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Loyalty programs have undergone a technological metamorphosis from its rudimentary beginnings. Arguably it was American Airlines that kick started this transformation nearly three decades ago. From ‘nice-to-have’, loyalty programmes have become a strategic imperative for customer-centric organisations. Contemporary customers in the post-global market are more demanding than ever before and thus organisations are forced to adapt their loyalty programs to be more sensitive towards the members they serve.

Most of the interactions between the program and the members have become customised including communications, promotions, rewards etc. It is technology that is playing the most crucial role in facilitating this change. The technology platforms on which today’s loyalty programs are run can enable quicker enrolment, accruals, redemptions and creation of varied promotions all fuelled by automated analysis and reports.

Attaining deployable customer-centricity in a loyalty program is indeed a gradual & progressive process which also requires the re-orientation of an organisation’s internal processes and conditioning of employees to put customer needs first.

Translating Insights into Action

The success of a loyalty program lies in its popularity among the members. We suggest a few pointers from our implementation experience that would go a long way in helping you create an effective loyalty solution.

• Capture transactional information accruing at the point of purchase terminal. Use customer segmentation to decipher purchase behaviour(s). This will enable in the creation of customised communication ensuring better response to campaigns.

• Have a business intelligence strategy in place to generate multiple analytical reports-tactical and strategic. While tactical reports will focus on improving revenue at a unit level like store-specific promotions, up-sell, cross sell opportunities etc, strategic reports will track the overall program performance. Used in tandem these reports can help in ensuring that the program is adhering to attaining its original goals.

• Use data from various sources (enrolment form, accrual & redemption patterns along with transactional data to identify MVCs (Most valuable customers) so that the organization can rationalise its expenses towards providing preferential treatment to them.

• Ensure your solution recognises customers' individual milestones, and allows you to reach out to them on a regular basis.

• Identifies "valuable risk customers" on a regular basis facilitating timely intervention thus reducing customer churn

Steps to Adopting Customer Centric Loyalty Marketing Solution

Needless to say, a customer centric marketing loyalty solution is critical for maximizing profits, out-performing competition and expanding market share. Maturation of a loyalty marketing solution happens over time with the help of the most critical ingredient-transactional data. Adaptive responsiveness to evolving customer needs is decided by the stage of technological and business maturity of a program.

Collect and organize data - Adopt a customer loyalty solution that allows not just the collection of data but its organisation into smaller and usable modules which will help in the accurate assessment of actual ‘market’ and locate existing and emerging trends. Organised data can be extrapolated not only with information on prevailing economic scenario but also to competitive landscape to fine tune a loyalty program that is future-proof. It goes without saying that the more detailed loyalty data repositories are, resultant reports generated would be more pointed making loyalty offers more attractive to its members.

Profiling customer segments – psycho-social profiling of customer segments is integral to the analysis of the health of a loyalty program. Besides demographic segmentation, your solution should allow you to pull up data that displays attitude, behaviour, spending, and customer satisfaction. This helps in ongoing fine-tuning of the loyalty strategy.

Integrating loyalty with organizational goals - Once insights are obtained, it is important to align them to organizational goals thereby drawing out a winning, fit-for-purpose marketing loyalty program. By identifying target groups and actionable touch points, it is far easier for organizations to get higher returns on loyalty programs. Research shows that when it comes to loyalty programs, one size does not fit all as customers are promiscuous by nature and thus heterogeneous in their preferences.

Adopt tailored tactics – While generic marketing is about broadcasting, loyalty marketing is the practise of narrowcasting thus its tactics has to be tailored to needs of specific customer segments. These tactics may be based on regions, gender, spend, membership to specific social class etc. Specific customer insights go a long way in sharpening visual merchandizing, planning campaigns & promotions and ensure that spend on any media returns more bang for the buck!

Conclusion:

In summary, while designing and implementing a loyalty program, it is important for an organisation to identify a partner who has multi-industry, hands-on experience. Such a partner can help not just in facilitating the implementation but also advice on tracking the effectiveness of promotions, identifying the MVCs, and setting the parameters to identify the overall profitability of the loyalty program. ITC Infotech prides itself as a pioneer in enterprise loyalty implementation across verticals including airlines, hospitality, retail to name a few. Our greatest assets are our people who have seen loyalty programs from close range and have been advising clients on loyalty strategy thus making our implementations relevant and accelerated.

