XOMETRIX-WP-Loyalty Program Ten Questions

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XWHITE PAPER

June 2007

Executive Summary

Management teams responsible for the operation of customer loyalty programs should

be able to answer some key questions. Primarily, management must understand their

reasons for operating a loyalty program, and define a clear set of goals and objectives forthe program to achieve.

It is critical to ensure that the structure of a loyalty program, which includes both the

benefits that customers receive and its internal operational design, is aligned with and

properly supports the programs goals. Other marketing efforts implemented by an

organization should be designed to complement, or at least not conflict with, the loyalty

programs marketing message.

The ability to effectively measure results is essential to successfully operate a loyalty

program. A well-designed approach to reporting and analysis will produce actionable

information that can be used to beer manage the program. Analysis, being a complex and

resource intensive task, requires a properly trained and organized analytical staff equipped

with the proper tools. The data produced by the program must also be effectively managed

to handle its volume and complexity.

Finally, management must monitor a programs return on investment (ROI) to make sure

it is performing as expected. Returns from loyalty programs cannot always be measured

strictly in terms of dollars; however, results must be quantifiable in order to be objectively

evaluated.

Ten Questions You Need to Ask About Your Loyalty Program

XOMETRIX, Inc. 841 Worcester Road, Suite 106 Natick, MA 01760 508.655.5430 www.xometrix.com

X.O.METRIX

M e a s u r a b l y B e t t e r D e c i s i o n s


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Copyright 2007, XOMETRIX, Inc. 1

Introduction

A record number of companies now operate customer loyalty programs. Yet despite their popu-

larity, many organizations are unable to demonstrate clear returns on their investments in these

programs. Whether these returns do not exist, or whether firms are simply unable to quantify

them, is subject to debate. In either case, businesses that sponsor loyalty programs must make

sure they understand their reasons for operating them and have mechanisms in place to actively

manage and measure the programs results.

This paper discusses a set of questions that any management team responsible for a loyalty

program must be able to effectively answer. The questions posed here address both strategic

and tactical issues, and are as follows:

1. Why does your organization operate a loyalty program?

2. What are your programs goals and objectives?

3. Is your programs structure well designed and in alignment with its goals?

4. Are your other marketing efforts complementary to your loyalty program?

5. How do you measure your programs performance?

6. Do you have an effective reporting and analytical process in place?

7. Is your staff able to support your analytical process?

8. Do you possess the proper tools to perform analysis?

9. Are you making effective use of your programs data?

10. Is your program achieving the return on investment it should?

Completing this exercise will enable an organization to beer articulate its reasons for having

a loyalty program, provide insights into how the programs goals and objectives can be best

achieved, and define requirements for being able to effectively monitor and analyze its results.


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1. Why does your organization operate a loyalty program?

The first question an organization with a loyalty program should ask is: what are the strategic

reasons for operating this program? Although the answer may initially seem self-evident, upon

closer examination the reasons are usually much more complex and layered. Unfortunately,

companies too oen respond to this question with platitudes (e.g., To create more value for

our customers,) rather than cogent explanations of strategy. Without a foundation of clearly

articulated principles to support a loyalty program, an organization will find it almost impossible

to improve its performance, let alone calculate its return on investment.

There is no single correct reason for operating a loyalty program. Some organizations use them

as a method to improve the effectiveness of their promotional efforts; others to beer understand

customer behavior. Whatever its current application, the first step in defining the programs

raison dtre must be to determine how it is viewed by management.

Management rationale for operating a loyalty program can be classified among four categories:

Core Values, Legacy, Competitive, and Functional. While some programs may fit neatly in a

single category, many tend to span two or more. These categories are defined as follows:

Core Values This category includes companies that view their programs as

integral to their overall business strategy. These firms invest a great deal of

time and effort designing their programs and formulating specific goals and

objectives. Significant emphasis is placed on ensuring that all customer-facing

initiatives integrate with and support the programs overall purpose.

