Before you set up your Loyalty plan and enable your account, it is worth familiarizing yourself with the components you will be working with, to aid you in your decision-making. Here is a description of these components and some frequently asked questions.
What kind of a plan do you want?
When thinking about your Loyalty plan, please consider the following points, as they will affect the way you structure your tiers and redemption workflow.
What is the objective of your plan?
The business need you are addressing will have a direct impact on the decisions you make when you set up your plan.
- If you want to increase average order value, you might want to base your tiers on high spend requirement and incentivize customers for high purchases as prerequisite for earning rewards.
- If you want to drive purchase frequency, you might want to base your tiers on high numbers of purchases and provide vouchers that are valid for a shorter period.
- If you want to increase engagement, you will need to use the Loyalty API to track and collect interactions from a number of touchpoints on your website.
Do you want to include visible points in your plan?
Having a visible balance of Loyalty points is a great incentive for customers to spend or interact more in order to reach a higher tier or earn better rewards.
However, points usually have a material value and represent a commitment on your part to redeem them. You may prefer simply to assign customers to tiers based on their behavior and not give them too detailed an insight into where they stand respective to the next tier.
How do you want to go live with your plan?
We offer a number of scenarios for launching your plan, depending on how confident you are with your loyalty strategy.
- 'Lite' launch - You can start with one single tier and add all new customers to it. As the customers begin to form cohorts within the tier you can organically extend your plan by creating additional tiers.
- 'Dark' launch - You can start your loyalty plan but monitor its progress without exposing any of it to your customers. In this way they can collect points and when you do launch the plan publicly, they already have a balance to start with.
- Gradual launch - You can invite just a few thousand customers to join your plan at first, and see how they behave. When you are confident that the plan is working, you can extend it to larger and larger groups of contacts.
- Migration of existing loyalty plan - If you already have a loyalty plan and want to migrate the points and balances of your customers, you can create a full list of the members and we will help you add them to Emarsys.
- Standard launch with contact distribution among tiers - In this scenario we analyze your historical purchase and browse behavior and distribute your existing customer base into tiers, either with points awarded or not.
Most of your customers will be familiar with online gaming and concepts such as accumulating experience, one-off seasonal benefits and levelling up. If you use a similar approach and language, you will help adoption and increase engagement.
We have different types of plan to cater for different business models. They ensure that the workflow for engaging with and rewarding your customers fits the use cases that underlie it.
Currently we have one active plan type: Points.
You cannot change your plan after you have activated your Loyalty account. If you do need to, you must contact Emarsys Support.
Once a plan is active, you can only change its settings, tiers or benefits once per quarter-year. In the last 14 days of each fiscal quarter, you can prepare changes to the plan and then activate them at the start of the next quarter.
Give your Loyalty plan a branded name that resonates with your customers and clearly describes the benefits they will receive by joining it.
Points are the standard currency for Loyalty. You define how customers earn them (e.g. through spending money or engaging with your brand), and then control how they spend them.
Loyalty points are described in two ways:
- Status points - These points cannot be spent by the customer. They are accumulated during the time period you define for tier allocation. When a customer has accumulate enough status points, they join a higher tier. Once per year (every 12 months or on January 1st, according to your settings) this total is reset to zero.
- Balance points - These points can be spent by the customer. Each point earned is added to a customer's Wallet, and each point redeemed (or expired) is deducted from it.
Treat your points like currency and give them a branded name that resonates with your customers.
How valuable should I make my points? Can I assign a value higher than $1 or €1?
In our experience, it is best to keep the value of your points low and let customers accumulate them in large numbers. We do not allow you to assign a value higher than $1/€1 to a single point. In any case, you control their value when you define the number of points required to redeem vouchers or benefits.
How does point calculation work for decimals?
We award points for every full currency unit spent, but we remember the leftover decimals from the last spend. For example, if a customer spends $1.50 today, they will receive 1 point (if the ratio is 1:1), with $0.50 being stored. And if they spend $2.90 tomorrow, that is added to the $0.50 (total $3.40) and they will receive a further 3 points, with the leftover $0.40 being stored until the next purchase.
