1996 Feb 01

The Lacek Group Reward
David M. Raab
DM News
February, 1996

I should know better. No sooner had a recent column stated that there was no standard software for loyalty programs than a fax arrived describing just such a system. For the record, and to avert more corrective faxes, let’s be clear that several such systems exist at vendors who specialize in running loyalty programs for their clients. What I hadn’t seen was a system that a customer could purchase and run independently on an in-house computer.

Reward(tm) (The Lacek Group, 612-359-3700) is a PC-based system that is built specifically to allow companies to run their own loyalty programs. The system is separate from the reservation or other operational system that manages the actual customer transactions and is also distinct from a traditional marketing database used to analyze customer behavior and execute complex direct response promotions. Instead, Reward provides the functions needed especially for loyalty management: definition of program rules; application of rules to specific transactions to accrue credit; and the all-important customer service component to answer member questions.

Since actual transactions are created outside of Reward in operational systems, data are typically loaded in a batch process. The system also allows manual entries for new member enrollments or transaction corrections. It does a simple matchkey-based duplicate check on new enrollments and if related accounts are found can link them to a single master account. When necessary, loyalty program information can also be transmitted back from Reward into the operational system–for example, to be appended to an airline reservation record. Customer service can be done with Reward’s own screens or by allowing an external system, such as a company’s mainframe reservation system, to execute a Reward report and import the results on demand.

Interactions with operational systems require some customization for each Reward installation, but are generally handled through standard import and export routines. The real trick in serving multiple clients with a single loyalty system is supporting the many different ways that companies structure their loyalty programs. Reward achieves this by building a large variety of options into its basic program definition facility. These options can include start and stop dates, day of the week, origin or destination location, numbers of transactions or points, specific products or services, member tier, and registration for specific promotions. Users can define the rewards in terms of points, specific awards, tier elevations, club membership, or registration in different promotions. Members in different tiers can receive different awards for the same transaction. The specific data elements are tailored to each industry and each client. The company says its clients can set up about 95% of their promotions without custom programming. By March 1996 it expects to add still more flexibility by giving users the ability to define program qualifications with boolean logical statements. The system can also import points generated outside the system by programs with marketing partners.

Once programs are defined to the system, Reward automatically examines each new transaction as it is posted to the system and credits the appropriate result. The system can attach any number of rewards to a particular transaction and provides the option of maintaining a list of the transactions that contribute to a particular reward. Expiration dates are tied back to the original transaction so that customers cannot improperly extend the life of their credits.

The customer service portion of the system is designed to make it easy to answer questions while members are on the telephone. The system provides a list of all transactions for each customer, showing the rewards associated with each transaction. In addition, service reps can query the system regarding a specific transaction and program to find why a member did not receive an expected credit. This portion of the system automatically runs the specified transaction through the eligibility rules governing the particular program and provides an English-language message describing the reason the transaction did not qualify. Reps can enter manual adjustments if necessary. To prevent fraud, the system records which user makes each adjustment. Other security features control which functions are available to each user or group of users.

Reward can also be linked to a telephone voice response unit to reply automatically to member inquiries.

The system can generate statements, upgrade notices, personalized letters, and lists of customers who meet user-specified criteria. It maintains a record of materials sent to each customer and allows users to store comments on each member record. Extracts from the system can include any data field but cannot perform complex selections such as random samples or test/control splits. This type of work is typically done outside of the system on an extracted data set. Marketing analysis and reporting are also typically done on extracted data because Reward’s database is tuned primarily to give very quick response to look ups of individual customers and their associated transaction records. The system does provide online reports showing usage and rewards associated with each marketing program.

Reward runs on PC hardware with the Microsoft Windows 3.X operating system and standard local area networks. The system uses the FoxPro relational database system supplemented with compression mechanisms developed by Lacek. It has been tested with up to five million customer records.

The system was introduced in mid-1994 and is currently used by six clients: two airlines, and one each in the hotel, retail, communications and car rental industries. The vendor reports that substantial customization is required for each new industry, but that relatively few changes are needed for clients in the same industry. The system is being marketed and supported through a joint venture with SABRE Decision Technologies. Costs for the software and implementation can run from $150,000 to $500,000 depending on the degree of customization required. Maintenance and support cost another $3,000 to $5,000 per month, including 7-day, 24-hour telephone assistance. Most Reward clients are also using The Lacek Group’s loyalty program consulting services although this is not required.

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David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.

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