Legacy These firms have inherited a program. These programs have typically

been in place for years, and may even date back to the companys founding. At

their inception they may well have had a clear strategic purpose. However,while the strategic vision of the organization has evolved over time, the loyalty

program has not. Management teams saddled with legacy programs usually

do not have any real belief in the programs value. The program is maintained

primarily due to fear of the negative customer reaction that might accompany

its termination.
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Competitive These companies have established their loyalty program as a

reaction to a competitors program. Very oen these firms mimic the design

of their competitors program without aempting to understand the strategic

purpose behind it. Active program management may involve nothing more

than shadowing, merely adjusting the program to match any external design

changes made by a competitor.

Functional These are generally smaller companies that have adopted

loyalty programs simply because they can. With many POS, ERP, and CRM

systems providing built-in loyalty program support, the technical aspects of

adopting a program have become much easier. Unfortunately, while effectivelyimplementing its functional aspects, many firms do not give appropriate effort

to defining an overall strategic purpose for the program.

While it might appear that programs in the Core Values category will be the most successful,

this is not necessarily the case. Management support must be in line with the strategic aims of a

program for it to succeed. However, defining realistic, measurable expectations for a program is

also extremely important. Programs with overly ambitious objectives may lose their true focus,

while those with simpler aspirations may go on to achieve beer returns.

Companies struggle most with the challenge of defining a programs strategic principles. To

facilitate this process, many organizations find it beneficial to move forward and outline specific

program goals and objectives before finalizing the overall strategy. Seing goals and objectives

is oen a less daunting process than defining strategic principles, and proceeding in this fashion

usually leads to a more sound strategic vision.


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2. What are your programs goals and objectives?

A loyalty programs success is predicated on determining what it can realistically accomplish and

then seing appropriate goals. Goals and objectives provide actionable steps for operating the

program and measurable benchmarks for gauging if it is achieving its strategic purpose.

As with the overall strategy, goals and objectives should be thoughtfully designed to ensure they

accomplish their desired results. Careful consideration should be given to the impact a goal may

have before incorporating it into the program. Once implemented, results must be monitored to

ensure the goal functions as anticipated.

Goals and objectives need to be treated as a collective. This system should be viewed as a whole,with goals defined to support one another and operate in a cohesive fashion. The effects and

interrelationships of a programs goals must be clearly understood for management to effectively

direct the program.

It is not unusual to discover conflicts between goals when analyzing existing loyalty programs. A

common example is the aempt to simultaneously maximize program participation and customer

profitability. Promotions offering discounts for joining the program are a favorite choice to drive

increased enrollments. Unfortunately, while effective at increasing membership levels, this type

of promotion generally has a negative impact on customer profitability.

This example of a potential conflict underscores the need to not only exercise caution in designing

goals, but also vigilance in monitoring program results. Careful observation and analysis will

lead to the quick identification of conflicts that exist among goals. Sometimes conflicting goals

can be harmonized, leaving both in place. However, this is not always the case, and occasionally

one goal must be eliminated to preserve the programs integrity.

Only aer an integrated set of goals and objectives has been properly defined should the

operational structure of the program be created. A programs operational structure puts a public

face on its goals and objectives. A consumers entire perception of a loyalty program is based on

its customer-facing structural aspects. It is these characteristics that will ultimately define what

the program truly is, and if it is successful.


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3. Is your programs structure well designed and in alignment with its goals?

A loyalty programs structure is comprised of an internal and an external component. The

internal component encompasses the programs functional design, which provides a roadmap

for its operation. The external component is the programs public, customer-centric face. For the

program to be successful, both structural components must be properly aligned with its goals

and objectives.

From the point of view of customers, a loyalty program is a reward mechanism driven by their

relationship with the company. The external structure of the program details to customers what

benefits exist, the ways they are earned, and how to redeem them. When developing this external

component, an organization must design benefits that effectively motivate customers to help it

realize the programs goals and objectives.

Companies oen make the mistake of designing program benefits solely from the vantage point

of the organizations underlying program goals. While this method may appear to be a valid way

to achieve the programs strategic objectives, it seldom results in a successful loyalty program.

Customers have no direct knowledge of the programs goals and objectives, nor would they be

interested in them. Such inward-facing designs fail to properly engage and motivate customers.

