In the world of loyalty programs, effective use of data is critical. The best loyalty schemes incorporate data from multiple sources and work across all customer touchpoints to provide a comprehensive picture of customer behavior.
The role of the loyalty engine is to generate insights and enriches other systems to make the customer experience smooth and personalized in every channel. Integrations are one of the biggest challenges while implementing a loyalty program, especially if you have a complex system infrastructure, multiple touchpoints, and a custom loyalty program scheme.
In the following article, we’ll take a closer look at the pros and cons of composable architecture for system integrations while implementing a loyalty program, point out when composable architecture may be a good choice, and outline the principles of modern loyalty software integrations.
Key takeaways
- The integration layer is a strategic business asset, as it can significantly impact the customer experience, the cost of operating tech stacks, and define the speed of change within the organization.
- Loyalty software plugins are suitable for companies with a simple loyalty program scheme; small-scale and with a limited number of on-site systems. E.g. you can add a loyalty program widget to your eCommerce platform.
- Composable commerce is a modular approach to building customized loyalty programs that allow brands to take the best building blocks, such as loyalty software, marketing automation, and eCommerce, and "compose" them according to their needs.
- With composable architecture, you can build systems as a collection of independently deployable, modular components that can be easily integrated and upgraded. The API-first approach allows businesses to enjoy systems designed to communicate effectively with each other, making it easy to furnish the loyalty program with new apps and data sources.
- Composable architecture offers both business and technical agility, which are key when dealing with complex technology ecosystems at enterprise level. As such, you can respond quickly to changes in the market, adopt new technologies and develop innovative functions or capabilities.
- APIs, webhooks, and integration middleware are key elements that "glue" all the systems together, allowing different components to communicate and exchange data with each other, and ensure efficient functionality.
Why does the "plug & play" approach not work for customized loyalty programs?
A custom loyalty program always requires integrating multiple systems - eCommerce platforms, marketing automation, CRM systems, payment gateways, you name it. As you embark on the implementation process, you probably find yourself looking for the most efficient way to integrate countless systems. As such, using out-of-the-box plugins offered by system providers may be a no-brainer for you.
However, plugins are only ideal if your needs are simple, you have a limited number of systems to connect, and no custom applications to speak of. Unfortunately, plugins aren’t a one-size-fits-all approach, particularly if you plan to implement a personalized loyalty program on a larger scale, and your requirements include connecting multiple systems and customer touchpoints.
Having worked on more than a dozen custom loyalty program implementations, I'm confident that loyalty programs can bring tremendous business growth. Even so, there’s no denying that building custom loyalty solutions is extremely difficult and time-consuming.
There are two key challenges that you're sure to face when implementing a custom loyalty program in an enterprise environment:
- Receiving many non-standard requirements from various stakeholders, ranging from the look of the loyalty program to its integration with other systems.
- Needing to integrate new and unfamiliar loyalty software into your existing (already complex) system architecture and trying to avoid duplicating the functionalities of existing tools.
These are the reasons why a ready-made plugin solution will often not work as well as advertised; not to mention the fact that you’ll probably also require at least some plugin customization.
On the other hand, if you have many different systems involved in your loyalty program architecture, all of which need to "talk to each other and exchange information," plugins will be a non-starter in most cases. Of course, your systems will still require custom integrations to work properly.
Even once you've customized plugins or implemented custom integrations between systems, you’re likely to face hurdles when it comes to even general upkeep of custom applications. Maintenance, regular updates - no matter how small - will turn into nothing short of a sisyphean task as you have to go through each integration individually to make the required changes.
What's the composable approach to loyalty program integration, and when does it fit?
In the past, companies implementing custom loyalty schemes had to integrate each system directly with each other. Of course, this approach was uneconomical, challenging to scale up, and highly restrictive in terms of the speed of change it offered.
Companies are now increasingly turning to the composable architecture model - a modular approach to development, offering greater flexibility. The approach enables brands to take best-in-class building blocks, such as loyalty software, marketing automation, or eCommerce, and compose them according to their needs. Akin to a toolbox containing countless off-the-shelf components for creating unique and flexible solutions, the approach offers its users the comfort of knowing they can meet any stakeholder requirements.
The business value of the composable architecture model is hard to overstate. For one, brands finally have the freedom to create unique loyalty programs that align with their business goals and satisfy customer needs. What’s more, all of this comes at a much lower cost than the traditional monolithic approach - both in terms of the overall financial burden, the speed of change, and the freedom to scale.
In terms of its technicalities, integrations within the composable approach are center around the following components: API-first solutions, webhooks, and integration middleware.
API-first solutions
API-first solutions are software built using APIs as the primary interface for accessing and interacting with a service — this means that the software is developed with a strong focus on providing a well-defined set of functions that can be accessed through an API (rather than relying on a traditional user interface plugins and widgets).
The API-first approach is particularly well suited to complex architectures where multiple services and systems must be integrated to provide a seamless experience for end users. API-first solutions also make integrating disparate systems and technologies a lot easier, by providing a well-defined and standardized interface.
APIs - Application Programming Interfaces - define how software components should interact with each other, setting rules for information requests or other services. Their power, however, lies in offering a far more fluid way for different applications to communicate.
One way to think about APIs is as the "front door" to an app, allowing authorized third-party systems or other solutions to interact with its data and features. Its well-defined interface for accessing and manipulating data means that developers can integrate different software components and services into a larger ecosystem much faster.
APIs are commonly used to:
- Retrieve data from the systems
- Initiate specific actions or functions
- Perform various other tasks in multiple software
In the composable approach to software development, APIs play a crucial role. Beyond enabling seamless communication between components, APIs simplify the process of building complex software systems, freeing up developer time and allowing the business to use that time to work on unique customer journeys.
