• Creating incremental value for your loyalty program by marketing your community

    Continuing our review of the best sessions from our recent Loylogic LIVE event, this time we’re sharing a great conversation all about creating incremental value from an FMCG loyalty program by marketing your community.

    In this session, Joël Muller from Nescafé Dolce Gusto PREMIO and Dani Schmidt from Loylogic delve into the world of FMCG loyalty programs and how incremental value can be created, using Nescafé Dolce Gusto’s supremely successful multi-market Premio Loyalty scheme as an example.

    Key talking points from the session include:

    - The need to partner with brands that are relevant to your target audience. This will increase the value proposition of a program and make it more relevant to members.

    - Carefully select brands to partner with. The brands should be a good fit with your brand and target audience, which means understanding your program members is vitally important.

    - This isn't about selling member data. You can partner with brands by inviting them into an ecosystem where they can offer their value proposition to members. Members can then decide whether or not they are interested.

    - There’s an opportunity to charge brands a fee for access to your target audience. This can be done through a co-funding model where the brand pays for points that are redeemed by members.

    The video from the Loylogic LIVE session can be viewed below, or head to Loylogic's YouTube channel hereto view all the session videos from Loylogic LIVE.

    To discuss how Loylogic can help you build a new FMCG loyalty program or supercharge your existing one, just like we have for Nescafé Dolce Gusto, click here and we’ll be in touch.

    Like this? Then don't miss our podcast featuring Joël and Dani here.

  • Creating incremental value for your loyalty program by marketing your community

    Continuing our review of the best sessions from our recent Loylogic LIVE event, this time we’re sharing a great conversation all about creating incremental value from an FMCG loyalty program by marketing your community.

    In this session, Joël Muller from Nescafé Dolce Gusto PREMIO and Dani Schmidt from Loylogic delve into the world of FMCG loyalty programs and how incremental value can be created, using Nescafé Dolce Gusto’s supremely successful multi-market Premio Loyalty scheme as an example.

    Key talking points from the session include:

    - The need to partner with brands that are relevant to your target audience. This will increase the value proposition of a program and make it more relevant to members.

    - Carefully select brands to partner with. The brands should be a good fit with your brand and target audience, which means understanding your program members is vitally important.

    - This isn't about selling member data. You can partner with brands by inviting them into an ecosystem where they can offer their value proposition to members. Members can then decide whether or not they are interested.

    - There’s an opportunity to charge brands a fee for access to your target audience. This can be done through a co-funding model where the brand pays for points that are redeemed by members.

    The video from the Loylogic LIVE session can be viewed below, or head to Loylogic's YouTube channel hereto view all the session videos from Loylogic LIVE.

    To discuss how Loylogic can help you build a new FMCG loyalty program or supercharge your existing one, just like we have for Nescafé Dolce Gusto, click here and we’ll be in touch.

    Like this? Then don't miss our podcast featuring Joël and Dani here.

  • Brands2Communities: The New Era of Loyalty Head and shoulders photo of Gabi Kool next to title of article

    At last month’s Loylogic LIVE event, Loylogic’s CEO, Gabi Kool, opened proceedings by presenting a strategy for loyalty success called Brands2Communities.

    In his presentation, Gabi stressed how traditional loyalty programs are becoming too generic, offering one-size-fits-all rewards and relying on easy technological integrations. Instead, Loylogic is working with brands to deliver a more effective approach that focuses on the unique makeup of each loyalty program's community.

    Brands2Communities is all about making sure loyalty programs can be more effective by understanding the unique characteristics of their member base and partnering with brands that resonate with those communities.

    During the session, which can be viewed on demand here, four key themes emerged:

    1. Loyalty programs must understand community DNA

    Loyalty program operators must delve deeply into the distinct characteristics of their community segments. This involves recognizing both commonalities and differences among members across various regions and demographics. For example, an Asian airline needs to distinguish between the preferences of its Platinum members in the US, China, Japan, and the Middle East. By doing so, operators can create more relevant and engaging marketing campaigns and brand partnerships.

    2. Successful engagement requires segmentation strategies

    To effectively understand and segment the community, loyalty leaders should start with basic demographic and behavioral data. These include but are not limited to geographical distribution, tier levels and customer value, engagement metrics, demographic insights that analyze age brackets, income levels, gender distribution, and communication channel preferences, and, of course, redemption behavior. As Gabi says, it’s important to monitor reward redemption patterns to understand member engagement.