For a program to be successful, its benefit structure must be designed from the customers

perspective, while still supporting the programs goals and objectives.

The programs internal structure is responsible for the successful operation of its publicly

defined benefits structure. It must also support other integrated marketing efforts (e.g., targeted

promotional campaigns) to further assist the program in achieving its goals.

In executing these functions, management must ensure that it delivers a consistent message to

customers. Loyalty programs by their nature must be viewed as long-term marketing efforts.Because of their continuing nature, providing a consistent message is critical to the programs

success.

The overall structure of the program must be flexible to accommodate change over time. As

the nature of business practices, customers, competitors, and other relevant factors change, the


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program structure must be capable of adapting to meet the challenges presented by a continually

evolving marketplace. It is important that the loyalty program and other marketing efforts

be modifiable in a manner that will not disrupt the customer base or negatively impact the

business.

The long-term success of the program also relies on its ability to seamlessly integrate with a

companys other marketing and promotional initiatives. Ideally, non-loyalty program marketing

efforts should be designed to complement the loyalty program, and not compete with it.

Presenting a uniform and consistent message to customers is important not only to the success of

the loyalty program, but to the overall perception of the business as a whole.


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4. Are your other marketing efforts complementary to your loyalty program?

It is rare that any company operates all of its marketing and promotional efforts solely under the

auspices of its loyalty program. Large organizations typically have multiple areas empowered

to run marketing initiatives, as specific campaigns may be required to support different lines

of business, channels, or merchandising efforts. Firms of all sizes generally like to retain the

flexibility of executing some promotions outside the constraints of their loyalty programs.

The reality is that marketing and promotional efforts from multiple sources will reach consumers.

Therefore, it is essential to ensure that these campaigns do not compete with or detract from the

loyalty programs primary mission. Customers are highly perceptive and will quickly sense when

conflicting messages are presented by a vendor. Most customers will ignore these messages;

however, some may discover ways to use them to exploit the organizations weaknesses.

The special care that must be taken to keep other marketing messages compatible with the loyalty

program stems from its unique nature. Most marketing initiatives have finite durations, but

loyalty programs are perpetual by design. While missteps made in other marketing programs

will be dulled by the passage of time, errors made in loyalty programs may be impossible to fully

erase.

Short of resorting to autocratic management rule, there is no simple way to guarantee that all

marketing and promotional efforts will properly integrate with a loyalty program. There are,

however, a few simple guidelines that can be employed to ensure that general marketing efforts

remain in concert with the loyalty program.

Good communication between loyalty program management and other marketing managers is

perhaps the best route to success. By effectively communicating the loyalty programs goals and

objectives throughout the organization, potential conflicts will be easier to identify early in theplanning process.

Especially in larger companies, loyalty programs need to promote themselves internally to other parts

of the organization. Educating other areas about the benefits they will enjoy by aligning, or even

integrating, their marketing efforts with the loyalty program, is a positive way to foster cooperation.


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In any enterprise, even one without a loyalty program, it is useful to employ some method to

coordinate marketing initiatives. Proper alignment will ensure that efforts do not conflict. Some

companies orchestrate this process through the use of an executive marketing commiee or some

other form of marketing clearinghouse.

Regardless of the approach used to integrate marketing efforts, analyzing results and measuring

performance are essential once they are operational. This is particularly true for the loyalty

program whose results must be measured longitudinally as well as on a discrete basis.


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5. How do you measure your programs performance?

Many marketing managers believe their experience allows them to make good decisions by gut-

feel alone. However, with loyalty programs now claiming memberships into the millions and

generating terabytes of data, this is definitely not the case.

Only through accurate measurement and careful analysis can a loyalty program be successfully

managed. This requires a comprehensive methodology to effectively analyze and interpret the

massive amounts of information generated.

The first step in designing such a process is to determine what should be measured and how it

should be analyzed. Companies with well defined loyalty program goals and objectives will

discover this groundwork readily enables the formulation of metrics.

As the process matures, some individual metrics will prove more valuable, while others may

only demonstrate meaning when used in combination. These management metrics should

evolve over time along with the programs goals and objectives.