Webhooks
Webhook is a tool used in system development to automatically notify an external software or service when an event occurs within an application. In layman terms, it's a way for one application to send a message to another when something happens. This message usually contains information about the event that occurred, such as the type of event and other relevant data. Webhooks are commonly used to automate tasks that involve two or more solutions.
Integration middleware
Integration middleware enables communication and data exchange between different applications or systems. Essentially, it acts as a bridge that allows different systems to share data, workflows, and business logic. This central hub provides an abstraction layer that helps developers build and maintain integrations more easily by hiding the complexity of integrating different systems.
At its core, integration middleware is a point of contact between different systems, serving as a translator that connects APIs and webhooks to other solutions. By interpreting business actions from one system to actions in another one, the middleware can, for example, transfer data, trigger emails, or retrieve customer information from a loyalty engine. Such communication enables disparate systems to connect and work together seamlessly.
In modern app architecture, integration middleware enables organizations to create flexible, scalable, and resilient systems. With the ability to adapt to changing business requirements, you can remain competitive and agile in today's rapidly changing environment. Companies can integrate and automate their systems using middleware to improve operational efficiency and streamline processes.
Composable architecture vs. out-of-the-box plugins
The four components I described here: API-first solutions, APIs, webhooks, and integration middleware provide a solid foundation for building integration using composable architecture. The composable approach to loyalty systems assumes that middleware is at the center of the systems, and all data is transferred through APIs and webhooks. This allows you to create flexible and efficient systems that adapt to changing circumstances.
Conversely, as we described above, plugins can be more cumbersome to maintain and update over time because they're tightly bound with the system. When a plugin needs to be updated, it often requires changes to the rest of the system, which can be time-consuming and error-prone. Additionally, plugins can be less flexible and scalable than complex components because they're designed to work in a specific context.
Nonetheless, keep in mind that composable architecture isn't a silver bullet, and the approach offers the most potential to larger organizations. Plugins can be a great solution if you are at the beginning of your journey and your loyalty program needs and technical infrastructure are simple.
What's the business value behind composable architecture in loyalty program integrations?
Composite architecture provides numerous advantages in creating customized loyalty programs, including:
1. Empower seamless customer interactions
Unleash the potential of your brand's customer experience with a flexible, composable stack that lets you customize touchpoints, loyalty program features, and journeys. You can easily adapt and adjust to market changes without limitations while creating a tailored customer experience.
2. Leverage specialized tools for advanced capabilities
Specialized software programs offer best-in-class features that outperform all-in-one products. Using a composable approach, you can combine and integrate these tools to take advantage of their unique capabilities, such as loyalty, segmentation, customer data platform, marketing automation, and business intelligence.
3. Reduce total cost of ownership (TCO)
The composable architecture is more cost effective than building from the ground up “manually”. By using this approach, you can eliminate technical debt and reduce maintenance costs. You can also avoid endless customizations, monitoring costs, and hosting fees unnecessarily bloating your IT budget. With fewer integrations to maintain, you save money in the long run.
4. Embrace change with ease
Composable architecture provides the agility to customize your loyalty program schemes to the highest degree, rapidly respond to changes in the market, and explore new ways to connect with customers, such as curbside pickup.
5. Quickstart innovation breakthroughs
The composable architecture allows tech teams to experiment and iterate without downtime, allowing them to focus on innovation output. This results in a shorter time-to-market for new releases, enabling you to stay ahead of the competition.
6. Break free from vendor lock-in
With a composable architecture, you can enjoy the freedom to mix and match components and functions using a modular approach that eliminates the limitations associated with a single-platform solution. You can easily introduce or replace systems and avoid getting stuck with a particular vendor.
7. Harness your data without constraints
With a modular architecture, you're free to transfer data between any system in the stack, allowing you to achieve true personalization of the customer journey in every touchpoint. You can easily break free from the monolithic platform and take a more flexible approach.
Possible roadblocks and challenges of composable architecture
While offering numerous benefits, the described composable architecture model also presents challenges that you should consider before adopting in your own loyalty program implementation journey.
Managing multiple components and vendors
Managing multiple components and vendors is a significant burden that needs to be heeded. Because composite architecture relies on numerous best-of-breed solutions, you must deal with more vendors, juggling multiple subscriptions, pricing, contracts, and integration terms for each solution. This can be a time-consuming and complex process that requires careful consideration.
Overcoming mindset barriers
Another challenge you may face in adopting a composable architecture is changing stakeholder mindset. Implementing this type of architecture requires a digitally mature organization with an approach based on deep collaboration between technical and business staff. This type of mindset shift can be difficult for companies that are accustomed to working with traditional monolithic systems. However, you need to keep in mind that implementing the composable architecture model isn't as complicated as it might seem. The key is to make a convincing case, list potential business benefits and call on the support of specialized partners during the digital transformation.
Adopting new technologies involves risks
Organizations considering composable architecture should also be aware of the potential risks of adopting new technologies. These risks include compatibility issues, security vulnerabilities, and system failures. To mitigate these risks, you should carefully evaluate each solution and vendor, assess the impact of introducing new technologies, and develop contingency plans to manage any potential issues that may arise.
Keeping in mind the cost
Finally, you also have to consider the cost of implementing a composable architecture. While the approach is less costly in the long run (for instance, the cost of expanding your loyalty program with new features or changes will be less than rebuilding plugins and 1-to-1 integration between each system), a significant investment is needed when making the switch. As such, you must carefully weigh up the costs and benefits of implementing composable architecture before rushing any decisions.
Also, remember that there are already proven and cost-effective ways to implement composable architecture incrementally, where phased migration can be done using the strangler pattern.
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