#544: Setting Strong Loyalty Financial Foundations

The Loyalty Academy™ senior faculty members, Bill Hanifin and Aaron Dauphinee, are your hosts for this week’s “Wiser Loyalty” podcast episode.

We’re kicking off a new month with fresh content from The Loyalty Academy™ curriculum that provides an Introduction to Loyalty Financial Modeling (course #105). This week Aaron and Bill look into some starting point considerations for brands and program operators to think through in order to be on sound financial footing. This is the starting point for a conversation on loyalty economics that will take place throughout the month of June.

In the Wiser Loyalty series, Bill and Aaron draw a theme each month based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation which is nearing on 1,000 individuals across 53 countries worldwide.

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.

Just before we share today’s episode, I want to ask you to sign up to the Let’s Talk Loyalty email newsletter. Our email newsletter is by far the best way for us to keep you up to date with all of the latest incredible loyalty stories we’re sharing each week. It’s also the easiest place for you to find our show notes with links to everything mentioned in all of the episodes. You can sign up at letstalkloyalty. com.

Aaron: Hi everyone. I’m Aaron Dauphinee, the CMO of The Wise Marketer Group, and one of two hosts of the Wiser Loyalty podcast series. And with me is my partner, of course, Bill Hanifin, who is our CEO at The Wise Marketer Group. For any of you who are listening for your very first time, welcome. And for those who’ve been here with us before, you know, a simple reminder as always what we run down each week.

I do want to let you all know that this series introduces constructs from our Loyalty Academy course curriculum. Things that we find interesting and hope will help listeners to become wiser on loyalty. Every month we tackle constructs from a new set of course curriculum, and throughout the month of June, we are going to be talking about loyalty financial modeling, at least at a introductory level, which is our course number 105.

When we think about finances Bill, I know this is an exciting month for you, since you’re kind of our steward for looking at loyalty economics at the Worldwide Marketer. And so this month, we’ll look at those few key constructs that individuals really should be thinking about from a financial perspective when launching.

Or even operating on an ongoing basis, their loyalty programs. So, and I know as you open up this course curriculum and we do it for brands and we go into corporate training or even online for our delivery of the CLMP curriculum that way. You know, we take a view on perspectives, right? And we talk about the idea that perspectives are what inform the best approach.

And so you kind of ask candidates a few questions, you know, you think about the things, you know, what if you treated your customers like precious equities? And then if you did that. You know, what would the challenges you be facing? What would be the objectives that you’d put as a priority? How would you define or look at the key revenue streams?

And then certainly the element of risk tolerance always comes into thinking about an equity. And so, all this, I guess, kind of leads to a bit of a flipping of the question, you know, if you’re asking quote unquote, you know, will I make money with loyalty you might be actually asking the wrong lens or you might actually have the wrong lens on your perspective. And so Bill, open the floor to you. Maybe you can elaborate a little bit on this today.

Bill: They could be. So, yeah, thanks, Aaron. Thanks. I appreciate it. And by the way, if you do your financial planning, well, you’ll have enough money left over to get a really nice coffee cup like this.

So for those of you that are on video, you get to enjoy that. I think that through battling through a lot of these plans and working with a lot of clients is how it came to this revelation that I kept hearing brands talk about being customer centric, but at the same time, they never used human like terms to describe their customers.

It was always a sell a target. How about a target? How do you like being a target as a customer? That’s really great. So, naturally, when you think about the program in antiseptic terms like that, you’re going to probably land on a question like, okay, is this program going to make money for me? Which is a veiled way of the executive saying, this is a direct marketing campaign in my mind. And so what’s the ROI on the campaign going to be? So it’s maybe looking at it more short term view. You know, without maybe all the other attributes that loyalty can bring. So I just had revelation one day and you and I have seen this play out. We’ve presented this in corporate trainings and get a really good response for it to the idea of, what if we ask the question a different way, like if we’re truly thinking about customers as equities in a portfolio and how can we grow the value in the portfolio for the long term, where should we make proper investments, all the things that you just mentioned, but the question you really ought to be asking is, listen, if I’m customer centric, how can I deliver the best customer experience possible?

Like truly deliver some value to my customers, encourage profitable behavior exchange. So get them to do something, but not manipulate them into doing something that’s not good for them. You know, have them do something that’s good for them and also creates profit for you. And how can you do it in a sustainable way?