Can I assign fractions of points per currency unit spent?
No. You can only use whole numbers for both points and currency units.
Can I assign additional points to specific products?
Not directly. You can only assign a different rate of points on a category level.
How does balance points expiration work?
If you have set an expiration date for balance points, Loyalty monitors when points are acquired and when they are redeemed, and makes sure that the oldest points are redeemed first. Balance points will only expire if two conditions are met: they are older than the expiration period, and no (or fewer) points have been redeemed since then.
Tiers determine the level of benefits that a customer can enjoy from your Loyalty plan.
Every plan has a starting tier which has no requirements for entry, and can have up to 10 tiers in total. When you create a new tier it is always added above the highest tier - you cannot create a new tier and insert it between two existing tiers. Likewise you can only delete the highest tier; all the customers in that tier will automatically be added to the tier below.
You define requirements for entry in terms of required spend and number of purchases. A minimum required spend is mandatory; a minimum number of purchases is optional.
When you set up your Loyalty plan you must decide what to do with your existing customer base. The option you choose will depend on whether you already have data from a previous plan.
Customers are automatically promoted to a tier as soon as they have fulfilled the requirements for entry. They then have to fulfil the yearly requirements to stay in that tier otherwise they drop down to the one below.
If you want to ensure that newly promoted customers have enough time to earn the yearly requirement for a tier, you can decide that all customers stay in a tier for at least 365 days; you can also choose to have no drop-out scenario at all.
Can I use my own icons for the tier badges?
Currently no. You can either select icons from our library or not use icons at all.
Why am I not allowed to set requirements for entry into the first tier?
The first tier is the entry level into the Loyalty plan. If you want to set entry requirements before customers can receive benefits associated with the lowest tier, then start your redemption plan on tier 2 and allow no redemption for tier 1 members.
Can I award more than one reward per tier?
Actions are the customer-side interactions with your Loyalty plan. Your Loyalty plan is based around offering incentives to customers to take these actions, and rewarding them for doing so. There are 5 types of action:
- Join - This action drives your customers to join the plan and become loyalty members. You can also set up "Join Loyalty" campaigns for specific entry points and segments.
- Purchase - This action drives your customers to their next purchase. You can delay the reward for purchases to take into account returns and cancellations.
- Engagement - This action drives your customers to engage with your brand and with your loyalty plan. By using the API, you can define any engagement on your website that you want. Without the API, this is dependent on a value change in a contact data field.
- Bonus - No explicit action is required by the customer - you define the circumstances under which they qualify for these rewards, for example if it is their birthday.
- Redemption - This action drives your customers to redeem points and earn rewards.
A customer can only have one open Purchase action at a time. This is to help you focus on converting purchases and not to confuse the customer with constantly-changing offers. Only when the purchase is completed or expires can the customer qualify for another Purchase action.
Your Loyalty account comes with a number of preset actions for you to use straight away. In addition to this you can create an unlimited number of your own actions.
Each master action (except for Join) has a default action defined for it, which has no rewards associated and which is a simple message relevant to the objective of the master action.
The default message is displayed when no reward is defined or in case of network or system errors.
For Purchase actions, the default message is also shown if the customer has already qualified for such an action.
Default actions are flagged with a black tag and cannot be deleted.
Join default action
The join default action is your default and basic "Join Loyalty" campaign. When necessary you can override it with Join Loyalty campaigns for specific entry points and segments. Unlike the rest of the default actions, you can define rewards for joining.
There are also some actions associated with Tactics and these are flagged with a blue tag. They also cannot be deleted.
Can I use my own icons for the actions?
Currently no. You can either use our default icons or no icons at all.
Most of the fixed benefits and redemption actions will involve vouchers, so prepare enough voucher pools to cover your needs and upload them to your Loyalty account.
