Loyalty Management Software to Increase Customer Retention

Definition of Customer Loyalty Software: What is Customer Retention Software?

Customer retention is a business approach that involves motivating existing customers, both emotionally and rationally, to remain loyal to a company or brand. Appropriate measures can certainly also contribute to attracting new customers. However, the primary aim is to convince those who have already made a purchase to keep coming back.

Companies have a wide range of strategic options and actions available to build and strengthen customer loyalty. These primarily include (of course) high-quality products, excellent customer service, attractive prices, and - for particularly effective reinforcement - special customer loyalty programmes.

Customer loyalty programs are specific measures taken by companies to offer buyers very active and proactive incentives that support loyalty. In the most common form, customers are encouraged to make repeat purchases through exclusive appearing and regularly transmitted offers. However, customer loyalty programs can do much more than just "simply" sell. If strategically perfect, they build an emotional connection and ensure that long-term stable business relationships and customers as real brand advocates are created.

Customer loyalty software helps managers set up, play out, and organise such programs, as well as further developing them.

Why should companies use a loyalty software?

Many executives in companies - particularly founders - strongly focus their business aspirations on acquiring new customers. While acquiring new customers is indeed important, retaining them is equally relevant in today's market conditions.

The oversupply existing in many industries and the possibility of potential customers - primarily on the internet - to easily find alternative offers, leads to more and more fiercely contested markets. In these conditions, customers quickly migrate to the competition without the provision of outstanding loyalty incentives.

It is absolutely logical from a business instinct to prevent this as much as possible. However, numerous studies provide figures that massively underpin this intuition. They make active and therefore effective customer loyalty a must-have rather than an option: increasing buyer loyalty by just five percent can achieve a profitability increase between 25 and 95 percent.

Additionally, acquiring new customers is always more strenuous/costly than retaining existing customers, who ideally are already satisfied with the product purchased and the associated brand. Surveys show that acquiring new customers costs about five times as much as retaining existing customers.

Regularly reassured regular customers are also less likely to look around for alternative offers when price increases are made. The knowledge of receiving good products and accommodating service is generally more important to them than the cost (at least up to a certain degree).

It is particularly interesting that strong customer loyalty can lead to highly effective word-of-mouth advertising. Due to the emotional bond that satisfied customers build with a company or brand, there is a good chance that they will share their views on the products with others. Such advocacy is absolutely authentic and can therefore have enormous advertising value.

On balance, a large, stable customer base increases revenue, enables long-term success and attracts additional buyers.

In a customer loyalty system specifically tailored to the respective operation, corresponding measures and effects are particularly purposeful to set up and control. However, a lot of work must also be invested for maximum effectiveness. Customer data analysis, strategy formation, well-organised communication of benefits, omnichannel consideration and tracking, as well as the continuous optimisation of measures, are just a few central to-dos. Hardly anything works without appropriate software.

How does loyalty management software work?

Normally, based on the industry and the type of company, a strategy and specific customer loyalty measures are developed, which are then to be realised with the help of the loyalty software. So what is planned and how the customer loyalty platform then implements it or how it works is always context-dependent.

However, there are some common and frequently used customer loyalty tools. The following list shows the most popular and often particularly effective measures and ways they work.

• Loyalty programs: With a loyalty program, customers are rewarded for their regular purchases. For example, the software records these purchases and issues points for them, which can then be redeemed for free products. Exclusive offers and discounts are also possible.

• Personalised Marketing: Using customer loyalty software, personalised marketing actions can be aligned. These then go to specific customers and transmit individually coordinated offers based on specific preferences and purchasing behaviour.

• Support: Loyalty software often offers direct contact options with customers, which can be used for proactive marketing communication, among other things. Good, proactive customer care can contribute significantly to strengthening customer loyalty.

• Feedback and surveys: Collecting customer reviews and carrying out other surveys is a good way to find out what regular customers like or dislike. By applying these insights to products, service, marketing, etc. in a noticeable way for customers, customer satisfaction and therefore customer loyalty can be greatly improved. Loyalty management software provides the appropriate functions.

• Social media presence: If a company is active on social media, it can appear more approachable and personal than would be possible on any other channel. This in turn has a positive impact on customer loyalty. A loyalty platform can offer a wide range of features for corresponding presentations.

What are the advantages and disadvantages of customer loyalty management software?

Effective customer loyalty through a loyalty program software equipped accordingly, can significantly boost and secure business success in the long term. What benefits customer loyalty software offer beyond these core advantages is summarised below.

• Maximum Efficiency: All threads of a company's customer loyalty activities can come together within customer loyalty software. It forms a central platform for managing relevant processes, which alone is a significant factor in efficiency. Various features are integrated, which considerably facilitate the related work. A comprehensive solution offers numerous options - it can function as a CRM database, messaging hub and generally as a command centre for discount vouchers, referral systems, online giveaways, etc. In addition, such software often provides tools to automate central processes. For example, notifications to customers can be distributed at set intervals. Existing customers can thus be kept "warm". Overburdening due to a too high frequency is to be ruled out.

• Perfect Integration: Good loyalty program software works together with other programs already established in the company for customer loyalty. CRM system integration is often very important here, as the most important customer data is organised in this. These can then in turn be used very efficiently for customer loyalty measures.

• Comprehensive Customer Loyalty Programs: Customer loyalty software usually includes numerous different loyalty programs or measures that can then be implemented with relatively little effort. These include point systems (loyalty points software), vouchers, discounts, cashbacks, and so on. With these options, companies can position themselves competitively.