    3. Creating loyalty program value through brand partnerships

    Once a detailed understanding of these segments is achieved, loyalty marketers can position themselves as valuable partners for external brands. These brands are keen to target specific audience segments that align with their own brand values and objectives. For instance, brands known for quality, innovation, customer focus, integrity, or sustainability can be matched with relevant community segments within the loyalty program.

    4. Curating relevant content to build loyalty

    Loyalty marketers should act as curators, akin to publishers, who tailor content to resonate with their audience. This involves mapping out and understanding the preferences and needs of each segment, categorizing them by strategic importance, and identifying complementary brands and offers. By doing so, they can enhance the member experience and strengthen brand loyalty.

    To summarize, Loylogic’s Brands2Communities approach is about deeply understanding the unique DNA of each loyalty program segment and leveraging this insight to foster meaningful brand partnerships and marketing initiatives. This strategy not only enhances member engagement but also positions loyalty programs as critical players in the broader marketing ecosystem.

    To chat with one of the team about how Loylogic’s Brands2Communities approach can boost engagement across your loyalty program, click here.

  • The Loylogic Podcast - How banks can unlock the multiple benefits of loyalty programs

    Bank loyalty programs are crucial business tools that can drive customer engagement and revenue, and also enhance customer lifetime value. Yet, there remains masses of untapped potential for banks to exploit, especially around the use of data and personalization.

    For this episode of the Loylogic Podcast, we are joined by Paul Wallis, Director of Growth at Epsilon, to explore the benefits that loyalty and rewards programs – when done well – can deliver for banks and how program leaders can overcome the challenges of delivering effective whole bank loyalty programs.

    Key topics discussed include:

    1. Bank loyalty programs today (2:05 to 8:10)

    • Why bank loyalty is still in its infancy, the need for much greater personalization in loyalty and rewards, especially given the huge volume of data banks posses.
    • Global trends in banking and why this is driving the ever-greater need for effective loyalty programs.
    • What the best bank loyalty programs have in common.

    2. Attracting and retaining customers with loyalty programs (8:11 to 15:42)

    • How banks – or any financial institution for that matter – can ensure they’re developing the right loyalty program strategy for their business to meet customer demand for innovative loyalty schemes.
    • Overcoming the main operational challenges brands face while executing their loyalty programmes.
    • The big talking point…data…and why effective use of the information that banks hold on their customers is the best way forward for any loyalty platform to power engagement.
    • How does this effective use of data play into the cost centre vs revenue generation debate?

    3. Bank loyalty programs in UAE & Saudi Arabia (15:43 to 19:48)

    • How global trends in bank loyalty are playing out across UAE and the Kingdom of Saudi Arabia
    • The region-specific factors loyalty program managers need to consider while implementing loyalty programs in the region.
    • The regulations, issues and requirements loyalty program managers need to consider when implementing loyalty programs in this region.

    Listen now...or read below

    The podcast can be enjoyed here, or by heading to the Loylogic Podcast channels on SpotifyApple Podcasts and wherever else you listen to your favourite shows. A transcription of this latest epiosde can also be found below.

    (2:05): How are banks across the world currently using loyalty programs as a strategic tool to drive success?

    From what I see, I think bank loyalty is in its relative infancy. And I see that across the world, not just in the Middle East. When I see the amount of data a bank has about me, it knows my spending habits, it knows an awful lot more than most people do, probably than my family, I still see that I'm not receiving personalized offers, and rewards live statically on web pages. I don't see that engagement yet.

    Typically, I'm not changing my bank every week. I've got this automatic loyalty there. And I think there's a real opportunity for banks to tap into that loyalty and be able to cross-sell and upsell me lots of different things. I never understand why I've got my current account in one place, I've got a car loan somewhere else, a mortgage with somebody else. I think, if banks get it right, there's a real opportunity.

    I feel that some banks are doing a particularly good job, but then there are others that really need to play catch up. When I've spoken to people, they've got their own challenges internally, but I do think if you can break those internal challenges, there's a really good opportunity for the banking world.

    (4:04): I guess what you're saying there is all the more important given that the banking landscape has changed dramatically since COVID. What are the global trends that are really driving the need for loyalty?

