What does it cost to set up a loyalty programme?

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So you know that customers aren't the only ones that benefit from a loyalty programme. You understand that loyalty can enhance your brand, help you to get to know your customer better and increase sales. You’re convinced! But you’re wondering just how much of your marketing budget will be involved in getting the programme started.

 

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The first point to note is when building and launching a loyalty programme, you really need to get buy in from all stakeholders. Customer loyalty programmes tend to be slow burners for ROI and time is needed to build momentum and for the programme to gain traction with your customers.

From customer recognition to retail loyalty, the investment in a loyalty programme can be as little or as large as your budget allows. If you want to create your own bespoke programme, this is how to determine the cost to set up a loyalty programme:

 

Stage 1: Discovery

This piece is all about getting to grips with your loyalty programme. Discovery is an information-gathering process that allows you to dig deep into the objectives of your loyalty programme and to prepare the right strategy behind it. The type of programme best suited to achieve your goals will be decided at this point. Scope and depth of research and inquiry will differ from project to project, but ultimately you need to determine:

- The reward rules (what does a customer need to do to get rewarded)

- The rewards and costs for those rewards

- The technology platform and customer journey

- The KPIs and anticipated ROI

By the end of the Discovery phase, the technical legwork should be complete and you should be able to gauge both the scope and the complexity of the backend development needs. You should also have accurate costings for your entire project at this point.

 

Stage 2: Technology

There’s so many great loyalty SaaS companies out there that you may choose to plug in with an existing technology or you may decide to design and develop your own technology. Either way, there is a body of work that needs to be done and the technology powering the programme always has a cost.

Set Up – To get started, you’ll need to name your programme and register the domain. You’ll also need to prepare a design brief as well as a business requirements document and brief your tech provider. There will be a cost for project management for getting the programme from concept to go live.

Design – Whether you’re just reskinning an existing platform or creating a bespoke website, there will always be a design element involved. At this point, you’re starting to bring the programme to life and a logo is generally developed at this stage. At least two rounds of flat file web layouts for mobile and desktop are worked up until the design is at the point of approval.

Development & Testing – Once approved, the build begins. Once complete, the site needs to go through testing. If your programme captures data on your customers, it’s a good idea to allow for penetration testing to ensure the system is secure.

Security, Hosting & SSL Cert – Make sure to make allowances for hosting costs. You might decide to opt for a virtual private server which costs more than shared hosting. Also, be sure to obtain an SSL certificate for added security. Remember, these costs are ongoing. Hosting fees may be charged monthly while an SSL certificate needs to be renewed annually.

 

Stage 3: Reward Costs

The biggest chunk of your loyalty budget will go on rewards. The cost you wish to spend on rewards very much depends on the budget you have. The best place to start is to think about how much you’re comfortably prepared to spend on each customer and that will determine your rewards budget. Then you can build your rewards strategy around that budget. There are many options for rewards that fit every budget as well as your type of rewards programme such as:

Points Programmes - Free rewards such as vouchers, cinema tickets or free product when you acquire a set number of points. These rewards carry a cost from your budget and points will sit on your balance sheet as a liability so factor those in to your overall rewards budget.

Competition-Driven Programmes - Similar to above but instead of the uncertainty of not knowing how many customers will redeem, you set your rewards budget by offering great competition prizes and asking customers to use their points to enter the competition. That way, you can control your rewards budget

Affinity Programmes – These programmes involve offering customers discounts and special deals with partner brands and are usually cost effective in that the brand partner carries the cost of the reward in return for exposure to your customers.

Fixed Fee Rewards – This approach allows you to offer compelling rewards but insuring it against over-redemption. This is a great way to allow you to control your rewards budget without compromising the reward incentive.

Remember to choose rewards that can be delivered digitally, otherwise you’ll need to factor postage and packing as part of your rewards budget.

 

Stage 4: Engagement and Promotion

Now that your programme is live, the success or failure of the programme genuinely lies with its promotion. There’s no point in having developed a fantastic programme and no one knowing about it. You must factor in the following costs:

Programme Launch Campaign - Announce in an eShot to your customers that you have a loyalty programme, include on any printed customer material, run a Facebook campaign using a competition to drive engagement, use Google Adwords or if you’re lucky, develop an advertising campaign to launch it above the line.

Lifetime Management - Send follow-up emails, keep on advertising, run competitions and organise special events which focus on keeping people engaged with your loyalty programme

 

Stage 5: Ongoing Programme Management

After launching your loyalty program, your job isn’t done, yet. You should keep in mind that someone needs to:

Update the rewards - If rewards expire or get boring, then create new ones based on your customers’ preferences.

Analyze the results & reporting - If necessary, make immediate changes, which can also mean improving your marketing communication.

Customer care - Ensure that customers have a top notch customer experience and that any problems are resolved quickly

Technical management - You may have monthly usage fees based on customer usage or maintenance fees to ensure the site it constantly monitored.

 

Keeping an eye on Year Two and Three

Always keep an eye on your costs for a year or two down the line. Remember, loyalty programmes take time to gain traction so it’s usually year two before you start to see serious ROI. Launching the programme will take the biggest chunk of your budget but in order for your programme to be successful, you must continually invest both time and money into achieving the right results.

 

Conclusion

So take time to consider the costs involved with launching a loyalty programme. The truth is you don’t necessarily need a massive budget. Loyalty programmes can have humble beginnings but so long as you have a very clear goal and the structures are in place to allow you to expand and grow your programme, you can achieve a very effective method to encourage repeat customers and ultimately reduce your marketing spend.

Good luck!

 Checklist for your Loyalty Programme

 

 

Posted in Loyalty & Rewards

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