Successful loyalty programs increase frequency and average spend, improve profit margins, and reduce acquisition costs. Although these all spell great news for a brand, setting up and managing a loyalty program isn’t free. How much does a loyalty program cost? Rewards, promotions, and technology costs are all part of the process. With this in mind, how much should companies be paying to create and manage their own loyalty program?
There’s no simple answer. It really depends on the individual company’s situation and loyalty program structure. However, here’s a quick guide to help you evaluate how much you’ll need to invest in order to create and manage your own loyalty program.
You are ready to offer a loyalty program to your objectives. Whether it’s a program that will work on points, punch card, or cashback, before you start looking at technology solutions, begin by planning your project. A solid plan is a good foundation that will help you save on costs in the long run.
First, start by determining what kind of program best suits your company. You can do this by analyzing your customer behaviour, strategy, positioning, and competition. This design phase can be done internally or with the help of a loyalty specialist. Either way, this step comes with costs that you need to take into consideration.
At this stage in your planning, keep in mind the following when determining your budget:
- Launch strategy and promotions
- Defining and documenting your business rules
- Documenting your business and technical requirements
- Project management
You’ve defined your program, rewards, and customer experience. Now you need to make sure your loyalty program is profitable. It’s time to calculate the program’s return on investment—or ROI. Remember to include all costs linked to soft and hard benefits, including points, welcome gift, birthday gift, VIP services, and more. Every reward has a price. Remember there are also costs associated with managing rewards, like delivery fees.
During the pre-launch phase, your calculations will be based on your initial estimates. Remember to regularly go back and re-look at these in order to adjust your budget as your program evolves. At launch phase, you’ll be onboarding more members than in subsequent years, but your program will gain traction over the first few years. Make sure you’ve budgeted your rewards accordingly.
Loyalty program implantation and management require an investment in technology and human resources.
Loyalty management platform
From a technology standpoint, you will need a loyalty management platform. There are plenty of loyalty suppliers to fit your needs and budget. Some suppliers offer pricing based on the number of members or locations, and others charge on a fixed-fee basis. You can choose between a turnkey service or an à la carte one. Every choice will influence your total operating costs, so be sure you understand exactly what you need.
Your loyalty platform must work seamlessly with the other systems you have in place, from your point of sale system to your website, e-commerce, mobile app, CRM, or automated email tool. On top of costs associated with the loyalty-management platform, you need to set aside a budget for how these systems interact.
Keep the following in mind when budgeting technology:
- Implementation and configuration fees
- Integration with existing solutions such as POS, CRM and e-commerce.
- Loyalty platform licensing fees
- Support and maintenance
- Front-end development for your website and mobile app.
Selecting or creating a solution and implementing it requires human resources. Depending on how large and complex your project is, you will need to employ at least a project and program manager. You will also require resources from your marketing, IT, and operations departments, as well as people to train your employees. To ensure your loyalty solutions function seamlessly with the other technology you have in place, you will also have to set aside resources from various IT suppliers.
As with every other phase, this step is made easier and smoother with the help of a loyalty expert—which is a smart investment to help you take advantage of best practices and save time in the long run.
Loyalty Program Management
Once all technology is in place and your program is launched, you need to think about managing your program. It’s one thing to offer a loyalty program to customers, and quite another to ensure it’s successful.
We highly recommend that you appoint someone to be in charge of the program’s activities, growth, and budget.
The successful management of your program includes:
- Customer service: Program members are your best clients as well as ambassadors. Make sure you provide them with impeccable service.
- Finances: Loyalty program currency is still currency. You have to treat it as such.
- Ongoing employee training: This is important when it comes to program tools as well as the message you wish to promote.
- Innovation: Don’t get stuck in a rut. Keep surprising and delighting members!
- Data analysis: Follow and understand how your loyalty strategy is performing.
- Promotion your program.
The design and promotion of a loyalty program are directly linked to its success. That’s why your promotional budget must also be carefully planned.
- Creative assets.
- Multi-channel communication with members.
- Costs related to advertising, contests, and VIP events.
Every loyalty strategy is unique, and so are all costs related to it. This guide is a tool to get you started as you plan your loyalty program. If you’d like the help of an expert to plan your launch and manage your program, we’re here to provide our support!
Now that you have a better idea of the costs associated with a loyalty program, the question becomes: Is not having a loyalty strategy actually costing you more?