Our system support vouchers and helps you manage them with pools. Points can be redeemed for vouchers only. The pools in the Loyalty admin page are divided into five types of rewards:
- Cash voucher (e.g. $5 off)
- Discount voucher (e.g. 5% off)
- Service voucher (e.g. free shipping)
- Gift voucher (e.g. branded item)
- Exclusive access
When creating a new voucher pool, you are required to upload CSV files with codes and set validity
- Pool validity represents the overall period of validity for the vouchers in this pool.
- Voucher validity represent the period of validity for a voucher code, from the moment the member earns the voucher, or buys it with points . Expired vouchers are removed from the Wallet automatically.
Who is responsible for producing the codes, uploading new codes and supporting their redemption?
All these are your responsibility; we only help you to manage your pools and expose the vouchers and codes to contacts in their Loyalty Wallet.
What kinds of codes are required?
For an action completion reward or a gift voucher we use one-time vouchers. You have to manage the one-time use on your side. If you want to provide a fixed yearly voucher (e.g. free shipping for each purchase), you will have to upload and support multi-use codes.
Does the same pool support both actions and fixed benefits?
No, while creating a new pool you will need to choose the type of pool:
- Inactive - The pool has not been completely defined or there are not enough codes left in the pool. Members can no longer earn or redeem vouchers from this pool.
- Ready to connect - The pool is ready to connect to any active action or benefit.
- Active - The pool is connected and cannot be edited except to change the pool values or upload new codes. To unlock the editor you have to disconnect the pool from active actions or benefits.
Here you define the number of points required in each tier to earn the voucher. Once a value is activated, this automatically displayed to members in their Loyalty Wallet.
How can customers see their available vouchers?
The vouchers are displayed in the wallet on the Redeem screen.
At the top will be displayed the fixed yearly and the one-time vouchers which are defined as fixed benefits in the tier settings. Then will be displayed the vouchers available for points, based on the value defined in the pool settings.
If the customer does not have enough points to spend, the number of missing points will be displayed as an incentive. Below that are the vouchers that customer has already earned from completed actions.
Please note that you cannot use any existing Emarsys voucher pools for your Loyalty plan.
Furthermore, we strongly recommend that you do not use any vouchers outside of your Loyalty plan, to focus the strategic investment of your discounts.
Clicking the Redeem button will expose the voucher code and expiration date.
The customer can then copy and use the code immediately, or at any other time as long as the voucher
is still valid.
What happens after using the code?
Since we don’t know if a customer has redeemed the code, after exposing the code for the first time, the voucher goes into Use mode, and automatically disappears from the wallet when it expires.
How are the used vouchers can be removed from the Wallet?
Currently there are two options:
- The voucher will be removed automatically by embedding an API call that notifies which codes have been redeemed on your side.
- The customer will be able to manually remove a voucher from the Wallet after using it (no API required).
These are the annual benefits you offer in advance to your loyalty members.
All members of a tier, without any exception, are entitled to enjoy the fixed benefits defined for the specific tier. Each tier can have different fixed benefits.
Our recommendation is to build a hierarchy of benefits based on your tiers. Start from the lowest tier and gradually increase the value of benefits and create an incentive to move forward to the next tier.
What types of benefits can be defined?
- Event reward - This is any kind of benefit that is triggered by an event in the customer's lifecycle, e.g. their birthday. To support this benefit you will need first to set up an event action. The rewards for this benefit are defined by the action you have defined.
- Exclusive access – Offer your loyalty members access to areas of your website that other customers cannot see. This allows free access to all areas throughout the year.
- One-time voucher - This is the standard benefit type, for example a discount voucher or free shipping on one order. To support this benefit you will need first to set up and activate a benefit voucher pool.
- Yearly voucher – These vouchers are valid for a calendar year (or 12 months, depending on your tier points expiration settings. You will need to define multi-use vouchers for this kind of benefit.
- Custom benefit – This option allows you to enter a free description of the benefit, and you are then responsible for delivering this reward (e.g. a VIP support line).
You can create an unlimited number of fixed benefits.
How do I set fixed benefits?
