Headless loyalty enhances composable commerce

Headless loyalty enhances composable commerce

commercetools partners with Currency Alliance to enable loyalty marketing in the age of composable commerce.

Every company strives to build loyalty among its customers, but the methods to achieve the never-ending pursuit of loyal customers can vary widely. Because each customer segment will respond differently to available loyalty incentives, tailoring the customer experience by segment across channels is essential to maximize ROI.

Millions of longstanding loyalty programs are testament to the fact that loyalty marketing can be optimized for the benefit of all stakeholders. Of course, companies need to be careful to select the right incentives and mechanics to align with their brand in order to maximize customer lifetime value. These can include special offers, discounts, value-added services, gift cards/vouchers, and/or loyalty points.

When brands offer points, there are clear and visible incentives for customers to engage in purchases and non-purchase activities that drive specific customer behavior. This is why brands with points-based loyalty programs enjoy greater customer frequency, larger basket size, as well as overt permission to analyze personal data and communicate directly with customers.

In fact, loyalty programs have become so prevalent that customers now often expect a brand to offer one – with 4 out of 5 consumers stating a preference to do business with brands offering a loyalty program. According to a study by Bain & Company and published in the Harvard Business Review, a 5% increase in customer retention rate can translate into an increase in profits by 25% to 95%. Furthermore, 91% of consumers want to be recognized. Loyalty mechanics give you the tools to automate frequent, incremental engagements with customers at scale.

While this article will talk mostly about loyalty points, the Currency Alliance API-first platform can deliver any type of incentive, so feel free to ask what types of incentives will work best for your business.

Currency Alliance operates the backend point-based loyalty infrastructure for dozens of international brands. The headless loyalty platform from Currency Alliance integrates easily into a composable commerce solution built with commercetools. In fact, nearly every customer journey can incorporate loyalty incentives with a few API calls to optimize engagement, and ultimately, conversion.

Read on to learn how loyalty marketing can easily be embedded in your multi-channel commercetools ecosystem and how the Currency Alliance API-first microservices solution integrates quickly and easily into a commercetools solution to enable any type of loyalty marketing.


Loyalty in the age of composable commerce

Composable commerce, headless commerce, or API-first commerce are largely interchangeable terms that basically mean the backend commerce platform can be deployed on a SaaS basis and allow brands to easily build any type of customer experience (CX) on any frontend, customer-facing platform. A more thorough explanation by commercetools can be explored, and you can find more about headless loyalty solutions and how they work with composable commerce in the Currency Alliance blog.

Headless solutions are a rapidly accelerating topic of discussion for brands as they seek to upgrade their technology to meet the demands of modern business. Such technology must enhance your agility to create new customer propositions, evolve existing ones, and forge new brand partnerships in response to a rapidly evolving business environment – driven by changing consumer needs and expectations.

Just as commercetools enables standard commerce services as API-accessible modules, Currency Alliance makes available sophisticated loyalty functionality to fit easily into any composable commerce solution.

Systems in the loyalty industry still operate mostly on tightly-integrated legacy technology platforms, in which changes are slow and expensive. Given the investment in these existing loyalty systems, many companies will not have the ability to upgrade to modern technology in the near future.

Recently, microservice-alternatives to the five core loyalty modules have made brands’ loyalty platforms more agile and affordable to plug into any channel. Even if you need to retain your investment in an aging loyalty system, putting cloud-based microservices technology in front of the monolithic legacy systems (as a hybrid approach) extends the useful life of the legacy systems, and rapidly delivers many of the benefits offered by headless loyalty solutions without the need to replace those existing systems.

Loyalty functionality as a set of microservices

The five modules of a loyalty system are the…

  • Points Bank – where you keep track of all the loyalty transactions and customer’s points balance
  • Rules Engine – where you define the logic for how many points a customer should get for any type of action or purchase
  • CRM and Analytics – where you capture data about customers, build profiles and run predictive analytics
  • Campaign Management – which manages all communications with customers across any communications channel
  • Redemption Catalog – where you aggregate interesting rewards that customers are motivated to earn by engaging with the brand

Only when these five modules are microservices, that support individual functions that work seamlessly with third-party applications, is the solution truly a SaaS-based, API-first, headless loyalty system that can adapt quickly to any use case.

Most loyalty solutions providers have enabled their systems to operate on virtual servers and started calling themselves SaaS solutions. Then they introduce an API and called themselves ‘open loyalty platforms’. Buyer beware.

A loyalty system operating in the cloud, with APIs, may still be a monolithic stack of legacy software that is expensive to modify. And, tightly bundled CRM and campaign management modules embedded in a monolithic loyalty system make it harder to get all the customer data in one set of enterprise-wide systems. Plus, most enterprises don´t need redundant CRM and campaign management functionality from a loyalty vendor.

In a true headless loyalty platform, the backend functionality is purpose-built to be decoupled from the front-end customer touchpoints and connected via optimized endpoints in the API. This allows any component of the content and commerce architecture to be modified without affecting all other components.

The ability to decouple all the customer-facing functionality in the frontend platforms from the backend technology (that keeps track of loyalty points transactions, member balances, loyalty rules, and redemption options) gives exponentially more freedom to developers to build whatever customer experience they want on mobile, web, POS, Social, IoT; or, even engagement platforms that have not yet been invented.