    Obviously COVID drove the change towards digital banking. And then of course, because everything's going digital, fintechs are seeing opportunities to offer more user-friendly banking. Then we've got the open banking adoption coming in. So, you're seeing a lot more use of data, data and AI, to reduce fraud and improve customer experience. You've got new asset classes coming into the business as trends to explore and the blockchain and crypto central banks are exploring digital currency to make transacting more efficient, as well.

    I think all of these trends are really dramatically changing the banking from a physical, quite slow process with expensive charges, to ones where banks are really going to need to be sharp in terms of what they offer to their customers to retain their business.

    (5:25): That makes sense, and therefore, are we seeing more banks turning to loyalty programs? And if so, what benefits are they hoping to extract from them?

    For me, whenever I've done banking loyalty programs in the past, or some sort of reward platform, the key drivers have been banks always wanting more transactions, and obviously being able to gain from cross border FX when people are traveling. But really, when I talk to banks now around loyalty, they're looking for better retention, and they're looking for more engagement with their customers.

    Key to that is the ability to cross-sell other banking products, it's not just about running a current account anymore, really, the bank should be able to own the household finance. We see the super apps coming along as well to also disrupt that business, simple buy now, pay later, modules that plug into shopping platforms are all taking away from these banks. I think, if banks can control it from the data that they have, again, I think that's one of the reasons they can turn to loyalty programs. I for one don't need to sign up as my bank has already got me as a customer. It'd be very easy to switch me on to my bank to be loyal if there was another incentive there.

    (6:47) So we're talking very much about kind of whole of bank loyalty here? And are there any examples of banks who are doing this well?

    Looking around, I think I've seen a few examples of where loyalty is used quite well in the banking industry. One of them is Citibank, and the other one is JP Morgan. They kind of have a fairly common practice, but it seems to be working well for those guys. Their rewards enable points earning across a range of banking services, which can be turned into cash or redeemed at participating merchants. It's quite simple and straightforward, but of course, you're earning points whenever you do something at the bank, which can be exchanged into real money. So, I think as a start point, what those guys are doing is really good.

    I think Citibank, when I last checked, they've got 23 million members on their rewards platform across the world. Of course, it's in multiple locations and of course, it's a large base of people. But 23 million people enjoying the platform is not to be sniffed at. And then moving from there, I think you can bring a lot more of the new technologies in to drive loyalty even further, but I like what they're doing as a start point, they're doing some good stuff.

    (8:11): That leads us nicely on to the kind of next chapter it really of today's discussion. And I'll start by kind of sharing that the findings of a KPMG study that reported that 61% of customers found it extremely important or very important for their bank to focus on coming up with more innovative ways of rewarding loyal customers. Given this, how can banks or any financial institution or brand for that matter, ensure they're developing the right loyalty program strategy for their business?

    Again, it comes down to the fact that they're blessed with data if they want to make their rewards for their loyal customers truly rewarding. They know for me, if they look at my profile, I like cars, I like golf. If they just offered me those things, I would do as much as I could, in order to make my lifestyle more fun, more enjoyable.

    I was talking to a couple of the card issuers and they're going down the experiential route, in terms of what they want to offer for their customers and, and there's a whole big piece around money can't buy rewards. Some of the banks and financial institutions sponsor big events, so they can get you into places. I think Marriott do it quite well with their Bonvoy reward platform. You can go to see Manchester United play or the Formula One.

    I think banks need to really focus on doing things that are ultra personal to the individual, but also bring in some of the experiential stuff. They've got these massive sponsorship deals around the world and so can leverage their relationships to provide some of their customers with true money can't buy experiences. I think that's where that's where they should be going, and they can really win from that type of customer engagement.

    (10:04) I think you could probably argue that people would pay you to go and watch Man United at the moment! Moving swiftly on, what are the main operational challenges that the brands face while executing their loyalty programs?

    For me, the competitive landscape of loyalty now is crazy. Everywhere you go, there's a loyalty platform or some scheme in place, whether it be at brand level, bank level, or shopping mall level, and people get confused. They've got points going all over the place, they've got app fatigue, as well. With all of this confusion in the actual sort of loyalty marketplace, engagement becomes difficult. And then, of course, all of these other challenges around the data management, the tech integration, the education of the team, building personalization, communication, running costs of the business, potential fraud, fraudulent activities, they exist on platforms. There are heaps of operational challenges, and loyalty shouldn't be taken on lightly, because you're trying to build that relationship with a customer over the long term.

