#550: Practice Checking for Sanity to Sustain Your Program

Each month in the Wiser Loyalty series, Loyalty Academy™ senior faculty members Bill Hanifin and Aaron Dauphinee draw a theme based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation, which is nearing 1,000 individuals across 53 countries worldwide. This month, they are talking about financial planning for loyalty programs and the material is based on the Loyalty Academy™ course: Loyalty Financial Modeling (#105).

Ensuring that your investment in planning and modeling is rewarded by a program that stands the test of time is the focus this week. To help you achieve what they call Sustainable Loyalty, Aaron and Bill look into the important “sanity check” questions you should ask to test your work and make recommendations on how to create a measurement dashboard with the right metrics to keep the CFO at ease.

Show notes:

1) Bill Hanifin

2) Aaron Dauphinee

3) The Loyalty Academy™

4) The Wise Marketer

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty and also Loyalty TV. If you work in loyalty marketing, you can watch our video interviews every Thursday on www. loyalty. tv. And of course you can listen to our podcasts every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world.

Today’s episode is part of The Wiser Loyalty Series, which is hosted by our partners, The Wise Marketer Group. The Wise Marketer Group is a media education and advisory services company providing resources for loyalty marketeers through the Wise Marketer digital publication and The Loyalty Academy program that offers the certified loyalty marketing professional or CLMP designation. I hope you enjoy this weekly podcast, The Wiser Loyalty Series, brought to you by Let’s Talk Loyalty and The Wise Marketer Group.

Aaron: Hi everyone, I’m Aaron Dauphinee with The Wise Marketer and I’m here today with my co host Bill Hanafin to share another episode of the Wiser Loyalty podcast with you. I guess we’re back with our third episode in this month’s Wiser Loyalty series now and we’re tackling constructs from one of the core courses from our Loyalty Academy curriculum as we always do in these in this series.

Through the month of June, we’re talking about Lottie economics and Lottie finances with most of the inspiration for this material coming from our Loyalty Academy course number 105, which is Introduction to Loyalty Financial Modeling. And so far, we’ve talked about all the things necessary to establish a really solid baseline for financial modeling for customer loyalty. And last week, Bill talked about the tips, tricks, and a bit of the pitfalls in terms of choosing the right assumptions for your model. So for anyone who maybe has missed the first two sets in this series, You can find the first discussion, which is entitled Setting Strong Loyalty Financial Foundations by searching for that title or for episode number 544 on Let’s Talk Loyalty’s website or The Wise Marketer. com. And then for the second session titled Winning The CFO’s Heart and Loyalty Finances which is episode number 547, you can find the same on either website by putting in the number or the title that I just mentioned. So, but today we continue to build on what is needed to create that sustainable approach to customer loyalty. Bill, what’s the meaning of quote unquote sustainable to you in the context of loyalty finance?

Bill: Hey, Aaron, it’s good to see you again. And you know what? It’s a little bit of a play on words. I must admit. So there’s a lot of people talking about how to make their loyalty programs go green in quotes.

And so that means that they’re trying to create sustainable loyalty. But oddly enough, I think about sustainable loyalty, but not necessarily including redemptions for carbon offset credits. But how about just making your program able to last the test of time? And we’ve both seen so many announcements of devaluations, rules changes. How about even model changes? Like think about the airlines, how they’ve made this massive shift from segments and miles to revenue. And it’s met with mixed reviews from customers. We know Delta took a lot of criticism last fall and then everybody, of course, piles on, but, in a lot of cases, I would say that the changes that we’ve seen are forced on the brands by outside forces. So maybe things change and they’ve got to make some shifts, but then there might be some others, and actually even our beloved Starbucks and some other programs that we know and love have changed the value of points.

They’ve changed the way you earn. And by doing that, they’ve consciously changed the groups of customers, which benefit the most. So there, there’s a certain level of you just want to create a program. At the outset, as much as you can, that’s that has longevity built in, that has sustainability, that eliminates as many surprises as possible.

So what we had talked about in the beginning was like, create that base case, set the assumptions in collaboration with a broader team. And I think that’s one of the keys to the sustainability issue is don’t work in a vacuum, but create that loyalty steering committee that we talked about

Aaron: That’s right too.

Bill: invite. The cross functional leaders in your business into that whole process and let them beat up all the assumptions and everything that you bring to the table. But by the time you finish that process, you’re going to have something that everybody has looked at. And because, you know, we’re not always the smartest people in the room.

