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Proving ROI and Delivering Features: Lessons From Loyalty Trends Report

The fourth edition of Loyalty Trends 2024, prepared by Open Loyalty, reveals that the industry is changing. The pressure is getting higher, and Loyalty and Marketing teams will have to adapt soon if they want to justify their programs to their clients – external and internal.

In this blog, I present some takeaways based on these industry trends. Moreover, I propose different ways to prepare your business for these upcoming challenges.

Going beyond the report, these are the two takeaways:

  1. ROI pressure for loyalty projects is increasing

  2. Concrete expectations from clients translated to functionalities (long and short-term investments mentioned in the report)

Takeaway 1: Increased ROI pressure for loyalty projects

This year, these are the top loyalty goals, according to the report:

  1. Improving overall Customer Lifetime Value;

  2. Lowering customer churn;

  3. Increasing purchase frequency;

  4. Increasing ROI (went up two positions since last year)

The top three remained still, which is unsurprising, as they represent common program loyalty metrics.

The most interesting point is in the fourth place: the pressure for ROI.

This is strictly related to economic cycles. As long as the economy is booming, markets are flooded with free cash and the questions on profitability of an investment in a loyalty program tend to magically disappear. We’ve seen a lot of projects where the ROI is a tentative goal in the very beginning, and the main motivation behind the investments were around the need of having shiny digital tools or being part of the digital transformation trend.

But if the global economy slows down (not to mention a recession), your local market or industry gets in trouble, and the sponsors start to ask those questions.

So quite obvious and works every time.

Takeaway 2: Concrete expectations from clients translated to functionalities

Increased competition is forcing patience out of the playing field. Customers not only expect their voices to be heard – they also want it to be heard and implemented swiftly in a user-friendly way.

This is clear from the results of the report. In the short and long term, loyalty experts plan to prioritize investing in areas with a proven track record of delivering results efficiently – such as gamification, marketing automation, and experience-based rewards. Even the recent explosion of AI advanced the trend, helping predictive segmentation reach the top 3 planned investments.

In other words, playing it safe and giving the market and customers what they want without reinventing the wheel.

How to ensure investments pay off: three scenarios based on your IT maturity, scale of your business and type of your program

Right, with those challenges laid out. What to do?

We see three paths. The bad news is that they are mutually exclusive. The good news is that every path requires a different company situation and a certain vision for the future: choosing two of them would not make sense in the first place.

Path 1: Enterprise businesses: carefully spend your millions

If you are a legacy retailer or a company that does not have a full-blown product team building your IT stack in-house, you’re looking for a vendor that will “take care” of delivering your program end-to-end. Prepare a fat wallet and hire one of the top Gartner / Forrester Loyalty all-in-one software vendors. Bring another one for integration with what you already have. Bring another pile of money if you would like to modify or change anything in these engines if you discover a corner case that will block the whole idea for the program or if the integration scheme requires changes in the API.

Alternatively, look for smaller specialized agencies without huge marketing and corporate overheads but be very conscious of verifying their ability to deliver and the level of loyalty expertise and experience they have. Most of the all-round digital transformation agencies tend to have a very shallow idea of the complexity of loyalty projects (especially those with roots in web/mobile development – they underestimate the challenges in the back-office of the program) despite their marketing proudly saying something else.

Do not start any IT work unless your program strategy indicates how much money this program will earn for your company and how exactly this is going to be achieved.

Disclaimer 1: round words and general declarations are not enough. You would need a comprehensive financial analysis going down to campaign level.

Disclaimer 2: Neither the Big4 type consultants nor the big software vendors have enough loyalty expertise to deliver this. You need to look for loyalty specialized agencies.

Path 2: Simple program? Trade flexibility for agility

If you’re on a budget, you can use the multiple cheaper SaaS offerings out there. However, you will almost certainly need to compromise on the flexibility of your program. You will need to solve the integration issues with some extra one-off budget or simplify the program even more.

Most of the out-of-the-box integrations offered by pure SaaS vendors are either a marketing hoax (they literally do not exist) or offer functionality limited to a single, simple process is just not enough in most cases. If you want more, you need to pay.

If your program is super simple, that might be a good way to go.

Path 3: Scalable program? Use API-first tools

If you are a tech-savvy company with an in-house team building your digital product (app, E-com, etc.) used to API-first tools that follow the composable architecture, you can build a program that will perfectly fit your case with a fraction of the cost and time.

Compose your tech stack from multiple API-first tools (Loyalty, Marketing Auto, E-com, Data analytics). Since you have your team of architects and developers, you can cut the delivery time using ready components (building them from scratch is not a real option) and then integrate them on your own (as those tools are by design made for it)

Your choice in loyalty is limited to 2 real options: Open Loyalty and TalonOne. Which, one must say, is not much of a choice if you compare the number of traditional legacy vendors.

This article was first published by Customer Strategy Network. Permission to use has been granted by the publisher.

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