A detailed guide to selecting the best customer loyalty software for your business.

There are a ton of customer loyalty software options out there; choosing correctly can seem overwhelming. Stakes are high, as loyalty programs come with switching costs. In addition to the software itself, brands also need to manage customer churn. Here’s how to ensure success during your evaluations.

Preparing To Evaluate Customer Loyalty Software

With software selection, preparation makes perfect. Some upfront work will make your vendor interviews more fruitful.

• Define your programs’ goals: the concepts of “retention” and “loyalty” are too broad. As Janet says, go deep. Example conceptual goals include: reduce churn, learn more about existing customers, develop relationships with VIPs, and solicit feedback before it hits social media.
  • To determine which goal is right, start with your financials. For example, is the average purchase amount across locations roughly equal? Launch a program focused on driving more customer visits.
  • Once you have a sense of your goals, be SMART. Define each goal as a specific metric you can reach in a set time frame.

• Determine the level of technical/IT integration your company can handle: give yourself a mental grade of low, medium, or advanced IT expertise. Use this to audit companies’ support capabilities.
  • e.g. merchants with “high” expertise need qualified vendor technical teams. Businesses with “low” expertise should avoid providers with a DIY/black box support approach.

• Assess your budget: to ballpark how much you can spend per month, calculate your customers’ average transaction size and the number of monthly visits. Retention marketing will manipulate one or both, so these metrics will give you a sense of how to calculate ROI.
  • As a benchmark, set up for a traditional point-of-sale integrated program with plastic cards costs ~$10K for a single location and ~$100K+ for multiple locations.

• Think through customer incentives: any loyalty case study will provide examples, but think about what makes your customer loyal. This knowledge will inform your perspective when you demo vendors’ consumer experiences and administrative tools.

• Inform key stakeholders: give all relevant stakeholders a heads up about your evaluation. This awareness makes them feel included and prevents slowdowns once you’ve selected the best option.

• Create a checklist/rubric: when interviewing vendors, make apples-to-apples comparisons. With a checklist or rubric, you will have a standard process.

How To Interview Customer Loyalty Software Vendors

To make that checklist, use the below criteria. Assign each vendor a grade in each category, add up the points, and make a selection.

Each criterion contains Rationale, which explains why that category is relevant, and Insider, which details under-the-hood tips you can use to inform your perspective.

• Does the vendor’s website simply summarize how their solution works? 
  • Rationale: perhaps silly, but jargon on a website is often a solid predictor of how a loyalty solution ends up working (i.e. clearly written website = well-written software).
  • Insider: the best vendors will be able to tell you how their solution impacts your bottom line. Loyalty drives engagement of course, but ultimately you care about revenue.

• How impactful are the referenced customers and case studies?
  • Rationale: anybody can write case studies; the best vendors take time to tell compelling customer stories. Verify that written materials are clear and convey a grasp of ROI.
  • Insider: once down to the final decision, feel free to ask for vendor customer references. The best vendors happily provide this access (just don’t ask too early – very similar to employee hiring).

• Does the vendor provide sufficient customer segmentation and targeting data? 
  • Rationale: loyalty is about identifying, engaging, and retaining your best customers. Without sufficient targeting data, loyalty programs won’t achieve much.
  • Insider: according to customer retention expert Dunnhumby (creator of the original supermarket loyalty scheme), the most important data are customer recency frequency and value.

• Does the vendor provide actionable customer insights?
  • Rationale: providing data isn’t enough. The best providers empower you to take action. (An example line of questioning: Can your solution identify VIP customers? What can I do with that insight?)
  • Insider: remember, your time is valuable. Make sure to understand during the interview whether or not the provider has any automated tools.

• Does the company have a proven track record?
  • Rationale: kind of a no-brainer here, but ask to see evidence of consistent vendor results. Remember, each business is unique. Vendors that drive results, regardless of industry, will drive success for your business. The ability to execute matters above all else.
  • Insider: there are a lot of loyalty programs, including some fly-by-night shops that charge bargain basement prices. Be sure to verify the strength of the vendor’s investors. When in doubt ask yourself, “Am I 100% sure this vendor will exist one year from now?”

• Did the salesperson take the time to establish a rapport?
  • Rationale: strong vendors have strong hiring processes. Quality sales people reflect the strength of a company’s overall employee aptitude and culture.
  • Insider: be on the lookout for slick sales talkers. Seek out providers whose sales team reflects a willingness to help you achieve your goals. This attitude carries over to a vendor’s support team and informs an approach to customers in general.

• Does the demo make your experience crystal clear? 
  • Rationale: Always see a demo of both the consumer experience and administrative tools. These walkthroughs should be crystal clear. A solution that’s confusing to you (with hand-holding from a salesperson) will certainly be confusing for your staff and your customers.
  • Insider: consumers care about effortless experiences. Added steps at checkout introduce hurdles that will ultimately limit the success of a program.

• Can the company demonstrate whether the program is actually driving incremental revenue 6 months after launch?
  • Rationale: purchasing software is about the total cost of ownership. A cheap loyalty program that cannot demonstrate actual revenue does nothing for you.
  • Insider: omitting this category led to many’s frustrations with Groupon. Merchants got cash up front but neglected to evaluate long-term success. Make sure vendors help you understand the total impact on your business.

• Does the vendor have a clear process for systems integration? 
  • Rationale: a point-of-sale integration done poorly delays the launch of your program. Ask vendors to commit to a strict timeline.
  • Insider: there are providers who do not require a point-of-sale integration. This is cheaper and particularly useful for multi-location merchants who do not have one standard POS system.

• Does the vendor support communication to your own customers about the loyalty program? 
  • Rationale: no matter how fully-featured, if customers don’t sign up for a loyalty program, there will be no success. Request that vendors provide collateral to help drive consumer sign-ups.
  • Insider: some vendors have technical expertise that’s useful if you don’t have these capabilities in-house. Putting a sign-up widget on your website (good idea)? Ask vendors to send you the code.

• Does the vendor have a competitive cost/month/location quote?
  • Rationale: different pricing models can muddle your ability to make that crucial apples-to-apples comparison. Demand that each vendor give you a cost per location per month quote.
  • Insider: ask about extra fees. Some vendors charge a setup fee or start charging before a service goes live. Use the cost/location/month to compare services, and factor the other fees into your switching costs.

• Negotiate on price
  • Rationale: every vendor will be open to negotiation, especially at the end of quarters (March, June, September, December). Expect to pay a discount if you pay up front.
  • Insider: Schedule 3-month and 6-month check-ins to help you interpret the success of the program (and “outs” from your contract if it’s not performing at those stages).

Work With Your Vendor To Drive Success

If you go through all these steps, that chances that you will find the right provider for your business increase exponentially. Remember, loyalty success won’t happen overnight. But no single marketing spend has the potential to greater impact your business. When you do your due diligence to find the right customer loyalty software provider, the results are worth it.