Measuring and interpreting program results is an ongoing effort that needs to be tightly integrated

with the programs operation. This process is built around two primary functions: reporting and

analysis.

Reporting is the process of producing answers to predefined questions. The generation of static

reports is an established practice with which most organizations are proficient. Reports play an

important role in allowing management to monitor their programs operation.

Analysis provides the means to determine what new questions need to be asked, and then

facilitates answering these new questions. Many organizations are not proficient at analysis,although most believe they are. This misperception arises because companies may view their

reporting efforts as also performing all necessary analytical functions.

Because of the competitive advantage proper analysis provides, it is important to reiterate the

primary distinction between it and reporting. While reports provide details on what has


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happened, analysis focuses on explaining why it happened. Although most companies can

define who are their hundred most profitable customers, few can explain why they are their most

valuable customers.

Businesses operating loyalty programs must make sure their reporting and analytical functions

provide the information and insights necessary to successfully operate the program. Management

also needs to make sure that it has an efficient and effective process in place to support its

reporting and analytical needs.


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6. Do you have an effective reporting and analytical process in place?

Supporting the reporting and analysis needs of a loyalty program can be a complex and resource-

intensive process. Many large organizations discover that the cost of these functions becomes

excessive over time. Smaller firms are oen faced with insufficient resources to adequately

perform both analysis and reporting. In either case, sacrifices are oen made which unfortunately

result in operational oversights and missed opportunities.

By creating an effective process to support the reporting and analytical needs of a loyalty program,

organizations can perform this work more efficiently, thereby requiring fewer resources without

forfeiting analytical value. The proper design and oversight of this process ultimately rests with

the loyalty program management team.

Sometimes loyalty-program managers aempt to transfer operation of the analytical process

to the information technology (IT) organization. The rationale for this transfer is that since IT

controls the program data and systems, IT personnel are in the best position to determine what

data to analyze and how. Offloading the design and oversight of the analytical process is a

strategic mistake frequently made by non-technical managers.

In some situations it may be appropriate to transfer the responsibility for the generation and

distribution of static reports to the IT organization. Once reports have been properly designed,

their development and ongoing maintenance is usually best le to technical staffs that have the

appropriate tools and expertise. The loyalty-program staffs responsibility lies in monitoring the

information contained in these reports and defining new reporting requirements as the program

evolves and its needs change.

Since the delineation between reporting and analysis is not always well understood, the analytical

process may end up bundled with the reporting function and outsourced as a whole to the IT

organization. Transferring this core analytical process out of the hands of program management

is a critical mistake. Doing so will negatively impact both the successful operation of the loyalty

program and staff productivity.


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As previously discussed, reporting provides answers to well-defined questions. Analysis, being

much more ad hoc in nature, consumes more effort than reporting, but at the same time returns far

greater value. The key factors embodied in an effectively structured analytical process include:

Reusability Although the analytical aspects of the process are specifically

classified as being ad hoc, this is not to say that each new analysis is unrelated

to those that preceded it. New analyses tend to be derivations or extensions

of previous ones. Based on this knowledge, practices should be established

to facilitate the creation of reusable analytical and reporting components. The

ability to leverage prior efforts will significantly enhance productivity.

Specialization Different areas, and even individual staff members within thoseareas, possess different expertise. A well-orchestrated process makes optimal

use of each area or persons strengths. For example, the technical aspects of data

retrieval should be le to IT staffs who understand it best, and not placed in the

hands of marketing staffs whose expertise lies elsewhere. Maximum benefit

cannot be achieved if personnel do not take advantage of their co workers

specialized skills. To create the most efficient process possible, each persons

highest and best value must be leveraged.

Coordination The advantage of having specialization among different parties

gives rise to the challenge of coordinating these efforts. Gaines made through

the division-of-labor can quickly be lost by inefficiency in orchestrating efforts.

Care should be given to planning the division of labor among various groups.

The coordination process should not be overly bureaucratic, nor exist as a free-

for-all. The best method for optimizing coordination is to start somewhere

between these two extremes and tune the process over time to maximize its

efficiency and productivity.

