Customer Loyalty Software

Customer loyalty software allows businesses of all kinds—especially in industries such as cosmetics, pharmaceuticals, travel, and retail—to create and run loyalty rewards programs. It helps marketing professionals overcome the challenges of operating loyalty programs, such as measuring loyalty metrics and using the program to improve the customer experience.

Customer loyalty platforms can also be used to track customer behavior, reward customers beyond purchases, and expand marketing strategies to attract new customers.

We’ve prepared this guide to help you select the right customer loyalty platform for your business. Here is what we’ll cover:

• What is customer loyalty program software?

• What are the typical features of customer loyalty program software?

• What are the important considerations when choosing customer loyalty software?

• How much does customer loyalty software cost?

• How do small and medium businesses use customer loyalty software?

• Frequently asked questions about customer loyalty software

What is customer loyalty program software?

Customer loyalty program software is an online tool that allows businesses to set up loyalty reward programs in order to strengthen customer relationships. The platform helps identify interested or loyal customers and incentivize them using gift cards, cash back, vouchers, points, and other similar offers.

Also known as customer loyalty software, the tool helps you set up processes for earning these rewards and then automates reward distributions. It also allows users to track customer behavior in order to ultimately increase customer retention.

What are the typical features of customer loyalty program software?

Typical features of customer loyalty software include:

• Loyalty program: Create, manage, and analyze the performance of customer loyalty programs.

• Rewards management: Set up a rewards structure, including the details about how points are earned and spent. Track customer’s reward histories and their progress towards rewards.

• Activity tracking: Track customer spending patterns, transaction history, recent purchases, and participation in loyalty programs.

• Customer relationship management: Collect and store customer information. Leverage data to understand customer needs, gather feedback, identify loyalty program members, and enhance communication and experience.

• Segmentation: Create a personalized approach by grouping customers on the basis of various attributes, such as their purchase history and spending habits. 

What are the important considerations when choosing customer loyalty software?

Here are some important factors to consider before finalizing your purchase for the best customer loyalty program software:

• Customization capabilities: Every business is unique and so are its requirements. Before you invest in customer loyalty software, make sure that the solution is capable enough to create a wide range of unique referral programs, such as point-based programs, tiered programs, or value-based programs based on your needs.  The software you select should be able to customize different aspects of your loyalty program, including the rules for earning and spending points. It should also provide tools for interface customization, messaging customization, and email customization.

• Customer segmentation feature: The software solution you select should allow you to group customers based on certain similarities, such as their demographics which includes their age, religion, ethnicity or their purchase history, geographical location, and others. This will help you create an optimized loyalty rewards strategy to target different customer segments.

• Flexible program limits: Customer loyalty software should not only allow you to set up different loyalty programs based on your specific requirements but also rules and limits with respect to these programs. These might include the start and expiration date of your loyalty points period, earning rules, validation rules for rewards, and usage limits among others.

• Security features: Select a customer loyalty tool that offers robust security features, such as two-factor authentication, user-level access control, SSL-protected access, and data encryption to secure important information and protect valuable customer accounts.

How much does customer loyalty software cost?

The cost of customer loyalty program software depends on the features and the customization options provided by the vendor. However, most products for this category are priced on a per month basis and can be divided into three pricing tiers based on their starting price.

Price ranges:*

• $19- $49

• $49- $79

• $79+ 

*The pricing included is for the entry-level/lowest-priced offering found on vendor websites on April 5, 2022. These ranges correspond to the 25th, 75th, and 100th percentiles of pricing information gathered from vendor websites of sample products.

The above list summarizes pricing for the base plans of most products from the customer loyalty category. An enterprise or premium product that is priced higher may include additional features such as customer surveys, gamification, and gift card management.

How do small and medium businesses use customer loyalty software?

Small and midsize businesses (SMBs) use loyalty management software as an automation tool for their customer loyalty programs in order to:

• Track customer behavior: Loyalty program software offers analytical tools that enable businesses to track social and behavioral customer engagement and design a program that encourages repeat purchases.

• Manage loyalty programs: Customer loyalty software allows a small business to manage customer loyalty programs. The tool allows customers to register for the program upon completion of a certain condition, earn reward points, and redeem rewards.

• Automate reward distribution: Small businesses use loyalty management software to automate the distribution of rewards once they are earned. The software offers omnichannel compatibility that helps businesses in distributing gift cards, coupons, and other such rewards through multiple platforms, such as social media channels and emails.

Frequently asked questions about customer loyalty software

Why is customer loyalty important for your business?

Customer loyalty is the act of choosing a company consistently over others. Here are a few major reasons why customer loyalty is important for a business:

• To spread the word about your business: Word-of-mouth recommendations are one of the most persuasive forms of marketing. Loyal customers share positive feedback about your business and products. Happy customers can also become your brand advocates, driving sales and generating business for your company at no extra cost.

• To increase profits: Customer loyalty helps generate referrals and encourages repeat business. Loyal customers are likely to purchase frequently.

• To lower marketing costs: Acquiring a new customer is much more expensive than retaining an old one. Long-time customers do not require extensive marketing efforts, which in turn, can significantly lower your marketing costs for advertising, social media costs, and other promotional expenses.

What are the four types of customer loyalty?

Customer loyalty software can help develop loyalty-based programs to build a long-lasting relationship with the customers. However, to develop a loyalty program, you need to first understand the types of customer loyalty: transactional, social, engagement, and emotional.

• Transactional loyalty is a potent tool to bring back customers by providing them offers or discounts on certain products or services. This type of loyalty, when used effectively, can provide great results.

• Social loyalty uses social media channels to engage repeat customers. Largely, it provides referral points to customers for sharing specific posts on their respective social media channels.

• Engagement loyalty helps to improve conversion rates for marketing campaigns. This type of loyalty rewards customers for subscribing to newsletters, downloading case studies, or watching YouTube videos.

• Emotional loyalty is the fourth major type of loyalty that aims to establish an emotional connection with regular customers. Such type of loyalty can be achieved by awarding points to repeat customers or customizing offers and campaigns on their special occasions.

How do you measure customer loyalty and retention?

Customer loyalty is fundamental to the success of any business. It can be measured using key performance metrics:

• Net promoter score (NPS): This metric indicates the likelihood of your customers referring your brand to their friends on a scale of one to ten, one being the least likely and ten the most.

• Repurchase ratio: This is another key metric that measures the ratio of one-time purchasers over repeat purchases.

• Customer acquisition cost (CAC): CAC measures the number of customers you have acquired over a given period of time.

• Customer churn rate (CCR): CCR represents the number of customers lost during a certain period.

• Repeat purchase rate (RPR):  This metric represents the number of customers who are likely to return back to the company after their first purchase.

• Customer retention rate (CRR): CRR represents the ability of the company to retain its existing customer. Several factors influence the customer retention rate, including the price of your products, time taken for delivery, site performance, and loyalty rewards programs,  among others.