4 Supply Chain Considerations for a Bulletproof Loyalty Program

3/8/2019 Cóbhan Phillipson

4 Supply Chain Considerations for a Bulletproof Loyalty Program

Complex in nature, today’s customer loyalty programs require a high level of customization. Depending on the type of loyalty program, companies must juggle a long list of factors like data capture, coupon printing, welcome letters, product samples, microsites, online and offline communications, as well as mobile apps.

Even the most creative, well-designed customer loyalty programs run the risk of failure if a company’s supply chain is not capable of supporting it ? program fulfillment can be quite challenging, involving more than a few moving parts.

To help execute a successful customer loyalty program, consider (adopting) the following supply chain strategies.

Assess your supply chain infrastructure

The success of your customer loyalty program is highly dependent on the state of your supply chain. Due to the complexity and high level of customization involved in modern customer loyalty programs, a robust and flexible supply chain will help you react to changes in program demand, fulfill direct to consumer, and keep costs low.

According to a December 2018 Retail Systems Research report, leading supply chain concerns for U.S. retailers include:

  • Pressure from competitors to achieve faster fulfillment to consumers (59%)
  • The pattern of consumer demand and how it is fulfilled has changed (51%)
  • New fulfillment strategies are adding new costs to the supply chain (42%)
  • Demands for more localized assortments are changing buying strategies (35%)
  • Increased promotional activity is distorting demand forecasts (35%)
  • Growing dependence on parcel shippers compromises leverage (28%)
  • The supply chain is too long/too slow (27%)
  • The supply chain is not built for direct-to-consumer (22%)

Looking to established supply chain providers (especially those who have the global infrastructure to support complex and high velocity customer loyalty programs) can help you boost a program’s operational efficiency and turn the tide on these concerns.

Develop a multichannel approach

In its “Commerce Technology Investment Trends: 2017 To 2018” report, Forrester found more than two-thirds (70%) of companies are investing in fulfillment systems (TMS, merchandising, inventory management, supply chain planning systems, advanced analytics tools) through either new/upgraded technology or labor.

Creative use of new tech has seen Customer loyalty programs have grown much more sophisticated over the last few years, moving way beyond the single transactional channel with companies embracing multi-channel programs. Nordstrom presents a great example of that.

Through a mix of online and offline channels, brands are looking to connect with customers across a number of touch points ? seamlessly. Multi-channel loyalty programs can involve a range of online and offline elements like mobile apps, loyalty points, physical coupons, and brand-specific credit cards.

The most successful customer loyalty programs (think: Starbucks) are bringing together different channels like mobile, online, social, in-store, and in-home delivery to improve the customer experience and give them access on their terms, 24/7.

Consider your reverse logistics strategy

Returns are an inevitable part of any customer loyalty program. Ideally, returns will be kept to a minimum, but the key is how you react. Leveraging the global resources of an established supply chain provider can help you develop the robust reverse logistics strategy needed here.

Why is this so important?

Accumulating unrefurbished assets in a warehouse result in losses that are often accepted or absorbed. Ineffective reverse supply chain management can threaten cash flow and cost companies millions in lost profits due to damaged customer relationships and external liabilities.

Along with the obvious need for efficient handling of the customer issue, best practice is to have reverse logistics functions operating as part of the daily product management across an organization. Some of these reverse logistics functions include (but are not limited to):

  • Product screening and testing
  • Spares management ? procurement, inventory control and fulfillment
  • End-of-life product recycling
  • Product recall management
  • Regulatory compliant disposal
  • Creative and structural packaging design for repackaging
  • Warranty adjudication

Bring online and offline elements together

One of the key loyalty program concerns is figuring out the best way to handle both online and offline customer sign up data. If, for instance, a customer signs up for the program by filling out a business reply card, there should be a process in place where this sign up data passes through the company’s CRM system. Customer sign up should also trigger a personalized welcome email or letter. Ideally, all the IT systems involved in the program should be integrated to enable real-time processes and supply chain visibility.

Companies who adopt a cross-functional approach to value creation are best placed to deliver successful customer loyalty programs. There are so many disparate elements involved in any one customer loyalty program, that cross-functional collaboration is now essential.

Leaders from sales, marketing, logistics, operations, finance, and the supply chain should all be looped in before any program is launched and maintain open lines of communication throughout the program’s lifespan.


Cóbhan Phillipson is a market development executive for RRD Supply Chain Solutions. This solutions group has worked with leading companies to help them gain greater control of their customer loyalty programs while improving flexibility and reducing cost.


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