Best Practices Perhaps the most important component in analytical process

design is the capture and use of best practices. Because analysis is oen viewed

as ephemeral in nature, organizations may not fully value the vast array of

intellectual capital it generates. In almost any enterprise, the knowledge of how


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to best perform a particular type of analysis is likely to reside solely in the head

of an individual. When that individual leaves the organization, that knowledge

leaves too. While companies would never consider allowing employees to take

physical assets with them when they depart, they are far too willing to allow

them to leave with the only copy of an analytical process in their head. This

situation occurs when management fails to sufficiently value an individuals

expertise, believes that other workers can easily reconstruct this lost knowledge,

or disbelieves that this type of process knowledge can be effectively captured

and reused. All three of these notions are incorrect. Management teams that

wish to maintain their competitive advantage should carefully consider the

appropriate value of retaining this process knowledge.

Designing the analytical component around these elements will ensure that the process is

efficient, staffs are productive, and the maximum possible value is derived from program analysis.

However, creating a well-designed analytical and reporting process is only part of the solution.

For reporting and analysis efforts to be successful, the marketing and technical staffs tasked with

performing these functions must be capable of effectively supporting this process.


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7. Is your analytical staff well organized and productive?

The success of a loyalty programs analytical and reporting process depends on a staffs ability to

properly execute it. As the majority of issues faced by the reporting processes at this time are primarilytechnical in nature, this topic will limit its discussion to those factors which affect analysis.

The thoughtfulness and labor-intensive nature of analysis makes it rely heavily on the personnel

tasked with its performance. Staffs responsible for supporting analysis must be properly trained,

organized, coordinated, and equipped.

Training is required to educate staff about proper methods for performing analysis, the effective

use of available tools, the data available for analysis, and the loyalty programs goals and objectives.

Education must be ongoing and should be provided via both formal and informal methods.

Developing effective methods of knowledge transfer are also crucial to quickly bring new analysts

up to speed, improve the existing staffs proficiency, and preserve the organizations intellectual

capital.

The organization of analytical personnel is also important. No maer how good training and

knowledge transfer is, proficiency and expertise among staff members will always vary. Some staff

members will possess years of experience, others will be new to their positions. To foster a productive

analytical process, a staff must be well organized. Creating teams of experienced and junior analysts

is oen a successful approach. This pairing helps to improve communication, facilitate knowledge

transfer, improve productivity, and limit risk.

Efforts must be well-coordinated, not only among analytical staff members, but also between

analysts and other areas involved in the process (such as IT). A major productivity drain faced by

many organizations is the ineffective coordination of analytical efforts. Poor coordination results in

duplication of effort, unnecessary work product, and incorrect or incompatible results. The single

most important factor in improving coordination is creating and maintaining good channels ofcommunication.

Finally, analytical staff must have appropriate tools to support their efforts. Improper tools can

quickly nullify all other efforts to create a productive staff. Tools designed specifically for the analysis

process will also support training, knowledge transfer, and communication.


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8. Do you possess the proper tools to perform analysis?

The enormous amount of data produced by loyalty programs makes it imperative to have

appropriate analytical tools. Relying on inadequate tools for analysis means that time and resources

are used inefficiently, which inevitably leads to flawed results with costly repercussions.

The single most popular tool used for reporting and analysis is the spreadsheet. Although

ill-suited to most loyalty program applications, the spreadsheets ubiquitous nature and its

straightforward rows-and-columns approach to information have created strong spreadsheet

cultures in most organizations.

Despite the spreadsheets reputation for low-cost and ease-of-use, in truth it is neither inexpensive

nor intuitive when used for reporting or analysis. While the dollar cost of a spreadsheet license

may be low, its true cost must take into account the resulting loss in productivity. Spreadsheets

are unable to effectively handle the volumes of information that must be analyzed in loyalty

programs. Additionally, aempting to manipulate this type of data in a spreadsheet is both

unwieldy and prone to error. With every spreadsheet containing its own separate version of data,

untold permutations of outdated or incorrect information are floating around most organizations.

Despite these issues, the spreadsheet seems to be in no danger of imminent extinction.