    So, whenever you enter into the space, you've got to do it right. Otherwise, it can take years to recover from these things. It's a big thing to embark on, if you're going to do it properly. And often, people miss out those things, going for the simplest way, if somebody downloads, I'll give them a simple reward per transaction and things like that. Loyalty needs to be really well thought through and driven, with the right strategy built at the front end of what people want to achieve, what KPIs they need to measure against, in order to build the platform.

    (12:14): I want to pick up on one of one of the areas that you've mentioned there, which is data. Data management is a hot topic, so how can any loyalty program manager ensure that the data has been managed in the right way?

    As we move forwards in the world, I think as we see cookie deprecation, and all of these things, and the influx of Web3, and things like that, data is going to become more in the control of the individual, as opposed to just being used across the board by anyone and everyone. Data control, coming back into the hands of the individual, will be a good thing.

    And then I think it will be down to the brands to ensure that they're able to build a trusting relationship with their clients, that clients will hand over their data to them, because they know the brand or institution that they're dealing with is actually giving them value back. Where I work now in Epsilon, we truly believe in value-led loyalty as a way forward. And of course, that includes Data Trust, as well as one of those things.

    (13:30): Taking that to the next stage, the ability to deliver those personalized golden moments through rewards, helps to build that trust and show that it's an intelligent use of data?

    Exactly, yes. If you personalize properly, you'll be receiving things that are relevant to you, and not just receiving emails and pressing delete. Brands spend a lot of money sending out hundreds or thousands of emails and to have 2% open rates. It doesn't it doesn't make any sense, right? It's just a waste of everybody's time. So as soon as this can happen, I believe that better for everybody.

    (14:09): The next question on data is how does the effective use of data play into the whole cost center versus revenue generation debate?

    If you get your data strategy right, and I'd always encourage people before they embark on loyalty to ensure that they've first got the data part right, their data pools under control, if you wish, because so many times people will start trying to build programs using fragmented data, and it creates all sorts of headaches. So, even before you start to do your loyalty strategy, it's always good to get your house of data in order if you wish.

    But, of course, there's an upfront cost associated with building your data strategy. But once you've got it, there's plenty of ways in which you can start building in monetization off the back of the of the data, and that's both from an internal efficiency perspective, based on the insights that you have known how to adapt the program, knowing what type of rewards to do, and then being able to use that data to the benefit of the customers. And then, you've got a pool for the cross-sell and upsell of the business, which then is a contributing factor to the ROI of your loyalty program.

    Loyalty is not built overnight. So those ROI calculations need to stretch over, you know, a good three years, but good loyalty programs will run into multiple years of engagement, if done well and data is used correctly, of course.

    (15:43): So, Paul, you have extensive experience of delivering successful loyalty programs in markets such as the UAE and Saudi Arabia and I want to focus on that region for a few minutes. How are global trends in bank loyalty playing out across the region? And is there a move towards loyalty program adoption?

    There is. Publicis acquired the Epsilon platform in 2019, came to the UAE, really, in 2020, and since we've seen a huge increase in enquiries for loyalty programs in the financial sector. Typically, before, it was very heavily driven on retail. But now we're seeing a move away with banks from a traditional 'just give him rewards' to actual loyalty. That goes across most of the region, and especially in the Kingdom, where there's a lot of growth accelerating. UAE has been fairly stable for a long time. But that being said, there's a lot of digital banks that have come in as well. So yeah, there's lots of new and exciting opportunities across the region.

    (17:00): What are the local trends and opportunities?

    On the large scale, we're seeing huge trends in digital transformation. This has taken a massive hold in most of the regions, and certainly from the consultative side of the business. They're driving forwards a lot. And people want to transform with super apps, they want to bring in fintechs to their business. They want to do so many things, Web3, there's so many new digital initiatives. On a country level, they're embracing digital transformation as well. And to that extent, you know, personalization is becoming very important.

