to add to the arsenal. Then fire at will …

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