For more than a decade, organizations have aempted to move analysis from the realm of the

spreadsheet into the realm of the business intelligence (BI) tool. While BI tools lend themselves

to reporting, they have proven too complex for adoption by non-technical business users. Most

organizations must rely on their IT staffs to develop and distribute reports using these BI tools.

The sole interaction of most businesspeople with these tools has been the receipt of static report

data or the execution of parameter-driven reports.

Over time, many of the reporting issues faced by organizations have been successfully addressed,

while unfortunately analytical issues have continued to worsen. The exponential growth of

customer data, and the ever-shortening time frame available to analyze it, lay at the heart of this

analytical dilemma.


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To successfully meet continually evolving analytical challenges, organizations need to begin

adopting analytical tools specifically designed for non-technical businesspeople. This new breed

of analytically-focused tools is not only business-friendly, but also allows the capture and reuse

of analytical best practices. These tools will allow enterprises to effectively address the volumes

of data that must be analyzed and do so in a timely and thorough manner.

While spreadsheets will always have their place, management teams seeking to grow productivity

and improve results are seeking out specialized analytical tools for their staffs. These tools must

not only support the analytical process, but they should also be agnostic in their approach to

data, embracing the many shapes and forms it comes in.


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9. Are you making effective use of your programs data?

The amount of data generated by a loyalty program can be daunting. Some organizations become

overwhelmed by the sheer volume of data, and end up limiting or even foregoing analysis. The

solution is not to limit analysis, but rather to properly manage how this data is used in the

analytical process.

There are a number of factors regarding data that must be effectively addressed, including:

volume, multiple sources, varying formats, and differing levels of completeness. All of these

items impact the analytical process and must be properly managed to ensure efficient and

accurate analytical results.

Handling the volume of information is typically the largest data-related challenge that

organizations face. There are several methods for managing data effectively. One method is

working with only a subset, or sample, of the data. From an analytical perspective, looking at a

valid statistical sample of the data can yield the same results as the complete data set. A second

method is limiting the type of data that is analyzed. For example, it may not be necessary to

regularly examine transactions at the item detail level, especially if doing so limits the quality

of other analysis. Finally, new database hardware and soware technology designed to support

the analysis of massive quantities of data are now available. The insights that faster and more

complete analysis can provide may justify adopting such technology.

Data coming from multiple sources, in differing formats, and at varying levels of completeness

elicits a second set of issues. Aempting to relate this data into a synergist whole for analysis can

be extremely time-consuming. As all this data can never be fully reconciled, many organizations

view the process as futile and do not even aempt it. A number of steps can be taken to facilitate

the reconciliation of this data, including the use of: metadata, predefined queries, data marts,

and best practices. Each of these items is discussed in detail below.

Metadata are structures that define the interrelationships and business meaning of raw data.

Many Business Intelligence and analytical tools provide support for creating metadata layers.

Ideally, a tool should allow the reuse of anothers metadata rather than requiring multiple copies

to be created and maintained. Once metadata is in place it can be used as an interface to the raw

data, allowing business users to successfully extract the information they require.


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Predefined Queries are another useful data productivity tool. Oen the same information must

be obtained repeatedly over time for the same analysis or for multiple analyses. To facilitate this

process, the required query can be predefined and encapsulated. This query may either be based

on a metadata definition, or, if too complex, directly constructed by the IT organization.

Data Marts are databases constructed to support specific analytical needs. It is generally more

efficient for an IT organization to physically bring analytical data together in a single repository

than to aempt to design and support queries across multiple data sources. Objections that

storing multiple copies of the same data is inefficient or error-prone have been proven unfounded,

especially in enterprises with well-managed IT organizations.

Best Practices leverage all of the abovementioned methods. By preserving and communicatingthe knowledge of how best to obtain the data for particular types of analysis, staff need not

reinvent the wheel each time similar work is performed. A formal repository should exist for

these practices, ideally within the context of the analytical tools themselves.

Although complex, successfully integrating data from various sources provides significant

analytical benefits. The main benefit of such integration is the ability to discover relationships

that can be used to create actionable objectives.

Organizations oen lose faith in the analytical process while aempting to perfect their data.