    It's really interesting to look at the mix of people in a region like Dubai, or the change in population demographics. In Saudi, 65% of the population that are Gen Z. So, you've got a very young audience, digital savvy, and they want things like gamification and Web3. In the region, everybody loves exclusive rewards, the VIP treatment and all of those things, but then we have to bear in mind that we need to keep it aligned with Sharia compliance, and Islamic finance and things like that. We have all these different cultural pockets that we need to be respectful of, but the trends are there, the mobile wallet integrations, AI and chatbots etc. It's really exciting. And you know, of course, we've got an audience that's wanting to embrace the technology changes.

    (18:48): Excellent. So where do you see the future of bank loyalty across the region?

    I think we'll see some of the best loyalty programs come out. There are some pretty unique things in regions here, where you see families that own multiple businesses, so shopping malls, car dealers, banks, everything, real estate, all falls under one umbrella, you know, whilst their individual brands and P&L is on their own. Ultimately, they report up into big family conglomerates. They're in a unique position to create apps that go across or touch all different parts of people's lives. So, from there, they're able to build ultimate loyalty. And if they do it well. they'll keep customers within their ecosystem. If I was one of those companies, I'd really be embracing what I could do with loyalty.

    (19:49): To conclude our discussion, what key takeaways can you share that would provide bank loyalty program managers the best insights from what we've discussed today?

    From my perspective, there's a shortlist. I like to think of it as bullet points. So, the first thing when you come to the region, and you get involved in loyalty, cultural sensitivity, important understanding of all the local regulations, because they differ by country, although you might be doing Middle East wide programs.

    Localization is the key, being able to localize like in the television industry. I refer to that because I used to work in it. But when I see the international platforms that come here, versus the local platforms that have set up, the local platforms are doing and performing better, because it's localized content. And people like to work in places they're familiar with. Then there's the personalization, ensuring everybody has a unique tailored experience. Data security, payment, diversity, collaboration with partners. You're not just in one ecosystem, you're able to use your points as a currency in in many partners. Exceptional customer service and feedback is critical. And of course, keeping an eye on the competition.

    For me, in summary, when I talk about loyalty, especially under the Epsilon umbrella, our remit is that we always want to capture a share of a customer's heart, a share of mind, and of course, a share of wallet. And we think if we can capture those three things, we can build the best loyalty programs.

  • The Loylogic Podcast - From Risk to Opportunity: Empowering Loyalty Program Directors to Demonstrate Program Value

    In today's challenging economic environment, loyalty programs have become a crucial tool for businesses to engage customers, drive revenue and enhance customer lifetime value (CLV). However, loyalty program owners often face a significant challenge in managing program costs, particularly the cost of rewards which is typically their largest expense and heavily scrutinized.

    In this episode of the Loylogic Podcast, we're joined by Rob Clements, Lead Consultant at Loylogic, to discuss how loyalty program owners can use rewards as an opportunity, not a risk. Chapters and key topics include:

    1. Managing risk and profitability(01:41 to 04:43)

    - The guiding principles that should we be using to establish a budget for rewards and how to strike a balance between incentivizing customers and maintaining a solid bottom line.

    - As loyalty programs evolve and costs fluctuate, we look at how program owners can stay one step ahead and effectively anticipate these changes and safeguard against unexpected financial challenges.

    2. Rewards, redemption and resource management(04:43 to 11:54)

    - Redemption rates of loyalty points or miles can have a significant impact on a program's finances. How can program owners forecast these rates accurately and control them strategically? Can you share some insights on maintaining the equilibrium between customer satisfaction and business viability?"

    - The liability associated with loyalty points and miles and how program owners can effectively manage this while ensuring that the program remains appealing to the customers.

    - How various types of rewards might offer different levels of cost-effectiveness and strategies for allocating resources optimally across diverse reward types.

    3. Metrics and program management(11:54 to 14:12)

    - The key metrics or KPIs that program owners should focus on to effectively evaluate the financial performance of their loyalty program

    - How these metrics should be interpreted to make informed decisions about the program's future direction.

    Listen now...or read below

    The podcast can be enjoyed here, or by heading to the Loylogic Podcast channels on Spotify, Apple Podcasts and wherever else you listen to your favourite shows. A transcription of this latest epiosde can also be found below.


     
     

    (1:41): When thinking about the financial blueprints of a loyalty program, what guiding principles should we be using to establish a budget for awards? And how do you strike a balance between incentivizing customers and maintaining a solid bottom line?

