The real cost of standalone loyalty programs

Martech Influencer, CEO of Esco Media | June 29, 2021

How are top enterprises leveraging loyalty programs? And more importantly, what is the cost and benefits of such programs?

Before we answer that question, let’s first align on what is a standalone loyalty program?

A standalone loyalty program is one which is static and transactional. Such programs only get triggered with a purchase, and ignores all other actions taken in a customer journey.

An integrated program is dynamic. It aligns with every action a customer takes in a journey, rewarding him/her for specific ones that matter.

Integrated programs have traditionally been a win-win for both customers and brands. In fact, 58.7% of internet users believe earning rewards and loyalty points is one of the most valued aspects of the shopping experience.

And for brands, over 70% of consumers are more likely to recommend a brand if it has a good loyalty program.

Now that we’ve covered the benefits, what are the costs?

Hidden Cost Of Standalone Loyalty programs

Even though it takes substantial time and effort to build the network and rewards, the outcome and ROI doesn’t justify the efforts put in.

Some of the other challenges standalone loyalty programs pose include:

  • Limited area of operations

    Standalone loyalty programs can work with specific geographical locations. Therefore, they limit your marketing reach. If your business needs to expand into another market, for example, then you’ll have difficulties implementing the standalone program there.

  • Brand liability

    Loyalty program liability is an actual liability for brands in their financial books. A static, standalone loyalty program only enables customers to earn points. All of a sudden, a few million points accumulate with little to no burning of points by customers (e.g. redemption of rewards and services etc). Why is that? It’s because of the nature of a standalone program, that focuses on being a mere ledger of points and not one that actively engages the customers nudging them to burn and redeem services and rewards.

  • The tipped scale of efforts and benefits

    The tipped scale between the efforts that go into building the program is so much that it outshines the benefits for a brand. For instance, a 4 – 6 member team may spend roughly 1,000 hours collectively each year to scout, shortlist, partner, negotiate and procure rewards and reward partners.

  • No scope for growth

    Due to their inefficiencies, many standalone loyalty programs fail to trigger customer actions (or additional purchases). For example, customers may find it frustrating when they aren’t able to redeem their loyalty points on other platforms. This may negatively impact their repeat purchases.

From Cost Centre To Cost Saver

Here are just three ways to cut costs and drive revenue with AI-enabled automated and personalised loyalty programs.

  1. Generate new revenue streams with m-commerce in-app reward stores.

    You can instantly set up your own m-commerce in-app reward stores and create a new revenue stream. The in-app reward stores could help you develop your own marketplace, where customers can trade in points or rewards.

  2. Choose from curated rewards tailored to your customers’ lifestyles.

    Rewards can be filtered based on location, popularity, categories, expiry, availability, and price. For example, the rewards for newly introduced products could be different from older products.

  3. Reduce time spent on manually identifying, procuring and managing rewards.

    Businesses spend a lot of time verifying and reimbursing rewards. Moreover, manually managing vendor relationships, as well as identifying and procuring rewards can be costly and time intensive. Instead, your resources can be redirected towards additional activities such as optimising campaigns.

The time and costs saved by replacing manual processes with personalised and dynamic customer engagement can boost your productivity and revenue.

How Top Brands Are Reinventing Their Approach To Building Loyalty

Here are just a few Asia Pacific-based brands who are modernising their loyalty program.

  • Singapore’s leading telecom company achieved around 27% growth in monthly active users or MAU with the help of dynamic customer engagements.
  • A Philippines-based leading electronics chain was also able to improve their conversion rate by almost 90% with loyalty programs.
  • A leading global bank used gamification to achieve credit card spends in excess of USD200 million.
Loyalty Marketing For The Mobile-First Economy

It is clear standalone loyalty programs do just that – ‘stand alone’. They are expensive to run because of their inefficiencies. So, it is important to look for a viable solution as you update your customer rewards strategy. For more information, click here to learn more about how you can resurrect your loyalty or rewards program in your pursuit of building customer loyalty.

Ready to transform your rewards, loyalty, and customer engagement strategy? Get in touch for a tailored demo today, and add it to your marketing toolkit!

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