Data, especially data valued for analytical purposes, will never be flawless. Aempting to

remove all of the datas blemishes only delays its availability, making it less valuable for analysis.

To successfully deal with analytical data, companies must embrace the chaos inherent in this

data and learn to work with it effectively in its incomplete and imperfect state.


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10. Is your program achieving the return on investment it should?

In the end, a loyalty programs success must be measured by the return it provides to the

organization. Completing the prior steps in this exercise should enable an organization to

quantify expectations for its loyalty program, measure the programs results, and understand

where and why the program is succeeding or falling short.

While loyalty programs produce returns that can be measured in dollars, they also produce so

returns which are more difficult to quantify. Although complicated to measure, these qualitative

returns need to be calculated and a value assigned. To gauge a programs overall success, both

tangible and intangible benefits must be measured and evaluated.

If a program is not producing the returns expected, then the steps in this document should assist

in determining what alterations need to be made to the program and how best to make them.

Analysis will provide insight into the operation of the program. By developing a solid analytical

understanding of how and why the program is functioning, steps can be designed and executed

to improve outcomes.

When planning changes to a program, it is important to effectively model the potential scenarios.

Modeling does not need to be overly elaborate, but to be realistic it must adequately account for

all significant factors. When major design changes are contemplated, creating and evaluating

multiple models may be appropriate as the number of unknown factors increases.

Above all, organizations should understand that loyalty programs are long-term efforts and may

not produce immediate returns. A programs strategy must include realistic expectations as to

when, and to what extent, the program will begin generating measurable returns. Only aer an

appropriate period of time has passed should management begin looking to make significant

alterations to the program. Major changes to the program should also be carefully considered toensure they have the desired effects.


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Conclusion

The operation of a successful loyalty program is an ongoing process that requires constant

aention and continual improvement. The questions posed in this document should be revisited

on a regular basis to determine if the existing answers are still relevant.

Since loyalty programs are not static in nature, their strategy must be periodically reviewed and

modified in order to adapt to changes in the business. A programs goals and objectives must

also be regularly assessed to make sure they properly support the overall strategy.

The message the program delivers to customers must be consistent. Ideally, the marketing

messages customers receive from the companys other marketing efforts should complement

that of the loyalty program.

To determine if the programs structure is delivering the desired outcome, results must be

continuously monitored and analyzed. This analysis will not only highlight potential problems,

but should also help identify new opportunities.

An effective analysis and reporting process is necessary to make sure these functions are both

accurate and productive. To support this process, staff must be well-organized and properlytrained. Suitable tools are required to support their analytical efforts. In addition to fostering

productivity, these steps will also ensure that maximum potential value is extracted from the

data collected.

As part of the overall evaluation process, an organization must be aware of its loyalty programs

return on investment (ROI). While achieving a quantifiable dollar return is ideal, loyalty

programs also generate so returns that should be taken into account. If the total ROI is not

adequate, then steps must be taken to alter the programs design and improve its performance toobtain the required returns.


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About XOMETRIX

At XOMETRIX we enable organizations to leverage analytics, improving their performance and

profitability. With our focus on generating actionable information, XOMETRIX assists its clients

in maximizing the return on their analytical efforts.

For companies that operate loyalty programs, XOMETRIX offers LoyaltyMETRIX, a complete

solution for analyzing and understanding customer behavior. LoyaltyMETRIX integrates best

practices, analytical methodology, and visualization technology to help companies ask mean-

ingful questions and obtain actionable results.

If you would like to learn more about LoyaltyMETRIX, please contact us.

XOMETRIX, Inc.

841 Worcester Road, Suite 106

Natick, MA 01760

tel: (508) 655-5430

email: [email protected]

web:www.xometrix.com
mailto:[email protected]://www.xometrix.com/http://www.xometrix.com/mailto:[email protected]


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XOMETRIX, Inc.

841 Worcester Road, Suite 106

Natick, MA 01760

tel: (508) 655-5430

email: [email protected]

web:www.xometrix.com
mailto:[email protected]://www.xometrix.com/http://www.xometrix.com/mailto:[email protected]

Documents

XOMETRIX-WP-Loyalty Program Ten Questions