Whether it’s a traditional loyalty program or an ultra-sophisticated one, creating and running a channel, brand, or influencer loyalty program requires a serious financial commitment. As per responses summarized in a new report, companies, on average, have already invested or plan to invest USD 375,000 for their loyalty program launch or revamp.

At present, many successful businesses are not just looking for ways to optimize their loyalty programs but also reduce the costs associated with running them. In such a scenario, leveraging technology and having a digital-first mindset is extremely beneficial.

Just imagine; if you choose to design and create traditional (or Excel sheet-based) loyalty programs, then it will require you to create everything from scratch. Besides, you will have to spend a lot of time and effort tracking and managing all your loyalty activities manually.

But you can cut your costs by leveraging technology and investing in a high-quality loyalty program. At LoyaltyXpert, we have created the right types of loyalty programs for a wide array of businesses for the best price. If you are pondering over the “What will it cost me to implement and run a loyalty program in 2023?” question, this blog post is just for you.

Factors Affecting the Costs of Loyalty Programs

The price that you are going to pay for your loyalty programs is going to be determined by a wide range of factors. Several factors influence costs in different ways. Here are some of those:

1. Types of loyalty programs

Different types of loyalty programs involve different costs. The cost of creating, running, and managing a stamp-based loyalty program can start from USD 100 and the recurring maintenance costs for a customized loyalty app can go up to several thousand (even million) dollars.

Let’s take some examples of leading companies that command strong loyalty from their business partners and clients. For instance, let’s look at Lenovo’s Leap Program, which is considered one of the best B2B loyalty programs in the world. To design, create, run, and manage the loyalty program the personal computer behemoth invested in a bespoke loyalty solution. It also leveraged high-end technology to provide excellent brand experience and build robust engagement.

But small and medium enterprises cannot afford to invest in such programs. They, however, can invest in small and medium-scale technology to create and run their loyalty programs.

2. Technology costs 

How could we not have technology costs on the second slot when we have discussed technology in the above point? This, however, doesn’t apply to businesses that don’t use any type of technology tool to design, create, and run loyalty programs.

But if a business uses any type of technology then it has to incur some types of technology costs. As discussed in the above point, Large and enterprise-sized businesses invest a lot in technology and their expenses (read investments) are quite considerable compared to their smaller counterparts.

This is where small and medium-sized businesses should look for the right technology partner to run and create loyalty programs. Many loyalty solution providers offer free trial periods, which can help in making informed buying decisions.

The setup costs of digital loyalty programs are usually low. After paying the nominal setup fee, you can start your program with just a click of a few buttons. If you are planning to run a digital loyalty program, then you will need to invest in the right software that can work for your business.

3. Implementation costs

After investing in loyalty software, you also need to implement the loyalty program and the costs associated with that known as the implementation cost. The cost of implementing a loyalty program increases with its size, scope, and complexity.

It is critical to consider implementation costs as they can have a huge impact on the total budget. The technology costs also considerably affect the implementation cost. The bigger the tech stack, the more will be the implementation costs.

4. Marketing costs

Marketing a loyalty program is as important as creating and running it, if not more. This type of cost involves designing and creating marketing strategies for loyalty programs, paying for the creation and printing of marketing materials, and incurring the costs of promotional and advertising campaigns.

As per responses summarized in Global Customer Loyalty Report 2023, on average, companies with a loyalty program allocate 28.2% of their total marketing budget to customer loyalty program management and Customer Relationship Management. The number has risen 5.4% from 22.8% in 2022.

5. Customer support cost

Creating and implementing loyalty programs is one thing but providing the right customer support is an altogether different ball game. From onboarding clients to assisting them in collecting and redeeming loyalty points, customer support is a huge part of loyalty programs.

When you create a loyalty program, you need to figure out the types and levels of support you intend to provide to your clients and set aside the right budget for that. If you create and run your loyalty programs in-house, it will require you to hire dedicated customer support representatives to provide customer support. But if you partner with a loyalty solution provider, then the provider will bear the customer support cost.

6. Location

Location plays a huge role in determining the costs of a loyalty program. For instance, a company that’s based in New York will have different costs to create and run a loyalty program than a Mumbai-headquartered firm. Let’s take a look at the cost of loyalty programs in different countries:

As per several reliable sources, the average annual cost per device for small and mid-sized loyalty programs ranges between USD 100 and USD 500 in the United States and Canada.

Likewise, in the UK, the average yearly cost per user for small and medium-sized loyalty programs ranges between GBP 75 and GBP 400.

In Australia and New Zealand, the average annual cost for small and medium-sized loyalty programs ranges between AUD 150 (or NZD 160) and AUD 750 (or NZD 810).

7. Add-on or update costs

Add-on costs are the expenses incurred by businesses when they add new features or functionalities to their existing loyalty programs. Update costs are the expenses that keep existing loyalty programs up to date. Both these costs apply to the companies that have existing loyalty programs and they just pay for the addition of more features or update costs.

Best Practices to Loyalty Program Optimize Costs

Creating and implementing loyalty programs is going to cost money. But it’s easy to optimize the costs and pay the right price for your loyalty campaigns. Let’s find out what are those:

1. Determine the features you need

An average loyalty software solution comes with several features, some of which may not be as useful as others. Before looking for any loyalty solution provider, list out the features you want and need in your software. This will help you ensure that you do not pay for features that you won’t ever need.

2. Set aside a reasonable budget 

After determining the features you need, setting aside a reasonable budget will help you in a lot of ways. First, it will guard you from overinvesting in the software. It will create a maximum upper ceiling beyond which you mustn’t go. Second, it will also prevent you from the temptations of ‘offers’ and ‘discounts’ on loyalty solutions and save you from low-quality products.

3. Select the right loyalty solution provider

This is the most critical step of all. In a highly-crowded market, you won’t find it difficult to find loyalty solution providers. But it would be extremely challenging to find the right one. Selecting anything less than that will be costly and wasteful in the long run. Nowadays, many loyalty software providers are providing free demos. You can search the internet and find some promising companies that provide free trials, which will help you in making an informed decision.

4. Create coupons with a minimum spend limit

To make sure that loyalty discounts don’t hamper your margins, create coupons with a minimum spend limit. The value should depend on your product’s margin and pricing. Also, start stringently and adjust your rewards as you go. But don’t make rewards, benefits, and points hard to obtain as it can be detrimental to your loyalty program.

5. Provide tailored and relevant rewards to your customers

The type of loyalty rewards you provide to your customers plays a huge role in determining your costs. If you choose transactional and financial incentives over experiential and non-transactional rewards, then it’s going to pinch your pocket more. But when you know your customers well and determine how many of them value non-financial rewards, then creating tailored and relevant rewards for them can prove to be cost-effective.

As a final point,

The cost of a loyalty program depends on several factors. And it is critical for businesses to carefully evaluate these factors and make informed decisions. Teaming up with the right loyalty partner and leveraging sophisticated technology can enable businesses to reduce their loyalty program costs in the long run.

Choosing a loyalty software provider can make a huge difference when it comes to cost optimization. At LoyaltyXpert, we have a proven track record of designing, creating, and implementing the right types of loyalty programs for the best price. To book a free demo, contact us today!