How to Calculate Customer Loyalty Program Return

Loyalty programs are a great source of revenue generation and customer retention. Being in power for a long time now, loyalty programs have been taking most of the industries by storm. Have you thought to develop a customized loyalty program for your brand? Before you finally get started with your program development, it’s better to strategize on improving your customer spending frequency.

There can be a few questions on how the benefits will offset the loyalty program cost? And what costs and revenue should a business include while calculating the return.

How to Calculate the Cost of a Customer Loyalty Program?

Analyzing the cost and profit from a loyalty program is quite a tedious process, mostly dependent on the incentive structure of the program. PWC suggests an easy formula for evaluating the performance of a loyalty program, it’s the incremental revenue subtracted by the incremental costs.

Here are the aspects of how much does a loyalty program cost-

• Customer Loyalty

• Customer Satisfaction

• Customer Retention

• Sales

• Brand Awareness

Stating the Benefits of a Loyalty Program?

Launching a loyalty program carries tremendous benefits alongside. Here are the benefits to consider-

• Higher AOV- Loyalty programs mostly require a minimum purchase or a considerable threshold to start generating customer benefits.

• Referral Traffic- Check out the sources in google analytics and analyze if any sort of website that sends referral traffic mention the loyalty program or not.

• Elevate the average revenue per user- Higher-order frequency and smart marketing can contribute to equating higher revenue for every user who comes on your website.

The basic revenue comes from more units bought, more visits, and promotions. The costs constitute loyalty management technology, services of a loyalty program provider, product costing, and reward costing. Once you have found the right balance between the cost structure and customer’s preferences, one can achieve tremendous success and improve on the program’s return and that’s the point when one would be able to understand the mechanism to manage program indicators, including app costs and revenues.

A smart loyalty program, stuffed with the right features will encourage customers to visit more often and spend more during each visit. Additionally, the revenue generated from a core program, with the right data collected, would be able to deliver relevant, targeted promotions to the customers loyalty program software, resulting in an additional source of revenue. The major benefits of increased customer spending can cover up the costs of products, labor, rewards, and program administration. To clearly understand the relationship between the program costs and loyalty program return basically works through a knowledgeable loyalty service provider.

How much does a Loyalty Program Cost?

A loyalty program cost varies from the kind of program you’re willing to have. A basic loyalty program costs less, the pricing keeps on increasing with the addition of extra features. The pricing is entirely dependent on features and the company one has selected to develop.

The loyalty program cost can be calculated in three main categories-

• Implementation Costs

• Marketing Costs

• Loyalty Reward Costs

Every category comprises several small categories. For instance, the implementation costs include stuff like development, design, and loyalty program maintenance. Then comes the cost of marketing the loyalty program to get the customers to sign up. It could include everything from paying through social media advertising to printing offline options like leaflets to populate in the stores.

Wrapping Up

Calculating your loyalty returns is quite an imperative aspect to take into consideration. As a brand having a loyalty program integrated, one requires to work out the profits and the expenditure associated with it. Find the right development company and get started with your loyalty program software cost calculation.