THE CLARUS Blog

The Old Loyalty Model Is Broken, but There’s a Fix

“If it ain’t broke, don’t fix it.”

The old saying does have truth to it, but we sometimes put off fixing things that need attention simply because it’s the way we’ve always done them.

Something might not appear broken on the outside which can cause complacency. That complacency can lead to not considering a better option.

The traditional loyalty model is a great example of this.

Retailers have been running these programs for decades. Just about everyone has one in place.

But this traditional model isn’t the only option anymore.

Let’s break down the current reality in the loyalty space and what options retailers have.

 

The Traditional Loyalty Model Takes Too Long to Break Even

A traditional loyalty program pricing model typically follows this formula:

A retailer pays a loyalty vendor up to seven figures for a loyalty program. That is usually for the platform itself and additional consulting and customization can cost even more later.

The retailer hopes to see a positive ROI after a 12-to-18-month period.

 

The Traditional Loyalty Model Puts the Risk on You

If your loyalty vendor generates one customer or one million, it still gets paid and makes its money off the program build.

Legacy SaaS loyalty companies charge huge upfront costs and use a model that benefits them – not you or your customers.

That essentially leaves the risk on you.

What happens to you if the program isn’t successful and doesn’t provide the ROI you were hoping for?

And for those vendors that do offer services with the program itself, there is usually a cost associated with that.

Need customization?

That typically doesn’t come for free.

If you sign up for their solution and implement their program, you wind up running the program on your own.

As retailers are then left to deal with issues such as recurring billing, member acquisition and retention become more challenging.

What happens if a credit card is declined? How does recycling work? What about the customer service needed when a question or issue does arise? What about testing and optimization?

These are questions that a true loyalty partner can answer for you.

 

A True Partner and a New Loyalty Model is Needed

A true loyalty partner will mitigate risk and build, manage, and optimize your loyalty program.

In direct contrast to the traditional loyalty model is the premium loyalty revenue share model.

In this model, the loyalty vendor simply makes its money from a percentage of program membership fees that customers pay.

There’s no cost cutting into your profit margins.

This essentially takes all the risk off the retailer because the vendor doesn’t make money unless the retailer makes money.

Since the goal of a premium loyalty program is to provide the best of the brand for its best customers, a true loyalty partner wouldn’t simply charge an upfront fee and then leave the retail partner to manage the program alone.

 

It’s Time to Fix What’s Broken in Loyalty

While the traditional loyalty model has been around forever, that doesn’t mean it’s not broken.

It can take over a year or two to break even and puts all the risk on you.

Premium loyalty programs exist to provide enough value that members engage constantly. And accomplishing that requires ongoing program management and optimization.

The traditional loyalty model wouldn’t work here.

Being a true partner to a brand that launches a premium loyalty program means being there on a continual basis, collaborating on optimization, and addressing any customer pain points that arise.

A premium loyalty program is the best your brand has to offer to your best customers.

It only follows that you should have a true loyalty partner who works with you every step of the way, from program launch to infinity.

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