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The Impact of "Brexit" on Developing and Operating Your Loyalty Program

by Arif Damji
June 30, 2016
The Impact of "Brexit" on Developing and Operating Your Loyalty Program

Last week’s announcement of the UK’s electorate decision to leave the EU was quickly followed by a number of humbling warnings for businesses based in the UK. UK consumers were told that their visits to the continent would be more cumbersome and expensive, businesses in the UK were warned of the riskier investment environments, and European talent was urged to look elsewhere. It is clear that the implications will be wide and significant, but for CIOs and CMOs with a significant investment in a loyalty initiative, there are clear and direct implications on their operational support and financing for programs. Here are a few thought starters:

  1. Talent acquisition for program management becomes harder:  The UK talent market (and specifically London) has for years provided a rich supply of foreign engineers and marketing talent, but the uncertainty around visa requirements and possible quotas is likely to stymie the inflow of this talent. If you are planning to launch a program, make sure you plan well ahead for your engineering and marketing needs for the program and remain open to remote workers. For those with an existing loyalty team, retention of your team members (much like with your customers) is going to be key. Loyalty requires much technical support, operational management, and strategic guidance and you will either need a full service package with your vendor or manage the risk of future team departures.

  2. Loyalty program operations become more fragmented in its structure:  As a number of corporations run their European operations (especially back and middle-office) out of the UK, the risk from “Brexit” is that operations may start to relocate to other parts of Europe within the next 3 years. From a program management perspective, this may mean the need to relocate your loyalty division to another geography. Technology teams may also move, which can cause disruption to rollout plans and the ability to run promotions and campaigns.

  3. Economic uncertainty constrains consumer and business spending:  As economists at the IMF, BoE, and Treasury all predict, the economic uncertainty is likely to limit consumer spending and business investment. The triggering of “Article 50” is likely to exaggerate the impact for a 2 year time horizon. This is likely to lead to a scenario where loyalty initiatives are pushed back, budgets are cut, and even the ability of programs to deliver results becomes harder. It will be critical to think of a design that works in a more economically restricted environment and plan for possible delays as early as possible.

  4. Privacy issues and data sharing becomes more of an issue:  As it stands, EU member data can be stored in the UK easily without additional restrictions. Such data can also be transferred across borders. This allows for a holistic view of the customer across borders and an EU-wide member view. As the UK exits the EU, data sharing and storage will be predicated upon the UK’s ability to conform to the EU’s General Data Protection Regulations. If it doesn’t, data centers will need to be relocated and an EU-wide member view may become harder to aggregate.

  5. Higher import costs place pressure on funding rates:  The possibility for custom tariffs on certain items (assuming non-full inclusion in the common market) has the ability to add significant increases in reward costs and benefit costs as part of a program. Imagine a situation where your “Birthday Reward” is produced in France and takes 3 weeks to reach the UK with a tariff to be delivered to the member. The implications on the financial performance of your program will be apparent and actual funding rates would quickly increase above any targeted levels. A mitigating approach is to increase the frequency of updates to your rewards catalogue pricing or even to move towards real-time loyalty currency valuation at POS for instant redemption.

In the end, the impact of “Brexit” as highlighted in its implications on loyalty initiatives may be limited and managed, as long as businesses are aware of the difficulty in managing talent, data, and rewards. The sooner a brand is able to create contingency plans for such an occurrence, the better it will be able to weather the “Brexit” storm that may or may not be upon us.


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