Once you have created and defined the tiers, including entry requirements and purchase benefits, it is time to define the fixed benefits:
Go to Tiers > Fixed Benefits.
The benefits table shows the benefits you have already defined and is where you can create new ones.
If you edit an existing benefit you will see the changes immediately, but your customers will only see it in their Wallets after the plan has been launched or re-launched.
Loyalty content in messages
During onboarding, Emarsys will provide you with a special content block for the VCE. This block is an easy way to display all your Loyalty information in one place but is fully customizable in terms of design and content.
You can add this block it to any template you like, enabling you to start including Loyalty content in your marketing campaigns with minimum effort.
Loyalty content is dynamically added to the message body via Loyalty tokens, which means you can also include it in any other content blocks.
On other channels
The Loyalty personalization tokens are available in the Personalization Service, so you can include Loyalty information in any channel that is integrated with this service.
The Loyalty Wallet is a small notification app that appears in your website when a loyalty customer is logged in. It is the online channel where customers are informed of their rewards, can redeem points and keep track of their activity history.
The Loyalty Wallet has some customization options in terms of the design but the functionality of the Wallet can only be changed if you use the Loyalty API.
The financial considerations of starting a Loyalty plan
Maintaining a Loyalty plan will have an impact on your financial reporting. Here is an overview of some of the issues that you should take into consideration.
Emarsys is not qualified to offer legal or financial advice. These notes are for guidance only and you are encouraged to seek advice from local experts if you require more information.
According to the International Financial Reporting Standard (IFRS) 15, the actual value of a firm’s Loyalty program’s deferred revenue will be based on three elements:
- The total number of outstanding points.
- The value of a point (Cost Per Point = CPP).
- Breakage (this is the percentage of issued points that are expected to never be redeemed by members).
From a balance sheet and profit & loss (P&L), perspective, as soon as the Loyalty points are issued to members, the costs associated with the “potentially redeemable” points are incurred.
From a cash flow perspective, Loyalty is a great solution as the rewards are not redeemed at the point of purchase, but later at a future purchase or time, therefore cash flow is maximized.
In general, reward points represent expenses, in the sense of the “reward” which the consumer will convert. These expenses have to be presented in the P&L report of a company at the time when the rewards are offered.
The way to present these expenses differs between the International General Accepted Accounting Principles (GAAP) such as IFRS/US GAAP, and the more prudent GAAPs, which are primarily used on a local basis in Europe.
Whereas International GAAP follows the approach that the expenses are embedded in the revenue and therefore part of the revenue has to be deferred to the time when the consumer convert their points, the prudent GAAPs leave the revenue unchanged and an expense has to be accrued.
Both GAAPs lead to a balance sheet liability and therefore impact the P&L.
Estimation of CPP and Breakage
Here are the methods for calculating:
Cost per points (CPP)
These are the expected expenses for the reward divided by the number of issued points.
This is the number of unused (removed) points divided by the number of issued points.
Impact of FX
FX risks can occur when expenses are calculated in a different currency than the value of the reward.
The CPP, and the expenses incurred, are tax-deductible and therefore not related to a tax risk.
Some countries demand a separate filing report of “points movement”, which means their status and number (sometimes also the CPP) at the beginning of a fiscal year, the converted and non-converted numbers of points (expenses) during the year and the number (expenses) at the end of a year.
How to minimize the CPP while maintaining perceived value?
- Set an expiration time for your points
- Reward low-cost, but high-perceived-value gifts
- Reward exclusive access (exclusive product/sale)
In addition, align to current discount standards of your business to ensure post-loyalty rewards are no more than pre-loyalty rewards.
- Tier benefits
The reward cost should align with the required spend for that tier (e.g. ask yourself, how much you would discount today a customer with a yearly spend of $1,000). You should most probably reduce the cost of the tier benefits.
- Points benefits
The reward cost should reflect your current average discount on a purchase. For example, if this is 5%, and $1 = 1 point, you should ensure that your CPP is no more than $0.05