Why’s Calculating Cost of Loyalty Program is an Unmissable Aspect in Developing a Loyalty Program

Loyalty Programs are quite an effective way for encouraging repeat customers and reduce total marketing spend. Customers can get rewarded on their regular purchases, though the retailers can always keep on improving customer retention and built it the way that can show a brand is quite caring towards the customers. A study states tat U.S. holds 3.3 billion memberships in at least one rewards program, having a 26 percent year-over-year increase.

Calculating the Cost of a Loyalty Program

The most common question when developing a loyalty program is “how much does a loyalty program cost”, determining the cost is imperative as it directly impacts the business budget. PWC suggests a simple formula for evaluating the performance of loyalty program which is – incremental revenues subtracted by incremental costs. Mostly, the cost calculation is not even considered an aspect to thought about before it comes as a shock. It’s important to know what kind of loyalty program you’re willing to start with and what sort of pricing plan suits your budget and business requirement as well. The cost calculation is based on the aspects of incremental revenue and incremental cost, here a brief to get you a better idea-

Incremental Revenue 

• Increased purchase frequency or volume  
• Low customer churn rate  
• Increased referral rates  
• Premium payment  

Incremental Cost 

• Costing of the involved benefits including perks, recognition and member events  
• IT investment and maintenance  
• Marketing & Advertising 
• Research & Development  
• Sundry expenses and staffing expenses  
• Vendor contracts

Benefits of having a Loyalty Program for a Business

Everything comes with a bag of pros and cons and launching a loyalty program is certainly one of them. Having a loyalty program is always a plus for any business, however it may involve a defined amount of costing. Here are the benefits associated with having a loyalty program implemented-  

• Higher AOV or Order Frequency  

Loyalty programs mostly require a minimum purchase or a certain amount of threshold to get stared generating customer benefits.  

• Referral Traffic

As a business you can analyze on the sources in Google Analytics and checkout if any websites are sending referral traffic to the customer loyalty program. 

• Significant Increase in Average Revenue per User  

A loyalty program is a great source to earn profits, having more orders and an efficient marketing spend helps in getting better revenue for a brand.

What constitutes a great Loyalty Program?

There’s nothing which can define a perfect Customer loyalty rewards program software but as a brand one can follow a few things to stay in line with customer demands.  

• Make use of more than one channel, let the customers to engage with your business which more than just one channel of communication.  
• Implement personalized messaging, make use of BI to target the right messages to the right set of customers.  
• Create a perfect customer retention strategy by analyzing business goals, evaluating what they require and making sure you cover everything!  
• Reach out to the customers through effective communication with the right channels to stay connected with them.

Wrapping Up

Loyalty program software cost calculation is one of the major aspects in developing a loyalty program for your business. It’s imperative to understand that determining the cost can be the key to structure your loyalty program or marketing strategy in the long run. What’s the wait for? Get started with a program suiting all your needs.