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Headless loyalty software and the evolution of the loyalty systems

Karl Bzik, CPO at Open Loyalty

In today's world, everything is going digital. Companies need to introduce more and more touchpoints to reach their customers to communicate with them effectively. More tools and platforms, such as eCommerce, mobile, social commerce, e-kiosks or chatbots, are always being developed. The challenge lies in providing a smooth and personalized experience with every one of them. Businesses need to step up to meet that challenge to maintain and grow its revenue. It requires a constant shift in perspective when designing and developing the right solutions. Headless loyalty software provides the highest level of flexibility and is the key for implementing scalable loyalty programs with personalized interfaces in every touchpoint. 

In this article, I'll explain what the headless approach means, what’s wrong with legacy loyalty software, when headless loyalty software is a good fit, and how to implement the new generation of loyalty systems.

What is headless loyalty software?

To understand the headless loyalty software approach, you need to remember how all digital loyalty programs are built in general. By default, they consist of two main elements:

  1. The back-end layer (what the administrators see) is a set of systems and tools only visible to the administrators of the loyalty program. This is where all the conditions, mechanics, and communication are configured and maintained. The back-end layer often contains multiple administration panels for areas like customer relationship management (CRM), the content management system (CMS), eCommerce, reporting, and marketing communication. Data is stored in the databases of the back-end systems.
  2. The front-end layer (what the customers see) is the user interface of the loyalty program. It’s the area where all information and visual content are displayed for the end customer. This part is usually identified with the mobile application downloaded by the customers, eCommerce store, or e-kiosk in the offline store. The front-end layer also includes any kind of communication, such as emails, text messages and chatbots.

Implementing a personalized loyalty program requires work on both layers and mixing different systems together. On the one hand, we need to align and please all users of the back-end systems and try to reuse the existing tools. The goal is to deliver the best possible customer experience in all channels our brand is present in.

What is the difference between headless and monolithic loyalty software?

The innovation of headless loyalty software is that the external layer, which serves as the visual interface for displaying the content of the loyalty program, is separated from the back-end infrastructure. The API handles the exchange of content between the front end and the back end within an ecosystem. In other words, what’s visible to the customer is separate from all the mechanics and data. This allows us to freely and easily change and modify the front-end layer without the need for changes in the back-end systems. The headless approach gives the business incredible flexibility, allowing them to create a smooth user experience at any of existing touchpoints or add a new one at any time.

Unlike legacy loyalty systems, headless loyalty software provides elastic components that give the freedom to create and are easier to connect with other systems

The content that the user sees at any touchpoint, like the mobile application and eCommerce, is independent of the rest of the back-end system where everything is configured and managed, such as promotions, rewards, etc. The database contains information about the customers, their transactions, and logs of all their interactions with the brand.

What MACH system architecture means and why is it important? 

If you search for more information about modern headless software, you’ll come across the term MACH. The acronym stands for microservices-based, API-first, cloud-native, and headless. MACH architecture is a set of technology principles behind new, best-of-breed technology platforms. MACH architecture gives organizations the freedom to choose from the best tools on the market and maintain a structure that makes it easy to add, replace, or remove those tools in the future. CMS and eCommerce software were the first industries to adopt a headless approach. Brands such as Amazon, Etsy, Nike, and McDonald’s decided to move many of their systems to the ecosystem of modern headless solutions. Open Loyalty, with its headless loyalty software, supports this new generation of system architecture.

Composable elements that go into a typical MACH system architecture, source: The MACH Alliance

What's wrong with software in the loyalty industry?

Traditional loyalty platforms tend to be all-in-one, monolithic software. Sure, they have tons of features. However, there’s a catch. You’re losing the business flexibility, are dependent on one vendor, and need to adjust the vision of your loyalty marketing strategy to what’s possible in that heavy platform. The monolithic loyalty systems have an overwhelming user interface (UI), and every time you want to make a change or introduce new functionality, you have to do it on the front end as well as the back end. It also prolongs the process, and with high competition and dynamic changes in the market, you need to act as quickly as possible and be flexible. In other words, you can not quickly change or extend the user experience (UX) of your loyalty program. Additionally, upgrading the legacy loyalty system basically means migrating the whole loyalty program to the new software - this is expensive and time consuming.

Lack of omnichannel personalization

Most of the time, the monolithic loyalty solutions have a specific front-end application designed for customers. Why is this bad for users? It forces a specific logic on your loyalty program that may not fit your original customer loyalty strategy. As a result, the user experience may not be personalized in different touchpoints. This can lower the conversion rate and cause you to lose the client. In the current market, customers expect smooth and consistent communication in every channel where the brand is present.

