THE CLARUS Blog

What is Loyalty Management? And Should You Tackle it In-House?

Eighty-eight percent of consumers agree retailers could do more to earn their long-term loyalty.

It’s a big reason why loyalty management is a frequent topic in marketing conversations. But it can mean different things to different people.

You might think of it as simply a piece of software. Or maybe a vendor who manages your loyalty program.

In reality, it’s all that and more.

So, what is loyalty management? And how do you know whether to handle it in-house or work with a loyalty management partner?

 

Loyalty Management Defined

Loyalty management can loosely be defined as the strategy, tools, and tactics around how your company acquires, engages, and retains customers.

It helps your brand target the right audience and then provides benefits, experiences, and rewards that drive long-term engagement.

Aside from your loyalty program itself, comprehensive loyalty management includes numerous elements:

All these pieces need to work together for a successful loyalty program.

And while certain retailers handle some of them in-house, managing all these pieces correctly can take up a huge amount of resources, technology, and expertise.

For this reason, most retailers choose to outsource some, if not all, of these elements to qualified loyalty management companies.

But not all of these companies are created equally.

Depending on your needs, you’ll want to work with one that fits. And there are several types to choose from.

 

Types of Loyalty Management Solutions Explained

There are three main solution types in the loyalty space: Loyalty agencies, loyalty technology platforms, and hybrid loyalty solutions.

 

Loyalty agencies typically offer the consulting needed to help brands with due diligence and program management.

That is, they assist with conducting market research and often draw on their own experiences to help you figure out your loyalty strategy.

Then, they help build your program and manage it after launch. Many of them will assist with performance measurements and offer operational support.

Most of them work with existing loyalty platforms and don’t have their own technology. Some, on the other hand, do offer some of these capabilities.

The cost usually depends on the size and scope of the project and additional services might be billed hourly.

 

Loyalty technology platforms are just as they sound – offering the software as a service (SaaS) technology platforms that companies need to manage their loyalty programs.

However, support services are usually pretty limited.

Some platform vendors offer implementation, integration, analytics, and support. Others leave you on your own.

These types of vendors usually charge for consulting and platform setup and the fees often run into the six figures. Plus, they normally charge an annual or monthly license fee that can exceed the cost of implementation – depending on the number of members in the program.

 

Hybrid loyalty solutions combine the best of both worlds.

Partners in this category combine consulting, program management services and a technology platform to manage the full loyalty program picture.

From the initial strategy to platform setup to ongoing management with analytics, hybrid loyalty solution partners provide end-to-end service which allows you to focus on running your business.

Many brands that work with these partners leverage them for day-to-day program management and operational services.

From a cost perspective, partners that specialize in traditional free loyalty programs charge similarly to the above. There are normally large fees around initial consulting, program implementation, and any type of initial custom work.

Plus, there’s usually a substantial monthly or annual fee for ongoing management and updates.

When it comes to partners like Clarus that build premium loyalty programs, the pricing model is quite different because consumers are paying to be a part of the program – similar to Amazon Prime.

This allows for a revenue-share model where the partner takes a portion of the membership fees that customers are paying as compensation for designing, implementing, and operating the program – leaving the majority of the fee revenue to cover program rewards and benefits.

This effectively relieves the retailer from substantial costs and ongoing liability to fund rewards & benefits

Additionally, this also means no upfront costs and no ongoing yearly fees for your brand. These types of arrangements are revenue-positive from Day 1.

Learn more about the premium loyalty revenue share model here.

 

Which Type of Loyalty Management Solution is Right for You?

The type of loyalty management partner you should team up really comes down to this:

  • What are your goals and what are your resources?
  • Do you have the technology and the people?
  • Do you want to update your own system constantly?
  • What type of loyalty program are you looking for?

If you have unlimited resources and lots of loyalty expertise, you could potentially build it and manage it in-house.

However, if you don’t, it’s probably in your best interest to talk to a loyalty management company.

If you’re just getting started (or even if you don’t know where to start), talking to a loyalty agency could be a good first move. They should be familiar with most of the platforms out there and can draw from their deep experience to help you figure out the best move.

Looking at loyalty technology platforms might make sense if you have an abundance of technical and marketing resources in-house.

But if you’re serious about loyalty and you have finite resources like many retailers out there, a hybrid loyalty solutions partner is worth talking to, especially if a premium loyalty program is on your horizon.

A hybrid loyalty management partner will free up your resources to focus on your core business and can also alleviate the significant costs of building and maintaining a successful program.

 

Now is the Time to Take Action

Either way you look at it, loyalty management is a critical piece of your overall marketing strategy.

Remember, nearly 70% of consumers agree their loyalty is more difficult for a retailer to maintain than ever before.

The time to start moving on your loyalty strategy is now.

Working with a loyalty management partner is one of the quickest and most impactful ways to start building better relationships with your best customers.

What’s the biggest customer loyalty challenge you think a partner could help you solve?

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