So are you ready to go out and leverage the benefits of customer centric loyalty marketing?

The landscape of service contracting is changing, as service providers and customers are replacing traditional agreements with contracts based on agreed outcomes. These outcome-based contracts (OBC) allow customers to buy the outcome of a product or service that is delivered, rather than merely the parts or repair services required for the product or service.

OBCs emphasise the concept of value-in-use, where value is the benefit the customer obtains through using the product or service. This compels the service provider to bring the customer into its sphere to allow the provider to optimise the service delivery together with the customer, in a process that involves both parties co-creating and co-producing value. As a result, the objectives of both the service provider and the customer become much more aligned under OBC.

OBCs are becoming increasingly popular with business-to-business transactions, particularly in the service of supporting and maintaining equipment, such as maintenance, repair and overhaul (MRO) contracts in the defence and aerospace industries. A good example is Rolls-Royce’s Power by the Hour® contract, where the continuous maintenance and servicing of engines are remunerated according to how many hours the customer obtains power from the engine, rather than by measuring the spare parts, repairs or activities rendered to the customer.

OBCs are fast becoming an important component of managing after-sales service supply chains beyond defence and aerospace contracting. It is also permeating into other service industry sectors, such as ‘no win no fee’ offerings from legal firms and revenue sharing models where fees paid to consultancy firms are based on how much savings they can help their customers make.

Why are OBCs becoming increasingly popular? Customers and suppliers are realising that it is not just enough to acquire world-class equipment; they also seek innovative and cost-efficient ways to achieve the same outcomes through reduced production of materials – leading to improved sustainability - and better service and maintenance throughout the useful lifespan of the equipment. They are beginning to see the benefits that OBC can provide in this respect.

Benefits of Outcome-Based Contracting

One major benefit of OBC is that by only paying for a measurable and predictable outcome, customer firms are able to make more accurate cost projections. OBC also helps lower total contract costs, as both the customer and service provider contribute complementary resources towards a joint outcome.

At the heart of OBC lies the notion that risks and incentives should be more equitably aligned between suppliers and customers than has been possible under traditional ‘fixed price’ or ‘cost-plus’ contracts. This better alignment between the interests of both parties means less scrutiny of the service provider is necessary, resulting in lower transaction and monitoring costs. Also, by rewarding them based on delivering measurable outcomes, service providers are incentivised to ensure the equipment they provide is of high quality and delivers the performance as promised.

Service providers also stand to benefit from OBC. Managing OBCs usually leads to greater internal effectiveness as a result of the improved understanding of, and alignment with, the customer’s requirements. This in turn results in higher staff satisfaction and loyalty, while improved effectiveness of service delivery leads to greater customer satisfaction and loyalty.

The closer relationship between the service provider and customer also enables the provider to have greater control and efficiency of service delivery. This in turn facilitates better use of resources and cost efficiencies while still achieving acceptable outcomes, such as through capacity sharing across multiple contracts. This close customer relationship also allows service providers to better anticipate customer needs, and therefore drives innovation to meet the customer’s changing requirements.

An integral part of a successful OBC is the service provider’s ability to manage customers for better co-creation and co-production to deliver the appropriate outcomes. Service providers which become adept at this will develop a unique competitive advantage that can help them secure more future contracts.

OBC is changing the way service providers and customers interact and create value. The role of the customer within the service provider’s delivery space requires new ways of thinking, and shifting to an outcome-based model requires both parties to adopt new skills sets, change attitudes towards the service provider-customer relationship, and acquire a better understanding of how to maximise the advantages of OBCs. It may also prompt a move away from traditional functional organisational structures towards the empowerment of cross-functional service teams spanning multiple organisations.

Challenges for customers and suppliers

While OBC is intuitively appealing to the customer, it however poses a huge challenge for the service provider as it requires a change in its business model. Research has found several organisational challenges that arise from this new business model.

First, the complexity and unpredictability in costs results in the need for a balance between delivering an innovative and effective service capable of dealing with changing circumstances, and the need to forecast costs to ensure that service delivery is economical and profitable. Second, the cultural change resulting from the move away from a traditional business model can cause individuals to question their role and value, hence significant priority must be given to dealing with the effect on individuals within the change process.

