If loyalty isn’t a core competency your loyalty program won’t move the needle

loyalty as core competency

Marketing

Nov 4, 2022

Reza Javanian

Mohammadreza Javanian

Editorial Content Writer

Time to read icon

5 minutes to read

Having a loyalty program is a great way to create value for engaged customers while increasing margins and reducing customer acquisition costs for the business — but only if it is planned and executed as part of a larger loyalty management strategy.

Businesses often try to create some loyalty features to tack onto their product, which can lead to frustration between developers, product managers and marketers. 

The key to a successful loyalty investment is having the flexibility to adapt to your customer behavior. Whatever your business’ core competency is, building a loyalty scheme as an add-on functionality risks poor performance — and a low return on investment. 

The following insights enable you to create a future-proof loyalty program that performs well as a value-sharing tool between you and your customers.  

Loyalty is a great way to boost revenue — when done right

A loyalty program is NOT a nice-to-have promotional device or a short-term fad. It’s an effective tool to bring in and nurture members that will become a company’s most profitable customers in the long run. That is why 69% of brand executives say they’ve increased loyalty investment over the past few years.

The increase in loyalty investment makes total sense in the context of an inflationary environment where businesses offer more loyalty perks to help their customers fight climbing prices. 72% of American respondents to a survey say they cushion the inflation effect by shopping from companies that have a loyalty program.

So, the current loyalty landscape is marked by:

  • Increase in investment by businesses

  • Increase in demand by customers

Building a loyalty program requires tech & loyalty knowledge

The story of building a loyalty program usually starts with one use-case or a set of ideas. You detect a trend or a problem in your business (for example, climbing customer acquisition cost) and you decide to solve it using a loyalty program. You want a set of functions and nothing more.

Through testing — and interaction with real users, however, you end up having a loyalty program that is nothing like the initial idea you had in mind. That’s not the end of the story though. 

Integrating a flexible promotion tool like Talon.One into your system enables you to update your loyalty program by tweaking a few rules. However, when everything is hardcoded in a bespoke loyalty function, then each single update means months of back-and-forth, mission-creep and budget overruns.

To top that off, developing a loyalty program isn’t only about having the technological capability. Dev teams can build a loyalty scheme based on the guidelines of business teams of a company. However, since loyalty isn’t their core functionality, it nearly always ends up not meeting the needs of the team as they evolve — and rarely generate the returns they were expecting.

Designing an effective loyalty program requires the tech ability as well as the promotion knowledge to create a fine balance between various features including:

  • Program structure: Entry requirements, tiers, minimum spend in each tier, points per currency, etc. 

  • Rewards type: Free, exclusive or limited products, cashback or store/app credit, discounts, birthday gifts/gift cards, free shipping, partnership perks, VIP experiences (exclusive events), charity donations. Etc.

  • Rewards balance: High value, medium value and low value rewards

  • Rewards logistics: Check-out code redemption or physical delivery options

  • Rewards limitations: Limiting rewards based on time, quantity, tier, etc.

  • Loyalty cards and referrals: Linking loyalty rewards to a referral program

Executing a cutting-edge loyalty program requires not only the knowledge of combining all these elements but also the agility as well as the resources to respond to many inevitable updates once the program is live. 

While integrating a third-party solution always has some complexity trade-off, working with a reliable loyalty partner gives you:

  • A high level of control over the features.

  • Endless customization opportunities.

  • A variety of attributes to represent customer data

  • Great return of investment over time. 

A ‘reward everything’ mindset breaks down silos

Many businesses invest the majority of their resources on customer acquisition, paying little or no attention to activation and retention. Integrating a loyalty program into your tech stack brings you loads of zero-party data. However, companies often fail to leverage the same data to enrich their activation and retention campaigns.

The resulting data silos threaten the effectiveness of your loyalty program in the long run, leaving customers feeling left out and frustrated and minimizing your customer lifetime value (CLV).

Treating your loyalty program as a business’ core competency helps you break down these silos because it’s able to incentivize customer activities at different stages of their journey. A well-designed loyalty scheme is able to connect all the pillars of customer journey, creating a bridge between acquisition, activation and retention.

reward everything mindset

Speed is non-negotiable

Reacting to customer actions in real time is a must-have for a successful loyalty program. Building your loyalty scheme outside your core competency may result in latency in your response to customer activities. The longer the latency, the higher the possibility of customer inconvenience.

On top of that, when your loyal customers see the effect of their actions in no time, they’re less likely to create traffic on your customer support team. This was one of the reasons the mobility company SHARE NOW worked with Talon.One to build their loyalty program.

“We wanted our customers who refueled or recharged the car after their ride to receive their incentives immediately after the ride was over. Talon.One made this possible for us. Such real-time services increased the transparency and clarity of each transaction for our customers. That, in turn, reduced inbound traffic on our customer service.”

Raphael Stange, CMSO, SHARE NOW

Loyalty pays off in an ecosystem of microservices

A flexible loyalty program is a key functionality when companies decide to select best-of-breed microservices to develop their composable toolkit. Once integrated into your tech stack, your loyalty scheme works in sync with other services in your stack, including payment apps, partners, online shops, physical stores, social media, etc.

loyalty in ecosystem of microservices

“We needed a tool that was able to integrate into different parts of our system, speaking with them in real-time. Talon.One was the right tool to put on top of this implementation.” 

Daniele Nigro, Chief Information Officer, Twinset

Adding a best-of-breed loyalty program to your ecosystem gives your tech team the freedom to focus on optimizing your core competency while giving you the confidence and assurances that your loyalty scheme delivers best results in no time. 

So, to recap …

  • Effective loyalty programs are always part of a larger loyalty management strategy.

  • A loyalty program is a great way for businesses to share value with customers only when it’s integrated into the company’s core competency.

  • An integrated loyalty scheme breaks down data silos, helping businesses leverage acquisition data throughout the entire customer journey. 

  • Speed is a must-have, meaning loyal customers must be able to see how their actions are rewarded in real time.

  • When done well, a loyalty program plays a key role in the microservices ecosystem, working in sync with other best-of-breed services to move the needle for your business.

To learn more about different types of loyalty programs, essential loyalty features and key metrics in a loyalty scheme, check out our white paper, “Building the perfect loyalty program.”

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