So how do you do it in an organized way where it’s not just good for this quarter, this year? But you could be, you know, getting towards 2026 if you launch today and say, this is working, I can deal with it. My budget accepts it. You know that if you look at it in those terms, I think you come out with a much better outcome.

Aaron: And I think that’s a key component there. The sustainable element that you touch upon, of course. course, right? Like oftentimes we think about marketing sorry, loyalty as a marketing expense more than it as a P and L, right? And very oftentimes programs are structured just as a marketing expense, and they tend to fail and not have that long longitudinal element that you’re talking about versus those that are more structured to really look at it as operating a business or their own PnL tend to have that sustainable component associated with them.

Maybe talk a bit more about that or lead into some of the other questions that you asked when you,

Bill: Sure, so it’s been just a minute since you and I met the first time, right? Maybe a number of years. That’s always a funny expression to me, but it’s been more than a minute. But when you and I met, I think just about everybody was focused on retention.

So if you were, if, and I think that to do proper financial planning, you need to set your objectives. You need to have full understanding of your objectives. So. Think about in the early days. Everybody just talked about retention. And so if you were going to create a financial model to measure the impact of retention from your program, You would focus on certain assumptions.

You’d probably build your model in a certain way. And there you go. Now, today, we know there are multiple objectives you might want to achieve. So, how about customer acquisition about how about growth in an existing portfolio? Right. How about even a quasi non financial? Goal that can be immediately measured, but it’s data capture building 0 party data profiles and expanding and understanding of your customers that has true brand and like goodwill value that you can put on the balance sheet, but you may not be able to look at it in terms of just like lift today.

So, and we even heard recently you and I did a webinar where we talked to, with a brand who was focused on marketing efficiency. So they were spraying out millions of promotional dollars and weren’t sure if it was reaching the exact audiences. So their idea of loyalty was focused in and make sure that the money that you do spend gets to the right people and elicits is the right response.

Aaron: And even extending that even more so, which I’ve talked about for a number of years, and now we’re actually seeing the ability to track and measure the impact back to the business around customer advocacy, right? It doesn’t necessarily need to be someone who’s just buying things from you. I mean, ideally, they’re buying things from you and talking about you, but there are instances where there’s a whole series of brands that have a bunch of voices talking about them in a very positive way that impact their sales indirectly in a split second.

It’s easy to think about sports as kind of a beacon for that, but it’s starting to get into the fashion world as well, too. And in some cases, even travel and tourism.

Bill: You know, it’s amazing is, you know, and we’re doing some work on this, as you know, about developing a new way to measure the impact of loyalty programs and some new metrics to track.

But. When people say that word of mouth marketing is invaluable or it’s hard to place a tangible value on, you can understand why, right? You’re not sure how many people that 1 really happy customer would talk to, but you do know the impact that every time they talk to somebody, the believability, the impact has tremendous value.

So 1 person could end up being an acquisition tool for 10 others. You never know. So there’s got, it’s got to be some rethink on on how we measure the impact of these programs.

Aaron: 100 percent agreed. Yeah maybe you can talk a little bit about that in terms of the organization goals to some degree to help people have a better understanding.

Bill: So I think that’s really important. So you’ve run teams before and you know how easy it would be to say, Hey, we’re started. We hit the go button. Everybody go grab your spreadsheets, go do your data analysis and just come back to me with a model. Show me some options, show me that range of results. Right?

It’s easy to do. And and I think if you just send people off down the path of looking at the data and crunching numbers you can get where you want to go, but it could be a rocky road and it could be bumpy organizationally. So what we’ve, and this is something that has really just come out of having walked a lot of rocky roads.

We realize like to create a good organizational process to optimize your path towards creating a financial model, but being able to get a budget approved for a program and getting a program launched in a market. Means that you need to some create some sort of a process that’s collaborative that invites the input of different line of business heads in the business.

So a lot of people will say cross functional bring these people together because it accelerates understanding of what you’re trying to do. It invites their collaboration gives everybody a voice. It certainly reduces friction because you don’t surprise anybody, like, getting to the end of have you made 1 of those presentations where you’ve been tremendous as good as your work is, you get to the end and you present it and the people that haven’t been part of the process are sometimes the 1st to raise their hand.

