M&A Integration, Creating Value from Loyalty Programs

Nitin Kumar2020-11-05

The core purpose of a loyalty program is to instill repeat buying behavior from customers through incentivizing them to stay and measure buying patterns.


M&A Integration, Creating Value from Loyalty Programs

The core purpose of a loyalty program is to instill repeat buying behavior from customers through incentivizing them to stay and measure buying patterns. This is not just applicable to B2C business but B2B needs to do this to enhance their relationship with their end customers. During an M&A Integration, one needs to increase the rigor towards this aspect given the compelling need to retain key customers during a time of flux and change within the organization. Enhanced focus on customer loyalty programs or even creating one (should it not exist) during M&A integration created increased customer intelligence, ability to design engagement, promotion strategies, profitability shifts, customer retention and acquisition when cross selling teams are ready. Success with this requires a strategic and thoughtful approach with multiple areas of focus:

Loyalty Strategy

Understand similarities and differences in objectives of the two companies. This is important to ensure the commitment to customers is across similar dimensions i.e., one company might want to enhance experience through discounts/redemption in their own products while others might open it up to several partners to foster better experience. The integrated programs need to be cohesive and not conflict with each other. Objectives tend to rage from acquiring new customers, to making existing customers more profitable or use consumer loyalty attributes and behaviors delivering relevant/personalized experiences and improving up-sell, cross-sell, and wallet share.

Omnichannel Considerations

Omni-channel engagement represents the largest risks and opportunities. Permitting loyal customers to connect and navigate to accounts or enabling products to deliver consistent information such as points, promotions or redemption processing across channels such as website, chat, e-commerce, contact center, mobile, social networks, email, direct mail, newsletters, member statements, events, and POS is lot of work. Watch out for imbalances e.g., the volume design for chat inflows or mobiles might far exceed (or be under-served) because of integrating two companies with disparate channel usage and planned capacities. Ensure proper routing, que optimization and incentive-based channel migration where applicable.

Program Positioning

Understand relative positioning, strengths, and perception of each loyalty program across both companies. Align the loyalty program with the brand message and vision of the combined entity. Differentiating to attract and retain customers is quite important — surveys have revealed that customers value three attributes in a loyalty program i.e., simplicity, trust, and transparency. Focusing on these attributes upfront at times needs capital creating tension with synergy objectives, from what I have seen customer retention and acquisition costs get lower over time to offset the investment upfront.


Tracking, monitoring, and reporting loyalty program status, its KPIs and customer incentives are a leading practice to drive incremental transaction value. Customer segments are distinct (even within the same company) and hence homogeneous application of policy, process or cost spreads could get counterproductive. Incentives must be relevant and valuable enough for consumers to join and remain in the loyalty program. Incentives should be allocated using a tiered approach to encourage higher spending levels with more significant rewards. Key KPIs such as retention, new sign-ups, cost of acquisition, cost of retention, cross sell benefits, up-sell statistics, CLTV, reward rates, break rates etc. should be reported regularly through the IMO. Deploy pattern identification as practice with contact centers to pro-actively address defection patters and additional buying patterns.

Day One Planning and Execution

Critical Success Factors for day one are around protecting touch-points with customers, ensuring relevance (campaigns, promotions etc.) is not diluted and there are no negative customer experiences, service quality and service levels from adhere to brand promise ensuring early trust and credibility. Alignment between CX, Loyalty, Marketing Operations and all customer facing functions must be in place and appear cohesive to the end customer. Think of day one as laying the foundation for delivering revenue synergies as the integration progresses.

Technology Integration

The technology systems must integrate well to ensure smooth integration of loyalty programs, multiple critical systems such as CRM, ERP, Point of Sale and GIS (Geographical Information Systems) must be weaved together to ensure data integration and information flow to and from the L2C (Lead to Cash) process.


Understand impact on cross sell and upsell value drivers, impact on areas such as customer experience, isolate impact by customer segment and analyze value drivers distinctly. The one size fits all strategy typically does not work, companies should focus on aspects of loyalty which can enhance product (or feature) adoption and create incremental revenue synergies.

Loyalty Marketing Automation

It is commonly observed that companies (to optimize cost) will think of the loyalty system replacing marketing campaigns, loyalty systems will not be able to deliver on this. Instead seamless integration of loyalty with marketing systems activate customer activity, online behavior and buying history from both companies and create personas. This can help enhance relevance, create new personas, make targeting more relevant and accelerate revenue synergy realization.

Customer Segmentation

Customer segmentation is the foundational element to integrating loyalty programs, the combined segmentation should be done was early as possible in the deal process, activating a clean room is a leading practice to ensure velocity and momentum. It enables sending more personalized/relevant content to targeted groups generating higher engagement, conversions, and yields. Think beyond demographics and purchase histories and include attributes such as interests, lifestyles, usage patterns, trending, events, and life stages etc. It can also help identify customer segments delivering highest profits to the companies as well as those absorbing profits. In addition, uplift modeling, can be applied through gaining a unified view of consumer intelligence acquired from loyalty program tracking (and other systems from both companies) with predictive analytics to maximize margin and retention.

Typical impact to customers occurs due to changes in policy, systems and operations creating positive, neutral, or negative experiences. Safety nets to retain customers, catalysts to extract new customers and get existing customers to have better experiences or pay more can stem from design and execution of loyalty programs. Loyalty program members generate 12%-18% incremental revenue per year, compared to non-members. Loyalty program members generate 12%-18% incremental revenue per year, compared to non-members.

Loyalty Program Integration Risks

There are several risks with loyalty programs even in the way they are implemented prior to the transaction, an integration like scenario will tend to completely break this down. Watch out, scarp, de-risk or transition programs or adjust the design if you see these patterns:

§ A program valid only to attract customers through a first transaction e.g., sign-up and I will give x thousand points, this will get terribly costly to use during an integration given systems are not geared to attract a new customer segments and the time one time stuff does not usually work, a byproduct is a costly onetime cost

§ A 100% system reliance with no human touch points can alienate key customers, added system glitches due to integration will combine the problem. Make sure there are safety nets and manual business continuity in place prior to executing automated loyalty and CX integration

§ Zero engagement — if you notice no sign-up process, no data capture it usually means no engagement and no returns. Over time it if one company does it better than the other, it will create data imbalances, skew surveys, and customer schemas. Use integration as a catalyst to drive higher ROI through investment, engagement and migrate from the free, easy and zero value game

§ Persona Management — Not managing personas is not going to create customer loyalty, it will rather portray an image of the companies not understanding the end customer. This is specifically important when data in being integrated, of not done properly you could end up showing baby toys to octogenarians. Understand clearly how value is created, distributed, and exchanged across every customer segment in both companies. Map personas and manage outliers without compromising synergies

As M&A drives new consumption-oriented models such as SaaS, SDN, IoT, AI, Big Data and OTT emerge there will be more competition for customer stickiness to monetize and grow those business models. Paradigm shifts are going to occur in customer loyalty programs and how we focus on integrating loyalty programs.

Companies have been explicitly seeking out this aspect quite seriously and nowadays often run them as their own value driver during M&A integration.

See More Posts


Copyright © 2021 Govest, Inc. All rights reserved.