    That is a really cutting question that I think touches right at the core of loyalty program management. When setting a budget for awards, you need to try shifting your perspective and view it more as an investment rather than merely an expense.

    Looking at the top loyalty programs, they're allocating a substantial part of their revenue, sometimes up to 15%, for rewards. And it might seem a bit high. But if you can share the value of those investments to your business, it can be actually quite a logical decision.

    If we look at some of the more lagging programs, often they're struggling to allocate their budgets. And that often means they're not really seeing the right results and sometimes deliver a really poor rewards experience. So although that approach may save some money in the short term, it really does risk losing customers and losing that engagement. So, ultimately, the aim is to strike a perfect balance between incentivizing your customers and making a robust bottom line.

    (2:43): In order to achieve that perfect balance, there's always going to be an issue where costs fluctuate, especially as programs evolve. So how can program owners stay one step ahead and effectively anticipate these changes? We'd all love to have a crystal ball, ultimately, at the end of the day, but what strategies have you seen that help to safeguard against unexpected financial challenges?

    You've touched on an essential aspect of how you manage a program and that's around the adaptability. So often, as programs evolve and grow, costs inevitably fluctuate. But the key really is managing these changes. And that really lies in understanding how that program is performing, understanding the financial forecasts, and any of those scenarios that you need to plan for. So often, it's the crucial part of the financial planning.

    Looking at leading programs, again, I think you can see that they're the ones conducting rigorous financial forecasting and scenario analysis, they're really able to anticipate those costs. And it's really some of the average and lagging programs that fail to have a more structured approach to that, which really means that they're unable to project their costs out into year two, year three and beyond.

    That lack of financial stability really limits their adaptability for the program and means that they're not really looking at it as an investment, but very much as a cost. They're not able to say, well, if I put this amount of funding behind it, we can expect this sort of return.

    (4:08): How far ahead can programs predict? How far ahead should they be looking?

    I think there are a few different horizons that you may want to look at, depending on exactly the maturity of your program. I think a good a good idea would be looking at the profitability maybe of your customers over a two year timeframe. But possibly, you know, you may want to take a wider lens, if you know that there are more technical costs that need to be incorporated. So possibly a five year view may be better.

    (4:41): The redemption rates of loyalty points or miles can clearly have a significant impact on a program's finances. So as a program owner, how would you recommend they forecast these rates accurately and control them strategically?

    Redemption rates can be a bit of a challenging aspect within the program. Often, program managers and program directors really want to see their customers redeeming, but maybe other parts of the business see that purely as a cost. So there are certainly financial implications there. But without redemption costs, you're not really going to be seeing that customer satisfaction, you're not really going to see them engaging in the program.

    Ultimately, I think that if you can prove the link between redemptions and the future value of those customers, and how that levels up to your overall program, then businesses are really viewing those redemptions as a good sign of a healthy program. And not just a cost.

    (5:37): You mentioned leading programs there. What are the leading programs doing to maintain the equilibrium between satisfaction and business viability?

    I think it starts with the data, I think you have an accurate understanding of how your customers are behaving, and understanding of how you can forecast those redemption trends, and certain predictive tools that are really able to guide your strategy. But, of course, you need to make sure you're engaging those members, and using your personalization capabilities, using your media in ways that really engage your customers.

    Of course, you can't do that in isolation. I think you need to keep a really close eye on your program, and understand any of those changes. So, if your customers are maybe finding certain redemption options more attractive, or maybe they're, you know, moving into new markets, different redemption ranges become important.

    (6:36): I apologize in advance for this. But I've got to bring up the elephant in the room, which is the liability associated with loyalty points in miles. Now, how can a program owner effectively manage this while ensuring the program remains appealing to customers, which ultimately is kind of what they live and die on?

    Yeah, it's really good you brought this up. I think, frankly, it's one of the aspects that businesses overlook, and they don't really understand it until it becomes a problem. The opportunity for programs is to be more proactive. Probably behavior is more reactive at the moment, I think. The leading programs really understand that it's something that needs to be managed actively. And it's not something that is going to work out well for the for the business if it's not really proactively managed.

    Some of these leading programs are using actuarial models, and employing robust forecasting techniques, that really gives them the ability to understand their liability today, and also what they expect it to be in the future. Often those liabilities can be understated, sometimes they can be overstated. And both of those can represent real challenges for businesses.