OBCs also tend to give rise to a perceived loss of control, both on the part of the customer with regards to its changing role under OBC, as well as with the service provider, where while the complexity and unpredictability can lead to higher monitoring and transactions between management and the support and delivery teams of the firms.

As both the service provider and customer work together to co-produce the outcome, boundaries can also become blurred. Boundaries can either be held rigidly as a result of not fully understanding the roles each party must play, or become fluid with out-of-contract requests being accommodated so as to build better relationships.

Finally, a big challenge for service providers is the coordination with its sub-contractors or suppliers. Issues arise from the need to reconcile and align the OBC with the firm’s suppliers, and to integrate their role within the contracts and fitting their components into the outcomes achieved by the provider with the customer.

To ensure the successful implementation of OBCs, these factors need to be addressed. Some factors that might mitigate these challenges include better and easier access to complementary information, materials and skills; better empowerment of the service provider and also individuals in both firms; the need to transform behaviours and attitudes of employees to ensure better usage of equipment by the customer; encouragement of teamwork both within the service provider firm as well as with its customer, and with its suppliers; acknowledging and addressing the perceived lack of control from the outset; and aligning the service provider’s and customer’s expectations.

Despite the many challenges associated with the transition from conventional to outcome-based contracting, it is highly likely that OBC is the future of business-to-business service contracting. Organisations should therefore prepare to deal with the transformation involved in acquiring true service value delivery capabilities.

Irene CL Ng, is Professor of Marketing and Service Systems at Warwick Manufacturing Group and a Fellow of the Advanced InsFellow of the Advanced Institute of Management Research (AIM Research)

It’s not necessarily the burden it first appears to be, writes Shirley Barnes, Client Relationship Director, Dinamiks Ltd

Employee legislation has not made it any easier to do business in the UK. The latest significant piece of legislation was the abolition of the Default Retirement Age [DRA] which came into effect on April 1st 2011 in a phased manner. The completion date is October 1st this year.

It means that employers will no longer be able to use the DRA to compulsorily retire employees. Employers who fail to embrace this new legislation may face claims of unfair dismissal and discrimination

Preceding it with another challenge to employers is legislation that has increased the maximum limits on statutory unfair dismissal compensation, redundancy payments and other awards.

The increase in retirement age means that many companies will experience situations where age/experience/capability will be a challenge and where the companies will require evidence leading up to and beyond the legislation change to justify why people should retire from a role or even why they should stay.

Employee legislation can help employees but it also increases costs and adds to the many burdens that businesses face. Legislation changes also add a layer of complexity to HR and other aspects of the business.

Changes provide challenges around constructive dismissal, data protection, DRA, disciplinary procedure, equality, employment tribunals, fair and unfair/wrongful dismissal, grievance procedures, statutory rates, working time regulations, performance, training, coaching and productivity.

Key points about, and arising from, the abolition of the DRA

Guiding principles associated with the retirement age change are provided by ACAS. Below are key points to consider and take action on.

Until April 6th, the law set a DRA of 65 years. Provided an employer properly followed the prescribed statutory retirement procedures, a business could fairly dismiss an employee on the ground of retirement at or above the age of 65.

The DRA change means that in order to retire an employee, a company now needs to demonstrate just cause and follow due procedure.

“Just cause” and “due procedure” are viewed as problems but, as with other issues arising from employee legislation, can be managed to a satisfactory conclusion with an online system that…

(i) Aligns every employee's objectives to those of the business

(ii) Provides the means to set development plans, track and record progress

(iii) Provides a record of capability for all employees, thereby supporting a common and consistent set of guidelines and principles that apply across all employee ages of the business.

(iv) Allows an employer to demonstrate just cause and follow due procedure

A variety of factors can determine at what stage an employee should step down. All these can be tracked, recorded and analysed by the system.

The DRA has long been viewed as a valued stake in the ground for employers, because it has been a focus for performance issues and succession planning. It has allowed poorly performing employees to retire gracefully and has enabled - in an orderly fashion - open discussion for succession planning. That has now changed. From October 1st, the door closes on it.

The “stake in the ground” concept does beg the question of why or how organisations don’t take action about poorly performing employees before they retire. Succession planning may have been months or even years in the making, to ensure a smooth transition and the engagement of a [hopefully!] more productive employee, but that does not excuse the inaction.

