How to audit your loyalty program health, with David Slavick

Welcome to the Loyalty Program Builders podcast, where we collaborate with top loyalty professionals to tackle business and technical challenges while implementing and running loyalty programs with the support of a robust customer loyalty strategy.

In this episode, we delve into the crucial topic of loyalty program audits with David Slavick, an expert in the field. Loyalty programs are a vital component of customer engagement, but they require ongoing evaluation to ensure they deliver the intended results. In this article, we'll break down the key takeaways from the podcast and provide you with actionable insights to audit and enhance your loyalty program.

What will you learn about loyalty program health checks?

A loyalty program audit might sound daunting, but it's a necessary step to ensure the long-term success of your program. David Slavick, our guest, emphasizes the importance of periodically assessing your loyalty program's performance, service model, and overall effectiveness.

Listen to the podcast here:

Key takeaways:

Why loyalty program audits are essential: David Slavick underscores the importance of loyalty program audits, comparing them to financial audits that help a company understand its financial health. By conducting an audit, you gain valuable insights into what's working and what isn't in your program.
Signs that an audit is needed: Enrollment rates, member growth, and other key metrics should trigger your attention. If these numbers are declining, it's time to investigate and identify the root causes.
Service models: Understanding your loyalty program's service model is crucial. David discusses various models, including in-house, hybrid, and fully outsourced, and explains when each is appropriate. Choosing the right service model can significantly impact program success.
How to conduct a loyalty program audit: David suggests a comprehensive approach to loyalty program audits, including evaluating your value proposition, assessing program metrics, and reviewing your technology and staff. He also provides a valuable four-box model to prioritize improvement initiatives.
Continuous health checks: To continuously improve your loyalty program, consider quarterly business reviews with partners, attend industry conferences, involve your finance team, and hire external experts when needed.

Three actions to boost your loyalty program health:

Conduct a comprehensive audit: Start by evaluating your program's performance, service model, and value proposition. Identify areas for improvement and prioritize them using the four-box model mentioned in the podcast.

Stay informed about new strategies: Keep up with industry trends and best practices by attending conferences and networking with professionals in your field. Cross-pollination can lead to fresh ideas and innovative approaches.

Collaborate with experts: Don't hesitate to seek help from external consultants who specialize in loyalty programs. They can offer valuable insights and guidance to optimize your program.

Loyalty program health inspiration corner

Start the loyalty program audit with the basics.

“Figure out the foundation. What were the assumptions associated with the program? How is the program performing? How is the program operating? And ultimately then, like I said, prioritize, and you'll have a better result.”

Benchmark against competition.

"As part of an audit, you should do a thorough competitive analysis. Not only of your direct competitors, but your indirect competitors and the companies that you admire - that you think are the best practitioners in the space."

Continuous loyalty program health checks are the key.

"Do quarterly business reviews with your partners and talk about your loyalty program’s health. The partners will come to you with ideas. The credit card company that you work with or a co-brand might give you fresh ideas and talk to you about new innovations."

Who is the customer loyalty expert?

David Slavick, Co-founder & Partner at Ascendant Loyalty:

David Slavick is a distinguished expert in CRM and Loyalty, boasting a career dedicated to crafting successful loyalty programs. As the Co-founder & Partner at Ascendant Loyalty, he brings a wealth of knowledge in business case development, program design & strategy, and global technology assessments.

With his extensive experience, David is a trusted advisor in the loyalty industry, helping businesses optimize their customer engagement strategies.

Full episode transcript

The following transcript has been edited for clarity.

Introduction and expert welcome

Irek: Hi David, great to have you on the show.

David Slavick: Great to be here. It's really looking forward to our visit, and I think we're gonna be sharing a lot of great information with your audience.

Irek: Definitely. So today we are going to talk about loyalty program audits. So I would like to start with a very basic question. If you could explain the importance of running a loyalty program audit.

David Slavick: Absolutely. We intentionally use the word "audit". I've written articles on it, which spurred our conversation today. When people hear "audit", they often get apprehensive, associating it with official governmental checks. But in this context, it's essential.

The comprehensive scope of audits

If a program has been in the market for, let's say, three to five years, it's crucial to assess its performance. This involves looking at the service model, the program's construction, and understanding its effectiveness at every touch point. This is not just from a top-line standpoint, but truly every area of the program.

Consider communication with members, interactions with store associates, and dialogue with customers. In a B2B program, for instance, you'd audit every touch point, component, and the entire operating model. This also includes financial performance to understand what's working and what's not. From the audit, you can refine the program over time. This information then informs budgeting, especially if changes require new investments in tools, solutions, or service providers.

Irek: It sounds quite complex. Based on your experience, what are the signs that a loyalty program audit is required?

David Slavick: There are multiple indicators. One should capture data to inform the business's financial model. If you see enrollment slowing down, it's essential to understand why.

