May 2015 Feature

New Disruptive Technology Is Revolutionizing Rewards Fulfillment

by Hobart Swan
Ron Benegbi
If you are of a certain age, you might remember your parents pasting sheets of S&H Trading Stamps into specially designed books. Once the book was full, your parents could check the S&H catalogs and see what they could trade in their stamps for as a reward for having shopped at an S&H store. Once they sent in their order, the S&H fulfillment house would mail out the reward. This basic process of exchanging reward points (or stamps) by selecting items from a catalog has remained basically unchanged for the past 85 years. And neither—says Ron Benegbi, president at Engage—have the problems vendors have faced as a result.

Changing of the Guard

The solution, Benegbi says, is something that may change how the world of loyalty and incentive programs works. This change, easy to articulate but difficult to engineer, involves replacing a decades-old fulfillment model based on catalogs and warehouses with an entirely new one based on ecommerce and local retailers. If successful, this new model promises to put an end to limited reward choices, long delivery times, poor customer service, and overinflated prices. By replacing the middle man—the fulfillment house—with a global network of local ecommerce retailers, vendors can simplify and reduce the cost of fulfillment, while accomplishing the main purpose of loyalty programs: to keep their partners’ sales teams motivated to sell their products and services.

A Solution Built on Years of Experience

Benegbi considers this radical shift in fulfillment the culmination of his long career in the rewards and incentives business. His career began more than 20 years ago when he answered a newspaper ad looking for someone to sell loyalty points programs. He got the job and quickly moved his way up in the ranks of his first employer, Carlson Marketing. (Today Carlson is known as Aimia, a Canadian company that has become one of the largest loyalty companies in the world.) In the subsequent years, Benegbi worked on both front-end rewards and recognition software management, and on back-end fulfillment technologies delivered through those more traditional models.

Birth of an Idea

Benegbi (whom we featured in a previous CCI newsletter Designing Channel Success: Lessons from a Channel Technology Leader), joined Engage as president in 2013. His role was quite simple: quickly transform an early-stage startup into a global company.

“When I started at Engage, the founders had an idea for a new technology. They hadn’t started development as of yet. There was no product. My role was to take their radical approach to fulfillment and pitch it, without a working model or track record, to customers all around the world.”

Two years later, the company’s work is paying off. Now that this innovative platform is ready for market, the market seems to be ready for it. A major U.S. hotel chain, known for being very conservative in the vendors it chooses, is one of Engage’s first customers. Other early adopters include a major European airline and a well-known North American financial institution.

So what is it that has prompted these companies to change the way the rewards business has been done for nearly 100 years?

Leveraging Ecommerce to Improve Fulfillment

“If you talk to 10 companies,” Benegbi says, “10 out of 10 of them will tell you that fulfilling these programs—especially on a global level—is a real pain. That’s the problem we were trying to solve by creating this new model.”

The concept behind the local retailer model was made possible by the rapid evolution of ecommerce technology. Today even small merchants in small countries have access to very sophisticated logistics and distribution systems. By tapping directly into this now-global ecommerce infrastructure, Engage enables loyalty program members to use their points, not at some fulfillment house located half way around the world, but from local merchants—maybe even someone they know.

“The traditional fulfillment model has worked reasonably well in the U.S. market and in big commercial markets in the U.K., Europe, and Australia,” Benegbi says. “Where it starts to break down is in smaller markets, when you start crossing borders and dealing with currency, language, and cultural issues.”

A traditional incentive house, Benegbi says, may have a warehouse or distribution partners positioned around the world. In other cases, it might have set up drop-shipment arrangements with large brands. Regardless of the arrangement, he says, this model is not going to be competitive with local ecommerce retailers in terms of delivery time, customer service, selection, or price.

Creating a Better Member Experience

One of the new realities that has prompted innovation in the rewards and incentives space is the “information parity” made possible by the Internet. If a program offers a salesperson five days in Hawaii for $500 in points, and the salesperson can go online and get the same package for $450, then suddenly the company’s reward program doesn’t seem so rewarding. And that’s bad news for the vendor.