The opportunity for businesses

The reasons why unproductive employees are tolerated are not in the scope of this article, but the subject does lead us to the question “Is the change in retirement age actually an opportunity for employers to re-tune the business in an era of suppressed economic activity, squeezed margins and demands from investors to optimise performance?”

We can also ask if the legislation that increases the maximum limits on statutory unfair dismissal compensation, redundancy payments etc, helps a business in unintended ways? If the business uses a system that helps it conform to employment law while improving performance, then, yes. The system does this by providing an audit trail of performance, behaviour, attitude and the ability of individuals to meet set objectives.

A manager in the business can track an individual’s performance over a period of time and share the view he or she has of it with that individual and/or with another manager, such as the individual’s line manager.

There is the belief in some quarters that employees don’t like change, but in reality we find that if the CEO and board get behind change initiatives, staff are happy to learn and advance in order to help the business and themselves. In fact, many desire it and employees in outsourcing are no exception.

That desire can, if harnessed, help business benefit from new, or changes to, employee legislation, by re-scoping the business where it needs it.

More at www.ikdevelopments.com

Without a doubt, there are a number of compelling benefits associated with cloud computing, especially in terms of the agility and scalability that cloud can provide. However, that doesn’t necessarily mean that cloud computing is the cheapest, fastest or simplest option for your IT delivery, regardless of what some vendors may have told you.

Any decisions in this area must be driven first and foremost by your own particular business requirements, and not simply by the availability of this technology. Cost will be one of many important areas to consider in this regard, especially as there are a number of potential costs hidden ‘in the cloud’ that may not be immediately apparent.

When evaluating the cost versus the benefits of any cloud computing solution, you’ll need to look at three very important areas. The first is licensing costs. A lot of people don’t realise that software licensing can actually account for between 30 and 40% of their total IT costs. Also, the pricing of these software licenses will vary widely by vendor. You’ll also need to check whether the software licenses that you’ve purchased for your traditional infrastructure environment will transfer to the cloud, since many won’t, especially if you haven’t subscribed to a maintenance contract.

Does it matter? Absolutely. If you decide to migrate some or all of these services to the cloud, you’ll need to make sure that you understand the current licensing agreements that you have in place, and then carefully work out the cost implications before moving any/all of them to the cloud. For example, Microsoft will happily allow you to migrate your existing software licenses to the cloud, but only if you have Software Assurance in place for them. If you don’t, then you’ll basically have to purchase the licenses all over again.

The second important factor to consider is transition costs. Unfortunately, moving a service to the cloud will never be as simple as some vendors would like you to believe, so you’ll definitely need to do your homework before rushing into any decisions. To begin with, you’ll need to consider what internal resources and/or third-party services will be needed to support this transition to the cloud, and you will also need to be aware of the associated risks.

The cost of the bandwidth that you’ll need to support a cloud solution is the third area that will need to be considered. Cloud may be able to give you easy access to your data, storage and applications via internet, but that means that your connectivity to the internet will become even more important in terms of resilience for availability and also bandwidth for performance.

As a result, you may find that you’ll have to upgrade your internet connectivity, but again, you’ll need to do your homework first. Why? Because you’ll want to make sure that any new bandwidth charges won’t outweigh the cost savings that you were hoping to achieve with cloud in the first place! An alternative (and recommended) solution to gobbling up loads of extra bandwidth is to deploy thin client technology to reduce network traffic and increase application performance. However, implementing a thin client solution such as Citrix will obviously have its own cost implications to consider.

One thing is for sure: any change in delivery method will require both money and effort, and will inevitably cause some at least some disruption to your business-as-usual processes. In addition, you’ll almost certainly need to do some integration work in order to keep your key processes tightly knitted together.

So, while the ‘headline’ cost of cloud computing may seem attractive at first glance, the costs involved with migration, integration and consultancy will also need to be considered very carefully, especially as these costs can vary wildly depending on the state or complexity of your current IT environment, as well as your future requirements. Asking these key questions at the outset and apply careful analysis and evaluation will definitely help you to avoid any unexpected costs further down the line.

The Future = Indirect Procurement

Many of us in Procurement would have to admit: we love 'buying bits for production'.