    (7:45): Is this where smart cost per point management comes into play?

    I think that's a really important weapon in the arsenal of programs. Understanding that by taking an active view on what the average cost per point is, they can look to lower it over time, which ultimately drops more profit to the bottom line.

    (8:04): What advice would you give to a program director when it comes to optimizing costs without negatively affecting the customer proposition? What are the trade-offs to consider? How do they strike the right balance?

    It's absolutely striking the right balance, it's making sure that you're delivering value for customers. And that balance with a cost really makes it more of an art for program managers. They need to understand that it's something that you can't really compromise for customers. It's really important to get that balance, right, in terms of the cost invested. And I think, if you're looking at some of the weaker programs out there, they're more likely to overlook the importance of cost optimization. They've probably had a budget that's been in place for years on end. And a manager just signs that off, and does that every year.

    What we tend to see is those programs missing the opportunity, because they're not really looking at what would their program would be like if they increased their budget. And not really understanding what the profit opportunity would be for making some of the cost savings as well.

    (9:19): To make those necessary changes, do you need a mindset shift?

    Yeah, it's about providing the best value for your customers, but also about recognizing that reward budget is an opportunity for investment. It's an opportunity to drive deeper loyalty for your customers and an opportunity to drive greater profit for your program, but also maybe optimize certain elements in the program that you haven't looked at for, you know, maybe up to the last five years.

    (9:52): Within the constraints of a budget, various types of rewards might offer different levels of cost effectiveness. How should program managers assess and compare these?

    Reward cost effectiveness is an essential factor. I think it's about providing value for your customers. Without overstepping that budget, I think customers really want more and more over time and I think programs have felt the pressure of needing to cut back. And really the only strategy that has been working for those programs is A/B testing for the rewards, getting that customer feedback, and seeing where there's an opportunity to leverage data to optimize rewards, which ultimately leads to the larger bang for buck.

    (10:39): We talk a lot about golden reward moments and diverse reward types. So how does that come into play here? How are the leading programs that you talk about devising strategies to maximize the potential of both global and local reward types?

    It starts with understanding what rewards your customers are going to be most interested in. Programs are able to access better data now than they were before. Understanding what those members want is not quite the challenge it used to be. The challenge now is how do they get it to those members at a price that the program's happy with, and the price that maybe the wider businesses is happy with, as well.

    I think you need to look rewards sourcing operations, you also need to look at the types of product ranges that maybe have margins that are more attractive for your business, and bringing that all together, to really ensure that on one side, you're driving that customer satisfaction. But on the other side, you're also ensuring the long term sustainability of your program.

    (11:49): In your opinion, given everything that you've said, what are the key metrics or KPIs that program owners should focus on to effectively evaluate the financial performance of their program?

    It's a really good question. I'm not sure there's ever one magic metric out there. I think certainly, depending on the industry you're in, and maybe depending on the education and loyalty that you've had, you may gravitate towards one more than the other. But I think you can probably handpick a few that are the ones that are going to drive you in the right direction. And one that's very common is understanding the revenue per member. It's vital to understand the customer lifetime value (CLV) of a member, understanding how profitable those customers are going to be across a period of time. And, of course, understanding that your program is an asset. Understanding the level of profitability of that program, the total level is really something that you can use to strategically guide the business.

    (12:54): To wrap up this episode, could you summarize our discussion or provide listeners with a few key takeaways?

    At the heart of a successful program is considering the reward budget as a deliberate investment designed to nurture customer relationships, but at the same time aligning that with business strategy, making sure that you're staying nimble and adjusting to any trends. So if there are any changes in the environment, you're able to safeguard your loyalty program, and ensure you're meeting those new and emerging trends.

    As well as that, optimizing your award budget, not necessarily thinking that the amount that you had last year is going to be suitable for this year, is key. Really being proactive and understanding that for each dollar that's invested, what the return is, so you're really maximizing that opportunity. Above all that, it means looking at your global loyalty program as a strategic asset, and not merely as a as a cost center.


     If you like this, then don't miss Gabi Kool, CEO at Loylogic, explaining why Loylogic is constantly pushing the boundaries of global rewards solutions through innovative incentives and experiences: click here to read more.

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