An analysis of experiences from 2009 to 2020

How do you choose an agency to manage a loyalty scheme?

The manager in charge is already B2C loyalty scheme / B2B incentive scheme Anyone planning to implement it must choose the right partner to handle all or part of the related activities. If they make a mistake, it will undoubtedly affect the implementation timeframe, costs, and also the overall perception and prestige of the project.

The following guide is based on experience in selecting service providers from the perspective of a marketer responsible for conducting tender procedures. It relates directly to the selection of an agency responsible for overseeing the work of a specialist contractor that implements and manages loyalty programmes. The organisation has taken part in over 100 tender processes and has already completed several dozen such projects.

In practice, the choice of a business partner is based on highly subjective criteria. One of the most important factors is mutual understanding – that is, a good fit in terms of communication style and mutual trust.

However, if one looks at the selection process from an objective point of view, five key factors can be identified as being of the greatest importance, namely: experience in delivering projects of this type, guarantees regarding the information security management system, the functionality of the IT system, in-house logistical capabilities, and a tried-and-tested legal and tax compliance system developed over many years. Another very important, yet often overlooked, issue is whether, during the course of the project, it will be supervised by the managing partner in terms of overseeing the team of managers.

The issue of experience in carrying out similar projects

One of the most important requirements cited during tender processes for the management of a loyalty/incentive scheme is experience. Few people are willing or able to afford the mistakes that can result from trial and error. However, if the aim is a long-term partnership involving the exchange of sensitive sales and personal data, experience in serving competitors’ clients is simply not acceptable. Industry exclusivity is the norm.

For this reason, experience is the key criterion, but specifically in managing English-language projects in other market sectors. It is always worth checking references at source by arranging an interview with the project leaders.

It is also advisable to ask the tenderer about the increase in sales figures resulting from the measures implemented. A specific answer should not give cause for optimism. If they are so willing to disclose such data, they may also share information about the current programme during future tender procedures. In such circumstances, one should consider whether such a partner can truly be trusted. Confidentiality is of the utmost importance in such strategic projects.

Information Security Management System

The most important process in the implementation of a loyalty or incentive scheme is the exchange of sales data. This is because points are calculated and rewards are awarded on the basis of this data. Unfortunately, such data sets and sales figures (which are usually very detailed, broken down by region or product line) can easily be lost or disclosed to third parties.

However, the organisation managing the programme must generate reports on a regular basis, as it uses them as the basis for awarding prizes and for making further strategic decisions. Consequently, it is essential not only to ensure confidentiality, but also the completeness and integrity of the information. It is most prudent to select organisations holding ISO 27001 certification, confirming that their information security systems comply with global standards. It is always worth checking the reputation of the certification body itself that carried out the audits.

Functionality of the tenderer’s IT system

To put it very simply, there are two main types of IT systems on the market – bespoke and off-the-shelf. The first type consists of software designed to manage programmes, created specifically to meet the needs of a particular organisation. The second, on the other hand, consists of solutions in the form of software as a service, i.e. tools hired on a limited basis via the Internet. 

If you wish to establish a partnership with organisations that are both experienced and secure, it is wisest to choose companies that have their own proprietary systems. Ideally, these should be developed in-house and hosted on dedicated servers at a reputable hosting centre. Otherwise, any change will result in an increase in the subcontractor’s margin and grant them access to confidential data.

Our own logistics centre

Rewards are crucial to loyalty and incentive schemes. Consequently, at least a minimum amount of warehouse space is required, as well as areas for recording goods received and dispatched from the warehouse, and for packing, addressing and dispatch. If logistics operations are to be outsourced, one must bear in mind that customers’ address details will be directly disclosed to external parties, which significantly compromises confidentiality.

This solution also gives rise to additional costs, which must be covered in a more or less hidden manner. The potential drawbacks also include the limited flexibility of a partner using an external logistics centre. This is because, in such cases, the partner does not have full control over, amongst other things, delivery times to the warehouse, dispatch times, working hours or the timely provision of the service (which is linked, amongst other things, to the applicable work schedule).

Legal and tax safeguards

Running a loyalty scheme also entails legal and tax risks. It is very important to take the most rigorous approach possible to documenting the taxable income arising from the awarding of rewards, as well as issues relating to VAT, invoicing for the service component and the rewards awarded, accounting entries, etc.

If the entity to which you wish to entrust the organisation of a loyalty scheme already has a legal and tax compliance system in place, this should be supported by the relevant tax rulings.

If you would like to read an analysis of the B2C and B2B loyalty schemes market, commission the organisation of a scheme, or find out how i360 If you’d like to optimise a programme you’re already running, please get in touch at the following email address Dawid.Luciuk@i360.trejka05.pl or by calling +48 600 534 631.