How to write an effective loyalty program RFP

An effective loyalty program boosts sales and drives revenue. It creates more customer touchpoints, engages buyers beyond the purchase cycle, and co-builds a brand that customers cherish. No wonder you might be eager to work on a new loyalty project. But what if you don't have all the resources to complete it in-house? Worry not!

Many companies have found themselves in this very situation and used external support to complete the necessary groundwork quickly and smoothly. So, if you're planning to create a loyalty program for your business and want to find a well-fitted contractor, then you should issue a request for proposal, most commonly known as an RFP.

A well-structured RFP process is sure to attract responsible vendors who will approach your loyalty program project with integrity. Read this article to learn exactly what a request for proposal is and how to write a good RFP to garner multiple best-value proposals. In addition, you'll be able to review an example of an RFP that you can use as a basis for creating your own.

What is an RFP?

Let's start with the fundamentals and answer the question of what an RFP actually is. An RFP, or request for proposal, is a comprehensive document issued by companies, government agencies, or nonprofit organizations that lays out the idea of a project and its requirements. Then, in the next step, the eventual vendor can submit their response to the RFP, which outlines the necessary elements to start, carry out, and complete the project.

The main purpose of the RFP document centres around its role in the bidding process. It also allows companies to identify their external resource needs to achieve goals and find potential partners with the right assets, skills, and knowledge. On the other side are contractors who can submit a proposal to win the contract if they meet the company's specifications, as outlined in the RFP.

Many companies have their own RFP templates. Structuring such information is essential for both SMEs and large enterprises to better accentuate their needs to contractors. You can use an RFP template for both a complex, multi-level bidding process and a simple one with a few minor players. In summary, a request for proposal is an ideal way to make a basic comparison of the market and what contractors have to offer.

The benefits of having an effective RFP

Let's elaborate more on the benefits of having an RFP. They can be divided into two categories: For the business owner (meaning the one who wants to create the solution) and for the vendor (meaning the one who creates the solution). So, a request for proposal is a mutually profitable process.

The benefits of an RFP for a business owner

From a business owner's perspective, the primary benefit of sending out RFPs is that they'll get responses from vendors with the same information architecture but different completed data. This way, the owner can easily compare "apples to apples." Accordingly, if the first company declares that the price for the project preparation will be $100,000, the second says $50,000, and the third is unable to determine the cost, this is valuable information for taking the following steps.

Responses to RFPs can guide the project owner and show them the spectrum of options that exist in the market. The best part is that they don't have to do the time-consuming work of researching each vendor themselves — they'll come naturally as part of the bidding process. That's why it's so important to have a properly structured request for proposal because it can attract quality contractors quicker. Proposals help the business owner compare backgrounds, skills, rates, strengths, and weaknesses to find the right partner for their customer loyalty program idea.

Before writing a request for proposal, a business owner must have a concrete concept of their project and its scope. This is because the RFP process can actually contribute to the success of a project, but only if there's a solid foundation to move forward. So, roll up your sleeves and consider what you really need from your loyalty provider.

The benefits of the RFP for the vendor

As for the benefits of RFPs, from the vendor's point of view, they get a standard and straightforward document that brings transparency and accountability to the bidding process. In fact, RFPs provide a chance to look at customer project descriptions before committing and signing any contracts. After all, vendors don't want to waste time submitting a proposal for a project they can't handle themselves. So, an request for proposal makes the vendor more confident in their ability to handle the task but also more independent in choosing who they'll serve.

If the contractor is savvy enough, they can include additional elements in the RFP template to make the response even more appealing. For example, they can attach invitations to conferences, add specific references, and use various tricks to stand out. Of course, vendors must fill out the RFP document meticulously as per the customer wishes, but adding key details to build a lead and attract the customer's attention is a clever tactic, don't you agree?

How to write an RFP

Let's start with the fact that there's no one perfect RFP template for a loyalty program. Each one presented online will need to be tailored to your project, its type, size, and the goods/services you provide.

