Customer loyalty software: How to compare and find the best fit for your company

Last updated
Dec 15, 2023
How to compare and choose the right customer loyalty software for you, alternatives, and tips for using software to its fullest extent.

Customer loyalty is the lifeblood of any business, translating into repeat purchases, positive word-of-mouth, and a steady stream of revenue. In the age of digital transformation, customer loyalty software (CLS) has emerged as a powerful tool for building and nurturing those valuable relationships.

What is customer loyalty software? 

Customer loyalty software consists of the digital platforms and tools to help businesses design, manage, and analyze customer loyalty programs. It goes beyond simple points accumulation, offering a range of features to personalize experiences, boost engagement, and drive higher customer lifetime value (CLTV).

The power of loyalty

The ROI of investing in customer loyalty is undeniable. So if you’re ready to compare and you’ve landed here, you’re headed in the right direction.

  • A 5% increase in customer retention can increase profits by 25% to 95% (Bain & Company).
  • Loyal customers spend 67% more on products and services than new customers (BIA/Manta).
  • The top 20% of loyal customers contribute 80% of a company's profits (Pareto Principle - the 80/20 rule is just always applicable).

Here's a glimpse of what it can (and should be able to) do:

  • Program design & management: Build customized loyalty programs with flexible points systems, tiered rewards, and personalized offers.
  • Data-driven insights: Track customer behavior, analyze purchase patterns, and gain actionable insights to personalize marketing efforts.
  • Automated engagement: Trigger targeted campaigns based on customer actions, send personalized emails and notifications, and nurture loyalty through automated communication.
  • Reward & redemption management: Manage the reward catalog, track points balance, and facilitate seamless redemption across various channels.
  • Gamification: Leverage the psychology of point accumulation to increase program participation and drive engagement.
  • Integrations & reporting: Connect with existing CRM, marketing automation, and e-commerce platforms for a unified customer view and comprehensive reporting.

Choosing the right engagement software for your company depends on your program strategy, which depends on your business goals and customer preferences

The word “software” is doing a lot of heavy lifting here. The truth is, that this market is not quite distinctly defined yet. There are so many tools that range from four core loyalty options: 

  1. Perks and incentives: Best for in-the-moment rewards that drive conversion, retention programs, and customer engagement programs. 
  2. Points and rewards: Best for companies that want to provide redemption options that include your own products or 3rd party partners. May cost the most to discount your products, but rewards ongoing purchases consistently. 
  3. Membership-based with exclusive access: Best for brands that want to cater to a small subset of highly invested customers. Highest tier = most perks. 
  4. Cash-back centers and apps: Best for companies that want to pony up the cash earned on each purchase. Usually requires extensive partnership negotiation to maintain profit margin. 

How to navigate the maze and find the perfect fit

1. Define your needs and goals:

  • What type of loyalty program do you need? Points, perks, or a hybrid approach?
  • What are your primary goals? Increase customer retention, boost sales, or drive engagement?
  • What are your budgets for redemptions, partnership negotiations, and technical resources?

2. Research and compare options:

  • Look for platforms that align with your program type, budget, and technical capabilities.
  • Read reviews, compare features, and request demos to get a feel for the platform's functionalities.
  • Pay attention to customer support and training options to ensure smooth implementation.

3. Consider key factors:

  • Scalability: Can the platform grow with your business needs? It should have an API that's easy to connect to and comes with active engineering support.
  • Integrations: Does it integrate with your existing systems and tools?
  • Security & compliance: Does it meet industry data security standards?
  • Reporting & analytics: Does it provide insightful reports and data visualizations?
  • Ease of use: Is the platform user-friendly for your team and customers?

4. Watch out for red flags:

  • Hidden fees or complicated pricing models.
  • Lack of customer support or limited training resources.
  • Inflexible platform with limited customization options.
  • Poor user interface or complex navigation for customers.
Two business leaders compare customer loyalty software side by side based on features, pricing, engagement tools, and api.

Connecting the full loyalty flywheel

While you’re integrating new software into the mix, make sure you’re also optimized for the highest quality experience in these areas, so that your efforts are not wasted by any anchors weighing your whole system down. 

  • Building strong customer relationships: Focus on personalized service, proactive communication, and exceeding customer expectations.
  • Creating a valuable customer experience: Offer unique products, excellent customer service, and a seamless omnichannel experience, with perks integrated as gifts for each interaction. 
  • Building a community: Foster a sense of belonging among customers through loyalty clubs, exclusive events, and social media engagement.
  • Rewarding advocacy: incentivize customers to refer friends and family through referral programs and social sharing rewards.

Examples of successful CLS implementations:

  • Sephora: Uses a tiered loyalty program with exclusive benefits and personalized offers, resulting in increased customer engagement and higher average order value.
  • Starbucks: Leverages its mobile app and gamification elements to drive repeat visits and boost customer loyalty.
  • Amazon Prime: Offers exclusive benefits like free shipping and discounts, leading to high customer retention and significant revenue growth.

Customer loyalty is the bedrock of any successful business. By leveraging the power of software to infuse positive experiences into the customer journey, you’ll end up with a more loyal customer at the end – who then goes back to the beginning, to buy again – and again – well, you get what I mean. Ready to compare Paylode to the rest? Let's talk.

About the author
Adrienne Kmetz
Adrienne is a marketing expert with a career history of working in startups of all sizes, from early stage to series A. She has 17+ years of experience writing about business, finance, and entrepreneurship. She went to Colorado College where she majored in skiing.
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