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How Do I Justify The Cost Of A Loyalty Program To My Boss?

Updated: Sep 11, 2019

Boy, if I had a dollar for every time I've heard that question asked I'd be rich! OK, I wouldn't really be rich, but for sure I'd have more than $500! It's just a very common question that seems to be on the minds of lots of folks looking for answers to this thorny question.

Of course the easiest method is to quantify what an improvement in customer retention can do to your bottom line, and in most industry verticals it's not that difficult to calculate. We've helped calculate this for many clients, and we can certainly help you calculate this as well. One example from the past however is very illustrative...a company that we helped to improve their retention by just 5% showed a 95% improvement in profits! Of course that's a real best-case scenario, but other results are also very impressive and striking.

Here's another way to come at the answer to this question, and this is supplied by a company called Brandongaille, who specialize in loyalty statistics. They say that 12-15% of consumers are loyal to a single retailer, but they represent 55-70% of total sales of that retailer!

ROI on Loyalty Investment
ROI on Loyalty Investment

I spent many years in the insurance industry for a company that was once the largest insurer in the world. We measured the impact on our bottom line for every 1 point in improved retention across a wide variety of products. Of course the larger the customer base, the larger the impact, and insurance and financial services are relatively easy calculations when it comes to answering this question.

But the point of all the above is that the investment in a well thought-out loyalty and customer retention program is ALWAYS a fraction of the improvement in the bottom line, and almost always the top line as well. This makes the decision for C-suite executives much easier, because you're telling them, essentially, that for every $1 you give me I'll return $XX, and it will always be a significant multiple of that original $1 investment.

If you're considering such an investment, just remember that the wrong way to approach this is by making it seem or look like it's just a "cost" of doing business, and we need a "me too" approach. No. This should ALWAYS be presented with both sides of the ledger front and center, with the investment, or cost on one side, and the increased revenue/profit on the other side. One being the direct function of the other. We can show you how to do that.

Let us help you put together the best possible plan with the best possible chance of success. It's easy to put us to work for you. Give me a call, drop me a note, or use our contact form to take the first step. And do it today please!


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