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Creating a loyalty program can be an exciting process—from coming up with your program’s visual identity to finding a name, deciding what currency to use, determining what rewards to offer, putting together promotions, and outlining customer journeys.

Designing a loyalty program also means investing in technology and operational aspects. It is therefore imperative that you define your program’s business needs in order to successfully bring it to life. One of the key components of this process is defining your business rules.

Just what are business rules?

In business, these are the specific directives that define or constrain some aspect of a company. These allow you to identify the fixed parameters by which to execute an operation. Business rules are well defined and managed, and help companies reach their goals and automate certain processes.

These rules can apply to almost every aspect of a business—including loyalty.

When it comes to generating loyalty, business rules represent the very foundation of your program by dictating how each action is to be executed.

For example, a rule may indicate the number of points to be emitted per $1 in purchases. These rules may also dictate what products are excluded from earning points, or the minimum number of points needed to redeem a reward. If you want your customers to fully live the experience of earning and redeeming points, you need to document (and configure) your program’s business rules.

Defining your business rules

When you sit down to define your loyalty program’s business rules, be sure to cover all aspects involved, including transactions to issue your loyalty currency, redeeming rewards, promotions, products, customer segments, brand relationships, communication, fraud management, and more.

Start by appointing someone to manage the process, then put together a multidisciplinary team that includes experts in marketing, operations, IT, legal, and finance, depending on your industry. This will ensure you cover all your bases.

To give you an idea of how to begin, let’s look at making an exclusion rule for redeeming rewards, for example. In a points-based program, certain products will probably not be eligible to redeem points for a wide variety of reasons. If products are regulated and can’t earn points, you’ll need legal advice. Or a product may need to be excluded for commercial, profit margin, or supply reasons.

These rules will also determine the conditions under which members can benefit from the program. You may need rules to limit the number or amount of daily rewards given out in order to minimize your fraud risk. You may also need to establish rules to ensure you debit the right number of points when an item is returned.

When setting up your business rules, you must also take into consideration the functionalities of all systems involved as well as how the program will be implemented. If your system works in real time, you will need to develop a different set of different business rules (based on the impact and possibilities) than one that does not. Your IT equipment and the collaboration of solutions partners will also help you determine the impacts and possibilities. It really is all about team work!

Why document your business rules?

Although there’s no legal reason to write down your business rules, documenting these will help avoid unpleasant surprises. It will also provide you with a comprehensive view of your rules and any potential combinations and conflicts that may arise. Documentation also enables you to circulate and follow information in time and across all channels and personnel.

 Having business rules in writing will also help guide you in any intervention when configuring your new loyalty program. This makes it much easier to create training material and develop program terms and conditions for members.

Be sure to update your business rules regularly once your program has been set up. That way, the rules are always up to date when your customer service or operation departments need answers to questions about the program.