Those of us from marketing and from loyalty, which we do our best, but somebody will bring an insight from operations or finance or another area. And that’s the thing that you need to catch, and you’d much rather catch it at the beginning, wouldn’t you? Then maybe a year down the road, then suddenly have to change your earning structure or some redemption values and things like that.

Aaron: Yeah, I would agree trying to get that buy in early is an integral part of the. The creation of the program and then the ongoing operations of it. So it’s not just a, you know, set and forget in terms of bringing these stakeholders together. But it’s in fact, like you said, putting that little T steering committee together that even in an ongoing operating type of environment, the stakeholders are coming together from the different parts of the business to be able to say, Hey, are we on track here?

Is this seem right? And really doing that sober 2nd thought. And in most cases, in terms of

Bill: how the programs performing,

I would say that this is something that we’re talking about much more than it’s being implemented. It’s still. A sell in idea to create a loyalty steering committee, because there’ll be a little bit of resistance of why do I have to be part of another monthly meeting?

And what’s the real benefit from this? What are we going to be talking about? Tell me what’s on the agenda every month. So, both the times that we’ve seen it implemented. It really is worked really well. So, hey, let’s jump all the way to the end. And let’s just say you finish this cycle of modeling work and you’ve got this great result.

You’re looking at it. You’re excited. You’ve decided how much budget you’re going to go and request. I like to kind of step back and, you know, how we say that we look at strategy with our consumer head on. Well, maybe we have to look at our financial modeling output with our CFO hat on. And I like to look at something, it’s a term that I used to get from the credit card business from time at Visa, but they call it the check digit.

You know, if you know how credit card numbers are created, there was always a check digit in the old days at the end. So. It was a security test, but the security test here is looking at certain questions that create a sanity check. It’s that 2nd. What did you say? The 2nd sobriety, maybe the 1st, there you go.

So, that’s important. The 1 that’s maybe creates more lasting impact, but, I mean, think about something like this. So you’ve done a lot of work on enrollment and. You’ve thought about how much revenue that your program might cover and you come up with some numbers. And I mean, it makes sense to compare that to competition to other, like, leading companies in your vertical.

And that number has changed so much. Like, I just saw the math and body works had reported in an earnings call Q1 this year that said they had over 80 percent of their firms. Of their U. S. sales in the first quarter accounted for by the loyalty program members. And then you and I were both at CRMC, a conference in Chicago.

And they talked about Ulta Beauty Rewards made a presentation and talked about how they had, what was the number we had to guess? And I guess short, you guessed the right number, I think.

Aaron: I think I was just shy. I think it was …

Bill:  95, 96%?

Aaron: Something huge.

Bill: Okay. So I mean, massive numbers, right? And these numbers are very different than what I think traditionally we used to say was the right number for revenue coverage.

Like I feel like it wasn’t very long ago when Starbucks said they had 40, 45 percent covered and we thought, wow, that’s stand up and applaud. That’s incredible. Nobody would want 80 to 90 or more, but there are reasons for it. And both Bath and Body Works and Ulta talked about those reasons. And that’s a little much for this conversation, but you know, it’s what they want.

But this is a, that’s a huge sanity check type question is where does your number fall? Is it reasonable? Is it attainable? Is it really what you want? You know, and there’s a lot of discussion just to get to that one number. Do you have thoughts on that? Or do you have another? Measure that you were thinking about.

Aaron: No, I was just going to actually reinforce the fact that, you know, with when you think about the old check digit list of what’s there, oftentimes the sales number is the primary one to have the sober second thought on. And then the only nuance here that we’re talking about, which is different from say, many years ago versus now is we knew that percentage would be much lower than what the numbers we just quoted for bed, bath and as well as ultra beauty.

And so, you know, now when you’re getting the programs that are 90 95 percent of affected sales, right? The program is a material part of the impact of the sales volume. It’s a little bit different on those of those check digits, whereas before you’d say, Hey, no, that you can’t have that.

That seems too high. You know, we, we actually don’t look at total sales impact. We look at. The portion that is actually only affected and really, I think, at the end of the day, it starts to get into your measures around lift and shift. And what are those key assumptions that you talked about?

Enrollment rates is another 1 as well, too, and starting to break those down into simplistic terms for individuals. So, if you have a lift, that’s looking at it to be 20 percent increase in terms of the total spend. Like, break that down into something that says, Hey if, you know, if one of our customers or sorry if all of our customers bought one more candy bar a year, you know, this is what the impact would be.