Nevertheless, the RFP should be in an easy-to-consume form, preferably designed in clear and contextual sections, with bulleted points and fillable tables. That's why an editable PDF, Word, Excel, presentation, or another business document will work perfectly here.

Your RFP document should consist of the following nine points to be comprehensive and straightforward:

Vendor company information
Team showcase
Product showcase*
Project description, requirements, and needs
Project deliverables and scope
Used loyalty mechanisms
Examples of specific actions
Loyalty program vision and mission
Vendor's special needs

Notice how these points form a cohesive loyalty program RFP template you can use in the bidding process for your loyalty scheme. Now, let's describe them in more detail.

Loyalty program RFP template

Suppose you more or less know what kind of customer loyalty program you would like to implement. You have defined its general outline and have a broad vision of what the scheme will look like. However, you're not quite sure how it can be built: You don't know the available market options, the cost of the technology, the time required to build your dream project, and so forth. In short, many questions remain unanswered.

You're asking a few companies to submit RFPs, giving them, well… a brief understanding of your loyalty program. And it's just fine! After all, that's what you do market research for, to find someone who can help you develop your idea to its ultimate state.

In the case of an RFP for loyalty programs, we suggest the following nine points to get solid and satisfactory responses. We've also added examples of the information you should expect back, so you won't be misled.

1. Vendor company information

First, you need to ask for basic information about the prospective contractor. The initial point is like a "sieve" to filter out only the legitimate service providers. In this section, you should get answers to such questions as:

The company name and contact information (VAT registration No., Company Registration Number, business liability insurance coverage limits, etc). You can request the contact information of the person who will respond to the RFP, so there's no diffusion of responsibility.
The company's background information, meaning year of establishment, employee count, company structure, offices, target audience, and industry focus area.
The number of years the company has been in business, so you know you're dealing with experts.
The relevant experience that would help them deliver your project. You can ask for case studies of customer loyalty programs that they developed.
The number of projects that have already been delivered to market.
The number of customers who are currently using their loyalty platform and/or services.
The list of affiliates or other business partners who could certify their achievements.

Indeed, this brief overview of the vendor profile will help you better understand their business and core and allow you to filter the best fit for your project.

2. Team showcase

Next, dispel any doubt that you're dealing with an inexperienced provider. At this point, ask for profiles of the team that will pilot your loyalty program concept. Request the contractor to present information about what they do professionally and their work experience. Actually, it's worth getting the professionals' resumes and LinkedIn profile links. This way, you'll be sure that the team is fully prepared to carry out your order and has the necessary competencies.

3. Product showcase*

Ask potential vendors to present their loyalty platform or other loyalty product (if they have one, of course). This will mobilize them to personalize the offer to your expectations. Take a special interest in the functionalities, competitive advantages, USPs, and pros and cons. When it comes to a demonstration of a loyalty platform, ask about elements related to customer relations and management, such as:

Flagship loyalty features that make the platform unique and eye-catching.
Customizable program logic, allowing the loyalty program to be iterated and upgraded in the future as your business changes.
A wide range of physical and digital rewards catalogs that can be tailored to members' expectations.
Points management options. Ask about possible ways to earn and redeem loyalty points. Also, make sure that the platform allows you to manage multiple bonuses/promotions at the same time.
Possible loyalty program types, for example, point loyalty programs, spend-based loyalty programs, tiered loyalty programs, paid/VIP loyalty programs, value-based loyalty programs, referral loyalty programs, multipartner loyalty programs, coalition loyalty programs, game-based loyalty programs, and hybrid loyalty programs.
Survey functionality to gather member feedback and drive sales.
Gamification modules to make your loyalty program more playful and increase member engagement.
User-friendly and scalable backend to enable vertical/horizontal integration and development of your loyalty solution.
Data collection mechanisms, for example, during the member enrollment process or website browsing.
Reporting and Business intelligence capabilities to collect data and turn it into knowledge about your loyalty program and your members.
Artificial intelligence capabilities that enable your loyalty program to "learn" from members' actions and purchasing behavior. You can also use this feature to create smart audiences, predict customer churn, personalize product catalogs, or perform proactive customer retention.
Community-building components that facilitate social, mobile, and digital engagement. With these in place, your members can earn rewards and recognition from the loyalty community. You can also request a list of social networks with which the platform has existing integrations.
A/B testing capabilities that let you experiment and improve your loyalty program based on real-world user data.

