Introduction to Loyalty Programs or What’s New in Microsoft Dynamics AX 2012 R3 for Retail?

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Customer loyalty is often considered as an extensive discipline within CRM (Customer Relationship Management) aimed at keeping existing customers and increasing their satisfaction and revenues to the business. In this article, we will look at what specific mainstream activities are covered under the concept of loyalty program based on the latest R3 release of Microsoft Dynamics AX 2012 Enterprise Resource Planning (ERP) system for retail. This will help to better understand the specific scope of loyalty program management in enterprise, introduce the latest ERP standard solution in loyalty and address key requirements of a typical loyalty program manager.

What is a Loyalty Program?

Loyalty program stands for structured marketing efforts that reward and encourage loyal buying behaviour and results in benefits to the company pursuing such program. Loyalty programs are often associated with physical loyalty cards under various names like point card, membership card, mileage card etc. By presenting such a card at the outlet, customer can qualify for various benefits like discounts, points, and status benefits. Recent new trend is to develop on-line and mobile loyalty programs which require minimal use or even elimination for a need to carry physical card.

Microsoft Dynamics AX package can enable initiatives from simple to complex loyalty programs involving tiers, across multiple legal entities and retail channels (such as, brick & mortar, online, call center). Loyalty managers shall be able to create loyalty schemes and customers to accumulate loyalty points. They also shall be able to enable multiple tier qualification criteria over flexible periods for loyalty status achievement by customers. Multiple programs can be associated to a loyalty card in Dynamics AX and different rewards enabled based on shopper status via tiered loyalty programs. Channel specific loyalty program is an option as well.

Loyalty Points

Loyalty points in Dynamics AX can be based on quantity (such as number of transactions) or amount - sales to customer in set currency. Points in loyalty program can be redeemable in new purchases or in some cases accounted for status change in the loyalty levels (e.g., bronze, silver gold or similar).

Furthermore, redeeming sequence can be controlled in case points are used along with other loyalty rewards in a program.

As many airline passengers already have noticed with their airline miles, points in a program are usually set to expire. In Dynamics AX, expiration time control can be set in days,  months or years.

When it comes to basic reporting, loyalty program administrators or operators shall be able to access summary on points. This includes summary of available points as of today, already issued points, consumed and expired points.

Loyalty Schemes

Loyalty schemes in Dynamics AX specify the rules with details of how points will be administrated and calculated. It serves as connection point between loyalty program and retail channels. It will also determine how customer can earn new points taking into consideration tiers (membership levels) if applicable. Points and status can be earned by activities. Types of these activities as classified by loyalty program are:

1)    Purchasing product by amount

2)    Purchasing product by quantity

3)    Sales transaction count

Furthermore, loyalty manager can choose to set up loyalty schemes by retail product category or limit to particular product for points earning. Loyalty manager is to set how many points are to be earned and when for each rule and for which reward points and to which stores.

Loyalty Cards

Loyal (and also not so loyal) customers can be associated to one or even multiple loyalty cards at the same retailer. Loyalty card can also be applicable to multiple accounts within an organization or family members.

Dynamics AX support loyalty cards for so called omni-channel business scenarios where loyalty program can be executed over various means of communication and sales channels. For example, client can earn points not only when making purchases in a store but also on Web store etc.

More advanced requirement of some interest for couple of companies is support for card tender process – the system can let you to administer if card can be used to earn, only redeem points or both. Example of redemption card could be Disney Rewards Redemption Card which is combined with Visa credit card and allows customer to use Disney Dream Reward Dollars as payment.

Card can be linked to respective loyalty programs and quick summary of points can be obtained.

Controlling of Loyalty Point Transactions

Administering loyalty point transactions could be a challenging area in loyalty program in a large enterprise. The high level requirements include.

 Earning points

Business solution shall be able to control point earning against criteria of loyalty programs. Points shall not be given away if the criteria is not met. To earn points, it is also necessary for the loyalty card to be associated with the point of sale transaction. If the customer is associated to loyalty card then this customer would be added to the transaction.

Redeeming Points
Business solutions shall be able to control that redemption happens only when customer has enough points and is qualified by the loyalty program.

Adjusting points

Sales and customer service issues and exceptions are not seldom happenings. Most of loyalty program managers will likely require ability to directly add points for customer satisfaction or in case of transaction related matters. In Microsoft Dynamics AX 2012 R3, adjustments can be done directly on the card form.

Configuring Dynamics AX 2012 Application

Now that we know loyalty program basics, someone also has to set it up in a business system. On Microsoft Dynamics AX 2012 R3 application side, to create and administer loyalty program, the following are key prerequisite setups.

*  Loyalty date intervals (necessary if tiered loyalty is required)

*  Channels – to link channel to loyalty schemes

*  Retail price groups – to enable loyalty specific pricing

*  Loyalty parameters – default parameter settings

Key setup areas for loyalty functionality itself are:

* Loyalty programs and tiers

* Loyalty points

* Loyalty schemes

* Loyalty cards
Further to basic application side configuration there will be more technical considerations and setups such as smart-card readers, POS support, integration to customer facing membership Web sites etc. We are not covering these scenarios in this article.

Approach as Framework

Real life loyalty program requirements and Dynamics AX capabilities are not limited to the ones described here. Dynamics AX for Retail is to be thought of as a platform. Microsoft Dynamics AX development tools allow extending your loyalty program business solution with new functionality. Furthermore, as retailers try to differentiate their programs from competition - segmentation, profiling, mobile loyalty and many other industry buzz-words and capabilities will have to be supported in near future. Having integrated ERP package as backbone enabling basic framework of loyalty program administration and other retail functionality could an approach to take at retail organizations.