It also gives companies the agility to introduce loyalty marketing into every sales channel or customer touchpoint to drive meaningful interaction. This means you can now use loyalty mechanics on Instagram, Facebook, WeChat, many 3rd party marketplaces, or as a pillar in a Super App strategy.

Developers don’t build data centers, payment methods, word processors, or email systems anymore. They simply connect via API to best-in-class platforms that focus on the individual functions, or to the microservices necessary to deliver comprehensive, yet flexible functionality to customers.

By accessing headless loyalty functionality, as API-driven microservices, software developers can stop building enclosed features. They can focus instead on designing scalable and responsive technical architectures that allow their business to respond to new market opportunities, customer expectations, devices, sales channels, and frontend development frameworks. Therefore, headless loyalty systems deliver the flexibility and rapid time-to-market that optimizes return on investment (ROI) from their digital transformation efforts.

Examples of loyalty mechanics in headless commerce

Ideally, a loyalty program has only one Main Points Bank (the single source of truth) where each customer’s loyalty transactions and points balance are stored. When this module is MACH-based, every platform can query the data via API to display it to customers or employees; and, any system can access the points bank to enable additional earning, exchange, or redemption of the points. This gives companies the tools to present the optimal incentives to get customers to take the next desired step in any customer journey to build loyalty, increase basket size, or reduce cart abandonment.

Advanced points banks and rules engines give you the automated ability to dynamically present the best incentive to each customer based on the combination of the customer’s profile, their behavior during the current session, as well as the characteristics of the product/service offered (price, margin, distressed inventory, and likely up-sell/cross-sell opportunities).

In the typical transaction flows, any platform can interact with the Currency Alliance API to display incentives, or allow customers to spend their points.

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Changing incentives in the loyalty rules engine should be simple and immediately get deployed across all channels. Loyalty marketers should be able to introduce new, or change existing loyalty rules on the backend – with a few clicks of the mouse. There should be no need for the IT department to update software on the customer-facing platforms.

For example, let’s say you have some inventory that is not selling well. You could change the rules in a few minutes on the Management Portal to offer Triple Points on specific items, and immediately a ‘Triple Points’ offer is displayed on every channel where those goods are sold or promoted.

You will also often want to make such changes to the rewards available in the redemption catalog. The redemption catalog is effectively a commerce platform that allows customers to redeem points for prizes. Traditional redemption catalogs are often very inflexible and require companies to aggregate and post new content in a highly structured way. Modern API-based reward environments can add, replace, or change any redemption option from any supplier instantly, as changes in the market take place – with no programming required.

This means that anything can be in the redemption catalog, and it gives brands maximum freedom to drive customer engagement as they wish.

In fact, rather than maintaining a separate commerce platform that accepts points as the payment method for redemptions, you could enable your commercetools-powered platform to be the redemption catalog and simply enable a new “Pay with Points” payment method at checkout. For large loyalty programs, consolidating the redemption catalog into the primary commerce platform could save millions per year and deliver much greater choice and freedom to customers.

Currency Alliance contributions to headless commerce

Currency Alliance does not offer CRM or Campaign Management functionality, because we know our enterprise clients already have these systems. This allows us to focus on being best-in-class with just the points bank and rules engine. We then plug easily into existing enterprise CRM, Campaign Management, legacy loyalty platforms (if necessary), Content Management, and commerce engines to complete a coordinated MarTech ecosystem with maximum flexibility. Furthermore, we only charge a tiny fee on incremental sales, so you are not adding any fixed cost.

As you participate in more marketplaces or new social media platforms, liquidity of loyalty currencies will also become a major advantage: specifically, the ability for customers to use their points more like money, by earning and spending their preferred loyalty currency with as much freedom as possible.

Currency Alliance makes it possible for brands to give customers this freedom. The platform can convert the value of any loyalty currency into any other loyalty currency or any fiat currency, at the moment of redemption, as well as settle with the supplier any way they prefer. We effectively enable any form of loyalty commerce and operate a global marketplace where brands can collaborate with each other and use the loyalty points/miles from many brands to co-create maximum value for customers (and themselves). Collaborating with complementary brands also enables the sharing of customer insight to improve personalization.

Much like commercetools’ modern composable commerce platform, the modules that enable loyalty marketing have also been evolving in such a way that brands can become much more agile in how they adapt to market opportunities; thereby composing the loyalty modules in a way that drives maximum engagement on any customer-facing platform.

You can find a few example transaction flows at the end of this document to show how easy it is to add loyalty marketing and compelling incentives for customers can be in your headless commerce environment.

Composable commerce removes the limitations of legacy platforms by introducing a new approach to building the technical architecture. Rather than bundle all functionality together, composable commerce provides companies with the freedom to build their own unique solutions by selecting ready-to-use components, deploying one or many customer experiences in multiple frontend platforms, and integrating them in a lightweight manner that is efficient to maintain or enhance.

The reasons why Currency Alliance and commercetools partner to offer integrated loyalty marketing capabilities include:

  • Complementary solutions based on MACH principles
  • Proactive and responsive corporate cultures
  • Relatively low-cost solutions to maximize ROI
  • Easy and fast integration via API

Much like mediocre retail has no future, traditional loyalty solutions will leave customers wondering if the brand really cares about them. Today, a customer’s great experience with any brand becomes their expectation of every brand.

Currency Alliance and commercetools enable brands to build completely customizable loyalty incentives into every touchpoint on every channel. Please contact either company to learn more about how we can enable your business to grow revenue, reduce operating costs, and build loyalty with a larger base of customers.