The purpose of a loyalty programs is to make its members feel like they are getting special treatment because of the vendor’s deep appreciation of them—not that the vendor is dressing up a low-price deal to make it look good. By using local ecommerce sites rather than fulfillment houses, vendors can leverage the openness of the Internet to make sure their most productive partner salespeople get rewards that don’t just seem special, but are special.

As with Fruits and Vegetables, Shopping Local Makes Sense

“A traditional catalog might carry a few hundred or thousand SKUs,” Benegbi says. “But when you open up the system to ecommerce merchants, members can now choose from millions of SKUs—often at a much better price.”

When people deal with a local merchant (instead of a fulfillment house that may or may not have a distribution center in the same hemisphere), Benegbi says, they get their purchases faster, they get better customer service, and it’s much easier to return or exchange purchases.

“If you’ve ever bought something on points, you know what a nightmare it can be to return it. Compare that with what it’s like to do the same thing for a product you’ve bought from a local company—or even from a local branch of Best Buy or Amazon. It’s a completely different experience.”

Simple Elegance

“The key to our solution is that we don’t integrate directly with ecommerce retailers,” Benegbi says. “One of our competitors has tried to do that and after three years, we understand, they’ve only signed up 10 retailers. Direct integration is really difficult. Most retailers won’t invest the effort into something that isn’t going to result in huge sales volumes.

“We do a little bit of mapping between our technology and the ecommerce site’s checkout process. This makes it very easy for us to sign up new retailers. When a vendor tells us they want to add five new retailers in the U.K., we can get it done in a day. The fact that we can work with 100 percent of ecommerce websites means we can provide vendors with exactly the mix of retailers they want.”

This same simplicity carries over into the process of integrating the ecommerce local retailer platform with vendors’ rewards and incentives systems. The integration, Benegbi says, amounts to a couple of web service calls directly to the vendor—not the six-month to year-long integrations that are all too common among technology solutions.

“We knew that if we were going to ask large companies to toss out the reward catalogs and fulfillment house model they’d used for decades, we better make sure we can provide them with something a lot better. We think this is it.”

Mutually Beneficial Solution

The rewards platform Engage has developed features a branded navigation bar that travels with members as they move from page to page. When members go into the store section of the site, they see links to local retail ecommerce sites the vendor has white-listed for that geographic area. Members can then navigate to a local retail site (still inside the vendor-branded interface), and add items to their shopping carts, as in a normal ecommerce shopping process.

“When members are ready to check out, the branded platform tells them exactly what to do: ‘Click this button. Click that button. Here is the cost of the item. Here are your points. Do you agree to this purchase?’ And when the member hits ‘I agree,’ the platform completes the entire transaction for them. They never actually handle any money or credit or debit card. It’s all done behind the scenes between the retailer and Engage. It’s a very simple process for both the member and the vendor.”

Reduced Headcount

Benegbi says the new model also benefits vendors by enabling them to reduce headcount. “We’ve eliminated 80-90 percent of a vendor’s customer service activity. At the Tier 1 level, the retailer will handle service calls, with the incentive company managing the program on behalf of the vendor.”

Will the New Model Find a Market?

By creating a system that dramatically expands members’ reward choices while improving the overall shopping experience, Benegbi says, the local retailer approach benefits loyalty members. By taking advantage of sophisticated ecommerce technology, this approach strengthens the vendors’ loyalty programs while saving them money. As such, it seems entirely possible that this platform, built on local ecommerce retailers, could indeed transform the rewards and incentives industry.

“The future for this new model is very bright,” Benegbi says. “We’ve got three major brands going live in the next 90 days. And in the next 12 months clients from South America, Europe, Asia, and Australia are scheduled to move into the launch phase. We’re also going to be launching more new technology to complement our existing product line. The old fulfillment model needs to change. We’re excited to be a part of the process of changing it.”