A glimpse under the covers at Xchanging reveals that Indirects constitute the vast majority of what is outsourced. Why? Because companies consider their Directs as core, and would never outsource them. But whether handled in-house or outsourced, there is a job to be done by Indirects buyers - and in just about every business. This is good news.

It seems that the future for career-minded buyers may indeed lie in Indirects. So what's in there? The key categories include:

IT, Telecoms, Facilities Management, Property, Travel, Fleet, Professional Services and Labour

Positives

• Longevity. Whereas (at least for the First World) Manufacturers face a continuing threat from low cost producers, the Service sector is relatively secure. The Indirects they buy will always be required.

• Transferable skills. Buying IT or Legal Services is pretty similar, irrespective of the business type or sector.

• Coverage. All businesses need Indirect goods and services - including manufacturers, retailers, and the Public Sector.

Differences

1. Finding the customer. With Directs it is usually pretty easy to trace an e2e line through Production right through to the end consumer. For Indirects there exists a multitude of ownership and responsibility models across different businesses.

2. Budgets. Rarely an issue for Directs buyers. But in Indirects you are helping the budget holders to get value for money.

3. Understanding Supply. For Directs this is usually about getting to grips with the supplier's manufacturing process (and costs) and then optimising the inbound supply chain. This also applies to some Indirects but more often it's about specifying and then getting great service and then measuring it.

Fortunately, there still exists significant local and regional capability in most categories so it’s not impossible to develop a multi-tiered supply structure. Negotiating a transition from Directs to Indirects can be problematic. It’s easy to get pigeonholed. But it definitely makes good sense to develop one's skills and experience in this area, with a view to a long and prosperous career – so what are you waiting for?

Unison General secretary Dave Prentis has said that taxpayers’ money had been ‘wasted’ during the outsourcing of public services.

‘The whole drawn-out, costly exercise is often a recipe for disaster. Many employers have to bring services back in-house after money, quality and efficiency has gone down the drain.

‘The government’s Open public services white paper can only lead to the public paying a higher price for fraud.’

Unison’s full response to the white paper is due at the end of September.

Australia's largest telecommunications company Telstra is said to have engaged Tata Consultancy Services for outsourcing parts of its finance, accounting and voice-related back-office processes.

As part of this multi-year deal which is said to be worth over $50 million, TCS will take over 100 back positions from Telstra.

Local councils of the future may undergo a process of ‘Californication’ as they respond to budget cuts, new analysis predicts. A report published today by localism think tank the New Local Government Network (NLGN) outlines three new models for town halls of the future as councillors navigate budget cuts in the coming decade.

One scenario outlined in the ‘Future Councils’ report suggests that a lack of funding and new rights for citizens over planning and service delivery could by 2020 leave local authorities in the same kind of position as the Californian state government: struggling to provide services in the face of high demands, low income and increased direct democracy.

NLGN Director and report author Simon Parker, said: “Local authorities are quietly preparing to transform the way they work in response to budget cuts. Some services will change radically as councils become commissioning hubs. Expect councils to redesign everything from social care to street cleaning, more delivery by the private and voluntary sectors, and an increased reliance on personal budgets.

Google announced on Thursday that it acquired the restaurant rating company ZAGAT.

“ZAGAT will be a cornerstone of our local offering — delighting people with their impressive array of reviews, ratings and insights, while enabling people everywhere to find extraordinary (and ordinary) experiences around the corner and around the world,” Marissa Mayer, vice president of local, maps and location services at Google said in a blog post. “I’m incredibly excited to collaborate with ZAGAT to bring the power of Google search and Google Maps to their products and users, and to bring their innovation, trust and wealth of experience to our users.”

Research carried out by the Contact Centre Management Association of Ireland (CCMA) revealed the sector employs more than 29,000 people spread of over 100 contact centre operations nationwide.

More than half contact centre companies in Ireland witnessed growth in revenue in 2010 – with almost three-quarters expecting to see rising turnover over the next 2-3 years.

With support of the IDA and Enterprise Ireland, the research provides insights, including its capacity for growth, competitiveness, skill levels and challenges ahead.

Tracy Kennedy, board member of the CCMA and head of customer operations for Bord Gáis Energy said: “These figures outline the crucial role the contact centre sector plays in the Irish economy, and the high level of service which is provided by skilled professionals throughout the country.”