And so taking that number, that’s in a, you know, a percentage or an absolute term and breaking it down into a finite thing of a simple actor behavior, I think is the path forward in terms of trying to make sure that you’ve got that sanity to check this up. Like, Hey, is it reasonable that. You know, everyone would buy a candy bar.

Probably that kind of makes sense in terms of the impact of the business. So I think in terms of sending checks and more end up in measurement dashboard, right? Like, I think this is the place. It’s not just something that’s pontificated even at the beginning, but there’s something that you have as in terms of longevity.

You talked about that. You’d have on an ongoing basis to keep checking back on these key measures. Is that true?

Bill: It really is, and I kind of feel like you need to think about some really basic things when you’re building a dashboard. And it’s you have to have accurate numbers. I mean, it sounds like a real very basic kind of achievable measure, but the numbers that you bring have to have credibility with the stakeholders.

And the way you establish credibility is partially through those meetings with the loyalty steering committee, but it’s also through testing those numbers well in advance of the time that you would think about. Even funding the program and getting it started. So you want to make sure that you don’t have discussion about where did these numbers come from?

When somebody’s reading the dashboard in a board meeting, you want people to already have the assumptions made. Like, I know how this was done. I know the methodology. I trust the number. So let’s just talk about the impact. So that’s number 1 is accuracy. And the others relevancy, different objectives, different brands, different timeframes for success.

So the numbers have to be relevant to that. Yeah. And I think that’s why probably there isn’t just 1 list of measures that works for every company. Like if somebody said, you know, give me that 1 set of metrics that you need to have in your dashboard. I would tell you there’s a good starter set of maybe 10 or so 12.

but some of those are going to swap out and they’re going to be different based on the vertical market type of business that it is the frequency of the purchase cycle. Kind of the nomenclature, like, you know, some people will talk about average order value. Some people talk about, you know, revenue per user, you got to make sure that you’re fully adapted to the business.

You can’t just use your nomenclature and always be cognizant of the objectives. And the last 1 is you better execute. Well, it’s a trust issue for me. So, I mean, I’ve always felt highly responsible. If I have to deliver the dashboard, it has to be. At an agreed upon frequency, it has to be done, right?

It’s got to be proofread enough times where you just don’t want that one to be the one where somebody says, well, shouldn’t that have been a different number? Oops. And suddenly your conversation is derailed. So some of this is sort of blocking and tackling, but some of it is also working within the context of the organization and in knowing probably what the CFO looks at, even if you think about, like, the type of dashboards that the CFO might be looking at for other similar projects.

Aaron: No, I’d agree on the last point. I mean, having come through a couple organizations for the planning and analysis team and then also on the marketing team, creating those marketing dashboards for program performance. The last thing that you need is when you’ve got a senior audience or even, you know, even just a director level and or higher where they’re materially operating the business and need to make decisions based upon the numbers that you’re providing.

You do not want to One of those numbers to look off and have it called out, and then you can’t be able to explain it because your credibility is shot right away. And to your point, it derails the entire conversation. And so then the next time you’re back in front of them, whatever the frequency is next week, or the following month or whatnot, that sure as can be, they’ll be actually asking you particularly about that number, but then also starting to scrutinize the other numbers of where they’ve come from.

So, you know, double check, triple check, et cetera, and so forth before you put those things into place. That’s probably a lot for this segment. I know we’ve got lots to talk about. We could go on ad nauseum to some degree when it comes to the finance stuff and reporting. But this has been good in terms of setting up kind of those three key elements to the dashboard, the accuracy, the relevancy, the execution.

I think that’s the good takeaways from this week’s episode. Pardon me. Next week, we’ll pull together all the information from these three segments this month and obviously share more tips on how to speak the language of the CFO. And to really start to gain the support for the program plan and your proposed budget.

So, for now, let’s we’ll say a do and see you next week as we explore more loyalty finance through the loyalty wires through your series as a part of Let’s Talk Loyalty, everyone have a good day. And as always stay loyal.

Bill: Thanks Aaron.

Paula: This show is sponsored by Wise Marketer Group, publisher of the Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights, and research. Wise Marketer Group also offers loyalty education and training globally through its Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals.

For global coverage of customer engagement and loyalty, check out thewisemarketer.com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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