• High Flexibility: With good customer loyalty software, managers can set up and develop well-graduated loyalty programs. It is usually not sufficient to define the corresponding rules once and then follow them in the long term. Customer needs and expectations change, and therefore the loyalty measures should also be flexible enough to adapt. With the right loyalty management program this is not a problem - thanks to data collection and various features for implementing specific measures.

• Simple Omnichannel Sales: An omnichannel approach is no longer an option for customer loyalty campaigns. It is a must, as nowadays people usually use numerous channels on their way to making a purchase decision! Good customer loyalty software enables companies to use this must-have relatively easily. For example, they can directly use in-app messages, special landing pages, Google and Facebook advertising as well as email or SMS for customer loyalty measures. Alternatively, such programmes can usually be linked to appropriate channels - for example with email marketing software.

• Strong Personalisation: When companies not only reward their customers with discounts, free samples, gift cards, cash payments, free delivery, etc., but also tailor these actions very precisely to the respective recipients, the probability of acceptance by them is particularly high. Loyalty program software can help those in charge to align corresponding personalisations very differentiated. For example, it tracks customer trends, sends surveys and tracks customer behaviour in the loyalty system. This allows them to find out very precisely which incentive is best suited for a specific customer segment.

• Compliance with Regulations: Customer loyalty programs are always associated with the use of customer data and other legally quickly complicated processes. The focus here is on compliance with GDPR regulations and the setting of clear rules for the rewards offered. Customer loyalty software can offer features that help managers create appropriate safe conditions. However, consulting with a lawyer is always advisable.

There are indeed also some disadvantages or at least potential challenges when using customer loyalty management software. The following difficulties are typical:

• Lacking strategic basis: Good loyalty software alone does not make a good customer loyalty program. While the best applications or providers also support their users strategically, the plan for maximally purposeful implementation in the respective company context must come from those responsible. This work is often not calculated or underestimated.

• Effort despite software: Not only the planning, but also the long-term management of ongoing customer loyalty measures can be quite time-consuming and costly, even with software support. Successful loyalty programs require dedicated teams to evaluate data, serve customers directly, implement new ideas, make optimizations, and so on. If the right (human) resources are not available here, even the best customer loyalty software is hardly of any use.

How do you choose the right loyalty platform?

The customer loyalty software market is large and requirements for the programs vary from company to company. Against this backdrop, finding a solution perfectly suited to one's own business context can be very difficult. For purposeful research, interested parties should primarily consider the following factors.

Time to Use It can take a considerable amount of time until the loyalty software is integrated into the systems already used for customer loyalty, and can be fully executed by the users.

Before deciding on an option, it should be weighed how long it will take until the company can actually use the new platform. This primarily includes considerations for setting up, training, testing and possibly required training.

Ease of Use Even if people are often looking for particularly powerful, quickly usable, and/or inexpensive options, the people who will ultimately use them should never be overlooked.

It needs to be checked whether the customer loyalty platform has a user interface suitable for the users and is generally a good fit for their experience. If the loyalty software is too complex, its potential cannot be fully exploited.

Support Another thing that is very important, especially for beginners in this field, is to take a close look at the support. It should be checked whether the service staff are easily accessible and the right communication tools are available.

Furthermore, it is important to pay attention to sufficient documentation, FAQs, studies, strategic support and other possibly desired or required support tools. Those in charge should get all the help they need to achieve their goals efficiently.

Essential Functions Every company has a number of indispensable customer loyalty functions. If the software under consideration does not have all the necessary features, even the most attractive offer is worth little. The solution then simply does not fit perfectly and can never provide the targeted benefit.

So before deciding, those responsible should make a list of all important tools or loyalty measures and compare them with the offers. The must-haves mainly result from customer habits, but also from the loyalty strategies of the competition. The latter should be kept up and surpassed.

Reviews Regardless of what companies say on their websites about their customer loyalty software, it is always a good idea to look online for reviews and testimonials from real users. Often topics are discussed here that remain hidden in the marketing information of the providers. You can benefit from authentic facts and the description of real use cases.

Of course, you cannot research in depth for every solution on the market. Ideally, those responsible first narrow down the list with the top options to three to five loyalty platforms. Many of the programmes from the above comparison have been rated by customers. So, this is already a good opportunity to start.

Availability of API In a world full of headless applications, the need for APIs is more important than ever. Therefore, the software API should be well documented and accessible.

Ideally, developers are given a flexible approach to endpoints in order to integrate the software easily into every important touchpoint.

Personalisation Options The more personalisation options are available, the better. It should be checked whether loyalty programs can be personalized sufficiently for recipients using the software considered.

Creating individual plans for personalized rewards, point or level systems, rewards actions, discounts and vouchers are good standards.

What does loyalty program software cost?

Customer loyalty software is usually billed on a monthly basis. Prices start at around ten euros. Comprehensive loyalty management suites can also cost several hundred or even well over 1,000 euros. For large installations or enterprise solutions, an individual offer is often used as a basis.

How expensive a loyalty software ultimately is, first and foremost depends heavily on the range of functions and the provision model (loyalty SaaS program or on-premise solution). Software-as-a-Service applications are generally cheaper than on-premise software - and the more features the provider integrates, the deeper you have to dig into your pocket. In addition, the number of contacts (customers) and any fees for successful transactions can have a significant impact on the price.