It's a good plan to get access to a product demo to have an even better idea of all the platform components and get a "taste" of its best features. After all, a proposal is a place where a loyalty provider can showcase what they have at their disposal.

4. Project description, requirements, and needs

Finally, you can define your project, your needs, and everything you want to achieve through this partnership. Before completing this part of the RFP, hold a few brainstorming sessions with your team to develop a list of obligatory elements you think your loyalty program should feature.

Deciding on the project form

In case you don't have a loyalty program yet, you can ask your loyalty provider to support you strategically and plan the roadmap as well as the final launch. You can refer to other existing loyalty schemes and their features that have impressed you to streamline the process.

Suppose you hire a loyalty platform provider to redesign your existing loyalty program. You can ask them to audit and fine-tune your loyalty scheme with some innovative features, or to rebuild it and migrate it to their loyalty platform completely. Updating an existing loyalty program is also a project that can be the subject of an RFP.

Describing project

Bring your project team together and describe what your idea for a loyalty program is all about. Write out its requirements and explain exactly what you need from the vendors, how they should do it, where the work should take place, and when the project should be ready.

If you include detailed schedules in your RFP process, you'll automatically cut out vendors who may fail to meet key deadlines. Doing so can save you and them trouble. Although, if you have some flexibility in the project, mention this in the proposal as well. This means your openness to negotiating a deadline for delivering a solution with the right candidate. You can also add information about specific preferences for materials, tools, systems, and products.

Setting goals

Additionally, a request for proposal is a fantastic place to define goals and measures of success. Clarify what you want to achieve in your project and how you define a successful loyalty program. Ask yourself: What needs to happen after you run the program for you to consider it a favorable outcome? The bottom line is that approaching a new investment without clear expectations and goals is a way to waste money and effort.

By outlining measurable goals, your vendor can develop strategies to help you reach them. Take the time to list all your must-haves and nice-to-haves so that the contractor can determine their suitability for the project.

5. Project deliverables and scope

The most critical moment in implementing a loyalty program is moving from the cognitive stage to the execution stage. Your contractor must briefly outline how they'd execute the entire concept. Remember, the point here isn't to describe the process in great detail but to sketch out some of the key steps they'll take, along with a timeline. Ultimately, the RFP is only the beginning of your relationship.

Ask for a condensed description of how the contractor intends to complete your project, from gaining knowledge through analysis, assembling the team, preparing the system, performing the integration, training staff, and delivering the complete solution. This is a request for proposal, so you can ask for a positive scenario with no delays or obstacles along the way. The contractor should then present you with their best approach to the project that both parties are happy with.

Functional requirements of the project

Functional requirements are those directly related to the core operability of your loyalty program. So, if you have a general idea of what features you expect — good for you! List them, add definite descriptions, and make room for vendor response.

However, if you don't know how to name the features, just describe what they're supposed to do, and the loyalty provider will offer you the best option. For example, "As a customer team colleague, I'd like to move loyalty customers to a different geographical segment in the system." It's so easy to write and understand, isn't it?

If you're technology-oriented, you can include your company's existing technology stack. Describe the current software technologies that will interact with your new loyalty program. Also, highlight the programming languages you intend to use, as these can determine the development direction of your loyalty program.

Non-functional requirements of the project

Non-functional requirements are, for example, security, privacy, legal, architecture, support, or analytics. Again, it all depends on your needs and expectations.

Security, privacy, and legal

Regarding security, privacy, and legal, ask your provider to describe the program elements designed to protect your members' data. Find out how they plan to cover these areas:

Data ownership, modification, and processing.
Compliance of the loyalty solution with GDPR.
Data security, protection policies, SSO, and encryption.
Data backup processes. Make sure the contractor equips you with an adequate disaster recovery process.
Data hosting environment.
Fraud protection mechanisms.
Level of access to the loyalty program.

