Many brands consider outsourcing their loyalty program to a specialist with the required expertise and focus to make it a success. Core program components that can be outsourced include:

  • Program design

    • Loyalty programs may seem relatively easy to design on the surface, but in reality challenges associated with delivering on all the intended business outcomes require careful balance between staying true to a brand’s essence, appealing to the customer base and delivering measurable economic outcomes to the business.[1]

  • Technology platform

    • The technology required to support modern loyalty programs is highly specialized. For example, customer information must be securely captured and easily segmented in a number of immediately-actionable ways.

    • Triggered actions based on customer segments as small as a single customer should be enabled in real-time.

    • Integration across all customer touchpoints is also essential. Reporting and analytics to inform program effectiveness from a variety of perspectives (customer engagement, retention, per-shopper recency, frequency, revenue, etc.) is also required.

    • With technology today ever-changing, a loyalty platform must be continuously upgraded to ensure the program’s evolution can readily incorporate new types of customer behavior.

  • Promotion and operations

    • Loyalty operations often require people and expertise that may be unavailable inside the company. Outsourcing aspects of loyalty programs can increase success probability at launch (or re-launch), minimize time-to-market, and deliver intended business results in a much shorter timeframe. Unique expertise like analytics, liability modeling and research are often areas companies seek to outsource for these reasons. Over time, operations can be insourced to reduce operational costs; however this process is best done gradually to minimize risk.

Outsourcing generally promises lower cost of program ownership, because the outsourcer typically only pays for functionalities/services used per member, eliminating the need for dedicated internal teams to manage platform roadmap, release updates perform maintenance. Partnership, or strategic alliance, is also frequently becoming a major feature of loyalty outsourcing. Sharing of risk and reward is a feature often emphasized. Outsourcing partnerships are a viable and sustainable strategy as they help in reducing risks.[2]

10 Core Benefits of Outsourcing

1 / Cost Effectiveness

The cost and time associated with setting up and managing a customer loyalty program can be considerable. Technology costs (or the opportunity cost of utilizing in-house IT resources), training costs of existing employees or for new intakes for customer care and database management will also push up the budget for the program. An outside company with the technology and employees to address these needs can look after the loyalty program with relative ease.[1]

2 / Focus on Core Competency

Outsourcing implies that no existing personnel or technology will have to be reallocated within the business. This allows employees to focus on their core competency and build other key pillars of the business. It helps keep leaders’ lives simple.

3 / Leverage Expertise

As in any business vertical, experience builds expertise. An outsourcing company that has handled loyalty for a number of years will be know best practices in the domain, challenges to be watchful for and how to circumvent them. This reduces risk.

4 / Save Time

Customer loyalty programs can generate immense amounts of data that hold valuable information about consumer behavior and other details. A technology-savvy provider will bring about increased accuracy and usefulness of data in minimal time. More broadly, loyalty is a strategic marketing initiative; the sooner it can be brought to market, the lower the opportunity cost and the sooner it will be able to deliver ROI. Speed to market is perhaps the single most powerful reason to outsource.

5 / Program Configuration and/or Customization

Experienced outsource loyalty companies can configure or customize the loyalty program as per the requirements of the client. For instance, if a special incentive program is initiated for a new target group, it will be challenging for a business to retrain or realign its in-house employees for that requirement quickly. By outsourcing the requirement to an expert, the approach can be tailored for the desired objectives as (and when) required.

6 / Convenience

Loyalty programs have to be mutually beneficial for the business and for customers. The convenience of the entire process plays a big role in how a customer will feel about the brand in the long-term, and will be reflected in the share-of-wallet the brand can expect to receive from that customer. Outsourcing can help to ensure a smooth customer experience, especially at launch.

7 / Secure Data

A well-maintained, up-to-date database is one of the most powerful marketing tools a company can have and it can be used as a strategic weapon. An outsourcing company that gives importance to data security should be preferred as a partner.

8 / 360-Degree Customer Service

Building customer loyalty is one part of the gamut of activities that make for good customer care. A specialist outsourcing company that is proficient in managing customer care in its entirety for clients across multiple channels will help to enhance customer satisfaction on all fronts.

9 / Effective Analytics

An outsourcing partner with the right skill-set can deliver analytics for the customer loyalty program, which will help keep the program on track to success. The right partner will not only have deep direct experience in managing its own programs, but also in its ability to ensure program design and technology platform are configured for mutual advantage and seamless execution.

10 / Increased Customer Lifetime Value

An outsourcing company that is accomplished in data management and analytics can help mine insights from the customer database. Marketing managers can then identify the most profitable customers and develop them over a long period through personalized offers. The right partner will have a proven track record in assisting its customers maintain and evolve programs for material business advantage over time.
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About the Author

Chris McLaren, VP Marketing, Aimia
Chris has been helping clients use new technology to overcome marketing challenges and create business value for nearly 20 years. In his role at Aimia, Chris has three responsibilities: he ensures Aimia’s story is well-told to potential new clients, manages Aimia’s marketing practice for the Americas, and contributes to strategy, operations, and account management for Aimia’s Americas-based clients. Since joining the company in 2014, he has been fortunate to be part of a team that is driving a dramatic increase in new business, not only in industries for which loyalty is well-established, but also in new verticals for which loyalty is truly an innovative concept.

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