Rightly. So maybe I don’t understand what you’ve done. What is this? Explain it to me. And it can take you way backwards before you get forward to back to where you want it to be. So. Okay. We’re calling it a loyalty steering committee and it’s worked really well in several different scenarios for brands that we worked with and having a loyalty steering committee established.

Brings these multidisciplinary people into 1 room. Maybe you just do it on once a month. Maybe it’s it’s 1 of those inform to most ask for input from some decisions, you know, falling to a smaller group or something, but it builds that that spirit of, like, we, we all know why we’re doing this.

So even the person who’s a district manager running a bunch of stores, who has responsibility for people that person understands as well as the marketing head who might be. You know, more passionate from the get go about this project, but it brings everybody together.

Aaron: No, 100 percent in my experience, you know, through many organizations in a corporate development environment or innovation team or even just the planning analysis team is you want to have that alignment from the get go, or as early as possible, certainly in an innovation environment, there’s so many.

Times where you don’t want to distract the core business from some of the things that you’re incubating with that might be on a horizon late horizon one, or even the horizon two type of mindset. But getting people in early and seeding ideas, even maybe you’re not giving them the full view on the project, but having a conversation with them about, Oh, what if this was to come along?

What’s your thoughts and perspectives so that when they’re invited. You’re in committee and they’re sitting there you, you brought them along. And that’s a skill set that requires a good acumen in terms of walking a fine line and sometimes playing the role of Switzerland which I learned from a a good mentor or mine, David Massey way back when I was back in the Alliance data systems, sorry, Alliance data systems days.

Bill: Well, I think no matter what you do, it’s there, there are certain things you could do. So if you say, okay, establish a process Have kind of a, like a worldview, if you want to say it on how to approach this whole process organizationally to get to the best result. But if you said, hey, what are your 1st, couple steps?

I always like to create a base case. We talked about that. Create the so called base case, which means what does the business look like today? What are we doing? What are the dynamics? Because you really need to have a complete understanding of what’s the organic growth in the business today. What cycle are they coming out of economically?

What are their expectations in the future? What’s the competitive landscape look like? So if you create this base case and then you read it back to your client or to your brand team, if you’re working as a brand marketer, you read it back to the team. It’s a really worthwhile exercise to get the to get sort of this confirmation of like, yes, that’s exactly that’s it.

You know, like, we all agree on where we are. And how many times have we done this? And we thought, oh, yeah, we’ve done this. Almost not sure this is worth it. Am I just reading back, you know, falling into the consultants trap of reading back to you what you already know, but many times we’ve done this and people have said, wait a minute.

That’s not the right number. Oh, why is that? Well, we asked you for certain things and you gave us a different number or the way your financial reporting is recorded. You only gave us part of the number and you meant to give us, you know, we asked for the entire number. It’s just there are nuances to it.

So, Creating the base case is super important. And then the other thing is just to agree on assumptions, right? The thing, maybe we should stop here, but cause we’re going to dig into this the next time for sure. Is the one thing you can say about financial modeling and loyalty is most everyone in the room will identify with the cost side of the business.

Fewer people will agree on the assumptions. And so after you establish the base case, you want to dig into the assumptions. What are they? How do you prioritize them? And then let’s talk about the ranges of reasonability and setting the assumptions. And if you can get consensus on that, you’re going to have a much better time going forward.

Aaron: I a hundred percent agree. And I think, you know, we spend a lot of time here talking about it from the organizational perspective. I think the other thing to tie off on this is that whatever model you’re putting into place and what your economics are portraying really need to satisfy you know, both the needs of the organization as we’ve spent most of our time talking about today, but also the customers in order to be sustainable over the long haul, talk more about that in the coming weeks as we dig in further into financial mod modeling.

Bill: Yeah. One of my favorite topics, so I’m looking forward to digging in the next few weeks.

Aaron: Sounds good. Well, everyone, we’ll leave it there for now. Join us next week as we dig into more topics and as always, stay loyal.

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.

Thank you so much for listening to this episode of Let’s Talk Loyalty. If you’d like us to send you the latest shows each week, simply sign up for the Let’s Talk Loyalty newsletter on letstalkloyalty.com and we’ll send our best episodes straight to your inbox. And don’t forget that you can follow Let’s Talk Loyalty on any of your favorite podcast platforms. And of course, we’d love for you to share your feedback and reviews. Thanks again for supporting the show.