Monolithic loyalty software often consists of many out-of-the-box features, but in most cases, it doesn’t need all of them. Because of the all-in-one system architecture, where the features are connected together with each other, it’s hard to change or extend the business logic of the given loyalty mechanics.       

The headless loyalty software offers a set of flexible and independent modules, like loyalty mechanics and tools such as campaign manager, in its core. That allows for easy integration into your existing ecosystem. Thanks to its robust API and webhooks, it manages two-way communication and shortens the time-to-market of your project.

In practice, companies build their personalized omnichannel loyalty program with blocks and glue them to the other system via API.

Not a true API offering

All-in-one loyalty platforms claim to be API driven. However, they weren’t built with an API-first system architecture in mind. The API offered by them is just another feature added on the way that extends the features. So, what you truly get is a limited set of API endpoints that are strictly tied to the logic implemented in the back-end layer. It makes you design the front end of the loyalty program in a certain way and limits your ability to integrate with other systems.

Headless loyalty software takes this burden off your shoulders. It allows you to personalize your loyalty program by using the flexible loyalty blocks with different loyalty mechanics. You can also match it with existing systems, such as marketing automation, CRM, and eCommerce, and add any kind of the user experience at any touchpoint via API. This can be done without losing anything at the API level and  without limiting freedom of choice. Changes are only made in the front-end layer, making them fast and efficient. 

Low business agility

Today, businesses need to move from feature-driven development to architecture-driven builds. This means focusing on building the right architecture that can quickly and easily adapt to new technologies and even external disruptive events like a pandemic. A monolith doesn't provide this dynamic ability to change because the entire system is dependent on one vendor.

With the headless approach, you can create a flexible architecture of various API-first tools and quickly exchange them or add a new component any time. What’s more, you can introduce changes in the user interfaces faster and cheaper.

How do you implement headless loyalty software?

Thanks to the modular approach, the implementation of headless loyalty software can be easier than the implementation of heavy, all-in-one marketing systems.

The most important step in the beginning of the process is mapping which system will be responsible for which business action and how the systems will talk to each other. On the way, you need to confirm the user experience in every touchpoint. The best way to do this is by preparing the designs and user flows. If you implement the loyalty program from scratch, you simply need to keep these two steps in mind. 

Migrating from old loyalty software

In the case of migrating from your monolithic loyalty software to the new headless one, you can do it all at once or step by step. Doing it step by step is the approach known as the "Strangler Pattern" that was outlined by Martin Fowler in 2004. It’s a proven way to gradually replace a large system. In fact, it's good to reduce risk, spread the migration process into smaller chunks, and convert one part of the system after another. You can change the front-end applications first by separating them from the back end and connecting everything via API. Then move on to the loyalty system, and then the CMS or eCommerce. Shut down each part of the monolith gradually. This way, you can eventually make the complete switch to the headless architecture of the systems which will save you tons of time and money in the future.

When is headless loyalty software a good match?

In general, the headless approach is the most beneficial for bigger companies. A headless loyalty platform is a perfect fit when:

  • You have a complex infrastructure of multiple systems which will have to work with each other.
  • You have multiple touchpoints in your business, like eCommerce, a mobile application or offline stores.
  • You plan to constantly evolve your loyalty program and test new things in it, plus you won’t get a headache every time you hear the word “update.”
  • You need the freedom and speed to implement changes on user interfaces to improve the UX.
  • Your loyalty program will have a massive scale and you expect great scalability from the loyalty system.
  • You want to maximize the usage of existing systems and don’t want to double responsibilities.
  • You plan to implement a unique loyalty program and want to mix and match different mechanics in a really specific way.

The summary

Here’re the most important thoughts about headless loyalty software and how to take advantage of its potential in your business:

  1. The headless approach means separating the front-end layer from the back-end layer, which increases business flexibility.
  2. With headless loyalty software, building the loyalty program to be personalized at any touchpoint is faster and cheaper than with the all-in-one solutions.
  3. Old-fashioned, monolithic loyalty software limits the user experience of your loyalty program and is difficult to upgrade.
  4. The ecosystem of headless, API-first solutions gives freedom of choice, flexibility, and business security. You can compose your perfect set of tools and stay independent from one software vendor.
  5. Thanks to the modularity of the headless loyalty system, you can shape any kind of loyalty mechanics and combine it with all channels of communication.
  6. You can implement the headless loyalty solution all at the same time or in a step-by-step process. In the case of migrating from the existing monolithic loyalty software to the new headless one, you should do it in smaller chunks.

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