What criteria should be followed when choosing a loyalty program provider? - Tomasz Makaruk

What criteria should be followed when choosing a loyalty program provider?

Analysis of experiences from 2009 to 2018

How to choose an agency to operate a loyalty program ?

Each of the managers who plans to implement or maintain a B2C loyalty program or a B2B motivational program, faces the necessity of choosing a partner to whom he will entrust the whole service or part of the scope of work related to the implementation and maintenance of the program. The consequences of a wrong choice have their implications on time, costs, and above all on the prestige of the ongoing project. This guide has been created on the basis of experience in selecting of entities from the perspective of the marketer conducting tender proceeding aimed at selecting a responsible agency responsible for sales and loyalty activities and the person managing the work of a specialized economic entity, that implements and manages the loyalty program. An entity that participated in over 100 tender proceedings and carried out dozens of such projects.

It’s an unwritten truth, that the partner for cooperation is chosen on the basis of subjective criteria, the most dominant is the matching of communication style and confidence in the reliability of the future cooperation.

From an objective point of view there are five important criteria, which should be followed in the process of partner selection. These are: experience in carrying out similar projects, guarantees, provided by the information security management system, which should be implemented by every professional entity specialized in the organization and management of loyalty programs, functionality of your own IT system, having own logistics facilities, supported by the obtained individual tax interpretations, a developed system of legal and tax security. Important, but often underestimated, is also whether your project will remain within the scope of service of an experienced team of project managers under the supervision of a managing partner.

The issue of experience in the implementation of similar projects

On professional grounds, no one wants to perform the function of the proverbial test rabbit. From this point of view, one of the most frequently used requirements in tender proceedings for the servicing of a loyalty program or an motivational program is the issue of experience. In the case of long-term cooperation, which is based on the exchange of sales and personal data of business partners there can be no experience in handling competitive clients, because the industry exclusivity is the norm. Therefore, experience in handling analogous projects in other market categories is put forward as the leading criterion. On this occasion, it’s worth checking references at the source, asking for the opportunity to talk with project leaders on the agency’s clients side. It is also worth asking the bidder for concrete results of sales increase within the implemented projects. If you receive a specific answer, it means that … with high probability, in a short time, the effects of your program will also be revealed during subsequent tender proceedings. It is worth then, with increased concern, to consider whether such a potential partner is trustworthy. It should be remembered that confidentiality is essential in such strategic projects for the company.

Information security management system

From the point of view of information flow, the most important process as part of the implementation of the loyalty or motivational program is the exchange of sales data, forming the basis for points or awards. Data sets of volume or value of sales, often very detailed in nature, divided into regions and even individual project units (SKU), are exposed to the risk of loss or disclosure to individuals or third parties. At the same time, the entity managing the loyalty program regularly generates reports, on the base of which awards are issued (paid) and strategic decisions are made. For these reasons, it is particularly important to ensure not only confidentiality, but also the completeness and integrity of information. If you don’t want to rely solely on the bidder’s assurances about the “tightness” of his system, you should select entities that have ISO 27001 certificates, that is, certifications of compliance of information security systems with the global standard. The prestige of the certification body that carried out the security audits is also important.

The functionality of the IT system owned by the bidder

By allowing generalization, it can be said that there are two types of information systems on the market. Copyright and box. Copyright systems are systems for managing loyalty programs created for a specific entity. Box systems are solutions most often used in the model software as a service, in other words, the case in which the bidder does not have an IT system, and only rents its functionality to a limited extent on the internet. If you want to cooperate with entities whose scale of operations guarantees safety and experience, look for companies that own copyright, created by their own forces (otherwise, each change will involve the sub-contractor’s margin and his access to confidential information) information systems, hosted on dedicated servers (not virtual) in one of the three most recognized hosting centers in Poland.

Own logistics center

There is no loyalty or motivational program without awards. And these require however a minimum of storage space, space to register their acceptance and issue from the warehouse, packaging, addressing, shipping. If these activities are outsourced by an entity with which you intend to establish cooperation, then you must count with it that the address details of your best and most satisfied (because of the award-winning) customers will be disclosed to third parties with all risks related to confidentiality. Such action will also be a source of additional costs, which You will cover in a more or less hidden way. Further disadvantages may arise as a result of limited flexibility of the partner using the external logistics center with respect to delivery times to the warehouse, the time needed to ship the awards, working hours in which the service is provided or even the possibility to provide the service in the expected time due to the applicable work schedule.

Legal and tax security system

One of the risks, generated by running a loyalty program, is the legal and task risk. For this reason it is very important to have a reliable approach of the accounting for and the documentation of the taxes of the revenues from the awards, VAT issues, the method of invoicing the service part of the program and issued (paid) awards, the issue of VAT invoices, accounting notes, reversed charge of VAT in the event of issued awards, referred to in annex 11 of the VAT act, etc. If the entity you intend to entrust with the organization of your loyalty campaign, has implemented a legal and tax security system, it should be supported by many individual tax interpretations, obtained in the area of key tax issues.

If you want to know the analysis of the B2C and B2B loyalty programs market in Poland, entrust the organization of a loyalty program or a motivational program, learn how i360 can optimize the program you run, please contact i360 at Dawid.Luciuk@i360.com.pl or 600.534.631.



dr Tomasz Makaruk

President of the Management Board i360 Sp. z.o.o.

 2018  i360 Sp. z.o.o.  All rights reserved.


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