Identifying problem areas

It could be an issue with the program's value proposition. If competitors offer better incentives, adjustments are necessary. Part of the audit should involve a competitive analysis, considering both direct and indirect competitors. Observing best practices in the industry can also guide modifications.

Analyzing performance indicators

Consider factors like units per transaction, basket size, and average transaction value. If you expected upward value migration from your members and it's not happening, that's a sign. If you're not seeing migration in member tiers or if reward redemptions are low, these are also indicators of underlying issues.

Finally, reward redemption is vital. If members aren't redeeming rewards, it could be due to various reasons – from ineffective communication channels to an unengaging mobile app. Addressing these areas is critical to ensure the program's success.

Understanding service models in business

Irek: Sure, thank you. You also mentioned service models. Could you elaborate on that and describe the service models that are available?

David Slavick: Certainly. Many companies start out with a program, especially in the business-to-business domain. Whether a smaller or large enterprise, some manage everything in-house. They might have their own platform for direct marketing or customer relationship management. All their staff – from strategists and analysts to modelers – operate in-house. This might work for some, but it begs the question: are they limiting their potential by not exploring external tools or platforms?

The all-in-house model

Having everything in-house can be efficient. These companies might have an excellent IT organization that deeply understands the business. But even if the enterprise is committed, they might lack the features needed to truly thrive in a competitive market. It's crucial for businesses to assess available tools and platforms, but only after defining their needs.

Auditing reveals strengths, weaknesses, opportunities, and threats. It's important to understand your business requirements and recognize if you're lagging in any area. For instance, your in-house tech might be becoming outdated, inefficient, or less effective in the face of modern digital engagement needs. The solution? Perhaps outsourcing.

Hybrid model: a mix of in-house and outsourcing

Another approach is the hybrid model, where some functions are in-house while others are outsourced. The tech you're using might be too costly, especially if it operates on a pay-for-performance model.

Sometimes, businesses find that their tech partners are not innovating quickly enough or that their tech isn't agile like open-source platforms. This type of tech, especially when it supports real-time responses, can be much more adaptive.

The fully outsourced model

Lastly, some companies might prefer a 100% outsourced model. All operations are handled externally, but an in-house team defines the vision and strategy. This can be efficient, with the outsourcing vendor functioning as a profit center. Their earnings are based on performance, ensuring they're motivated to support your business.

Irek: Cool, thank you. So, can you describe what a program audit entails and its duration?

What's involved in a program audit?

David Slavick: Absolutely. I'll provide a detailed document for reference post this discussion. But to give you a brief, an audit considers various factors. It delves into the program's value proposition, performance metrics, operational model, and tech support. Also, it evaluates the staffing needs based on program maturity.

Another critical component is evolution. If a company's growth slows, partnerships can offer a renewed value proposition. The audit essentially examines all facets – be it people, processes, design, or strategy.

Evaluating and improving loyalty programs

Irek: Okay, thank you. So once the audit is complete, how do you determine the necessary steps to improve a loyalty program?

David Slavick: At the onset of our visit, I mentioned prioritization. You need to evaluate the demand on resources and the benefit in terms of incremental revenue. There's a four-box model:

Low demand on resources, low revenue value.
Low demand on resources, high revenue benefit.
High demand on resources, high revenue potential.
High demand on resources, low revenue component.

From the audit, you'll identify various initiatives, such as looking at new technology, adjusting the value proposition, and refreshing your communications strategy. There will be major overarching ideas and smaller tactical ones. All of these can be placed in the four-box model for assessment. And remember, while you might instinctively know which initiatives can drive revenue, altering the value proposition carries risk. But with risk comes reward.

For example, adjusting tiered rewards in your loyalty program can demand high resources but can also significantly improve the program's profitability. Many companies go through program redesigns, often with the help of consultants like us.

Building continuous improvement into loyalty programs

Irek: Thank you. So, any advice for loyalty program managers aiming for continuous improvement?

David Slavick: Certainly.

Engage with partners – conduct quarterly business reviews. Your partners, like credit card companies, will bring forward new ideas and innovations.
Learn from others – attend conferences and engage with other businesses, both in and outside your industry. This can help you identify new trends and get a fresh perspective on your program.
Internal workshops – consider having off-site workshops to discuss the program's strengths and weaknesses.
Engage with finance – collaborate with your finance team, as they can provide insight into the program's financial model and help identify potential improvements.
Be cautious with drastic changes – while it might be tempting to implement a paid program like Amazon's, understand its challenges, from managing acquisitions to handling cancellations.
Prioritize foundation – revisit the foundational assumptions of your program. Determine how it's performing and operating, and then prioritize changes accordingly.

And finally, seek expertise – consider hiring external consultants. Experts, like those from Ascendant Loyalty, can offer valuable insights.

Irek: Thank you very much for sharing your expertise.

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