Architecture

When it comes to loyalty program architecture, find out about the technical infrastructure the vendor intends to use to implement your loyalty program. Here you should claim more information about:

Customer portal and member accounts. Make sure what your members will be able to do as part of defining and customizing their accounts.
Potential integrations, for example, eCommerce integration, marketing automation integration, omnichannel options, open API documentation, web services, mobile SDK for app integration, social media integration, file transfer tools, business intelligence solutions integration, etc.
Hosting and backups.
Program's accessibility and scalability.
Program monitoring and anomaly detection systems.
Any other relevant information.

Technical and account support

Another area within the project scope is technical and account support. Your loyalty program provider should assign you a dedicated customer success manager to support you from the get-go.

Make sure the contractor can offer you technical support and consulting services when needed. Set definitions for incident response time, incident resolution time, availability hours, support hours, and incident severity (for example, critical, high, medium, low). Also, consider signing an independent service-level agreement (SLA). That way, you'll never be left alone when something unpredictable happens to your loyalty program. A sudden outage may upset your program members, wouldn't you agree?

One last thing — ongoing training, workshops, and updated self-service materials. Don't stop educating yourself on how to get the most out of your new loyalty program to get the best results.

Metrics and analytics

No less important is the metrics and analytics field. Determine what loyalty metrics you'd like to track within your loyalty program. If possible, incorporate predictive modeling, segmentation modeling, and response modeling when within your existing/collected data. This will help you streamline your business, as well as the loyalty program itself.

In summary, your winning vendor should be able to define milestones with specific project goals, propose timelines, and develop performance standards for your loyalty program. In turn, you should provide selection criteria so that the vendor knows whether they meet your expectations.

The agreed-upon deliverables and project scope ensure that the deal moves forward at a pace that satisfies both parties. Remember to back up your partnership with a list of all loyalty products or services used in the implementation process, comprehensive reports, and plans delivered within a specific timeframe to keep both sides on track.

Also, keep in mind that the contractor won't present you with a ready-made offer but a preliminary proposal. Some vendors add a legal clause to their response, emphasizing that all items are subject to change due to a shift in the project scope or economic situation. So, the steps included in the RFP are subject to further negotiation. In this way, both you and your vendor are protected.

6. Used loyalty mechanisms

When you outsource the implementation or refinement of your loyalty program to a loyalty provider, you want to know what loyalty mechanisms and tactics will be used to foster engagement and build a solid group of loyal members. In the RFP, insist on including loyalty mechanisms so that you can plan campaigns of any scale in the next step.

For example, suppose you already have some sort of points-based loyalty program. In this case, the loyalty solution provider will probably suggest sticking to this mechanism because the program members have spent time accumulating points, and any other equivalent would be unsatisfactory.

However, nothing stops you from fine-tuning the rules for earning, collecting, and redeeming these points to activate your customers even more powerfully. You can also add a new referral program so that your members can invite others and gain points that way. Additionally, you can consider rewards in the form of pre- and post-trade coupons, various prizes, or early access to parts of your offer. On top of that, you can offer cash back or expense reimbursement, which works as an "add-on" to collecting standard points. You can also include everyone's favorite raffle, which injects an element of competition and gamification.

This was just an example of how primary and secondary loyalty mechanisms should complement each other. They need to form a chain of activities, so to speak, whose main goal is to keep members in the program and create that stickiness between your brand and customers.

7. Examples of specific actions

Now it's time for the vendor to step up and play the trump card. That's why you should include a section in your RFP for their ideas on how your loyalty program could work if it existed. Ask various vendors to come up with three options for activities using your program that would range based on its features or access to data and customer base.

The actions you're about to read about are just examples. Remember, at this conversation stage, don't ask for ready-made loyalty campaigns but a rough demonstration of how the mechanisms in question would work. This will better visualize their concept and allow you to decide on a future partnership with a loyalty provider.

