When it comes to running a loyalty program, the best way to get a great return on your investment is to budget wisely from the start. Today, we’ll explore how to create a cost-effective loyalty program that delivers great results.
First, understand the key costs involved in a loyalty program.
Know Your Costs
Rewards
Rewards can vary. Whether it’s gift cards for a sales promotion or percentage-based rewards, plan your budget accordingly. We recommend setting rewards at around 2% of the program participant’s annual revenue value
Technology
Technology costs can be fixed or variable. Some providers require upfront payment, while others offer subscription-based models with optional features.
Consultation
Consult with loyalty program experts. Choose providers with a proven track record in your industry to ensure effective long-term planning.
Management
Management costs include reward fulfillment, performance tracking, and participant support. These vary based on participant numbers and outsourced hours.
Marketing & Communications
Don’t forget marketing! Allocate a budget to create awareness and excitement. Clear communication of program rules and objectives is crucial.
Budget Sharing Options
Next, consider budget sharing options to maximize your resources. You may be able to share your loyalty program budget, either between your Sales & Marketing departments, among your channel partners, or both.
Sales and Marketing Budget-Sharing
Variable costs, like rewards, can be attributed to Sales. Fixed costs, such as technology setup, often fall under Marketing. Both departments benefit, so share the investment.
Channel Partner Budget-Sharing
Collaborate with channel partners or non-competing organizations. Offer special promotions to partners who help fund the program. Co-sponsor with a loyalty program coalition. Use co-op or marketing development funds (MDF) to help cover the program costs. All this should reduce the program overhead and boost ROI.
Strategic budget sharing not only makes your program more cost-effective but also fosters better collaboration across departments and partners.
Remember, a well-planned budget is key to a successful loyalty program. Know your costs and explore budget-sharing options to do more with less.