Let's say you'd like to introduce segmentation for your loyalty program to better understand your customers and tailor your offerings. Your vendor could take a three-pronged approach:

If the loyalty provider has no access to data, they can implement simple demographic segmentation for your loyalty solution.
If the loyalty provider has access to your transactional data, they can segment customer demographics with exact transactions and selected products. The customer's shopping activity and purchasing capabilities become much easier to determine.
If the loyalty provider has access to full data, including payment methods and current loyalty mechanisms the customer has tapped into, then they can prepare full transactional, product, and demographic segmentation with predictive options and data monetization capabilities.

Now, let's bring up another example with three options for couponing using a loyalty program:

If the loyalty provider has no access to data, coupons will simply be delivered by post, regardless of customer type and preferences.
If the loyalty provider has access to transactional data, which includes information about product categories chosen by customers. Well, it's possible to provide coupons dedicated to individual customers, but they'll still be delivered by traditional mail.
If the loyalty provider has access to full data, it's possible to recognize customers by their loyalty card at checkout. Then, the coupons are printed in addition to the receipt.

The last example will be about a member welcome campaign using your loyalty program:

You can give a 30% margin discount on the purchase of two packages of products within a certain period.
You can give a 40% margin discount on the purchase of three packages of products within a certain period.
You can give a 70% margin discount on the purchase of six product packages within a certain period, as long as there's an additional purchase of product Y or X.

The vendor's preparation of such three scenarios can clearly show you the spectrum of possibilities you can achieve with a loyalty scheme. Of course, the third scenario is most likely to give you the best returns, but it's still up to you which implementation option you pick. Plus, the three options also show the vendor's flexibility — depending on what access and information they have at their disposal, they can provide you with a solution tailored to your needs.

8. Loyalty program vision and mission

The contractor for your loyalty scheme must think like you, meaning they must sense the project and have the same vision and mission in mind. Ask the vendor to summarize the vision/mission of the loyalty program in a short, businesslike form. You'll see if they focus on the right elements and if they overlap with your perception. The mission and vision are part of the loyalty strategy and are fairly corporate elements, but they can make a contractor act more like a visionary rather than a mere manufacturer.

9. Vendor's special needs

It's important to ask what the contractor needs beforehand to thoroughly dig in and finish your project. After all, you don't want to become a roadblock, do you? For this reason, you need to secure space in your RFP for special requests from the vendor to let them work efficiently.

For example, they may need access to a database to set up recognition and data mapping, a meeting with the loyalty manager twice a week, an access to the inventory or POS system, and so on. Remember, on the way to getting the loyalty solution of your dreams, you need to be ready to say "yes" and "no" many times.

Moreover, your loyalty provider will certainly notify you of the team's availability and… deadlines. They may impose a date by which you must state your interest in the proposal ("the offer is valid for three months"). The proposal is time-limited, not because the contractor is nudging you — they just want to prepare the staff and not add extra work. Eventually, they'll soon support your specific project.

What about the pricing in the RFP?

One thing we didn't mention in the article is pricing, and we did that on purpose. Price, of course, can also influence the final selection. However, budgeting isn't a mandatory part of an RFP but can speed up the bidding process.

There's always the urge to ask for a project quote immediately, but hold off and ask bidders for a detailed cost estimate of their loyalty services. Find out how they charge for their activities and whether it is a one-time payment or recurring weekly, monthly, or yearly. Then, you'll know if you can afford their support and if you can negotiate the price.

Save time and effort with loyalty program RFP

Clearly, an effective request for proposal can do wonders for your business, such as connecting you only with legitimate loyalty program providers, saving you a lot of time researching and reviewing potential options. Use the advice in this article to prepare your own RFP document, or simply apply the nine points as an RFP template to get responses from the best vendor.

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To get some loyalty program inspiration, check out the Top 100 Loyalty Programs report, or peek into the future of the loyalty industry with our Loyalty Trends 2022 research.