Launching a B2B loyalty or incentive program is a strategic move that can significantly impact your business. The initial cost may seem daunting, but the potential for a profitable return makes it a worthwhile investment. Your role in justifying this value is crucial, as it’s not just about getting sign-off but about shaping the future success of your business.
Clarifying the return on investment (ROI) is critical to the initial internal approval and the ongoing acceptance of your program by your customer base and audience. Your program’s cost needs to align with the potential and actualised outcome of the sales performance, which is the perfect place to begin an ROI review.
A significant factor in the difficulty of recognising the ROI of a B2B loyalty or incentive program is the varying resources and funds required from limited budgets and multiple stakeholders. Additionally, quantifying a large percentage of the value drawn from programs is challenging.
Your program is capable of providing additional metrics and business outcomes tied to customer insights, which are more significant than other comparable strategies and associated costs can usually offer.
In contrast to other sales and marketing tactics, a B2B loyalty program’s costs are traditionally 100% based on sales performance. Your target audience—be they existing customers, new acquisitions, channel partners, or distributors—must fundamentally change a measured sales behaviour to earn and redeem rewards.
With the availability of sales performance details, calculating an ROI for your B2B program becomes far easier. While the ROI formula is simple, it requires access to accurate pre- and post-program sales data.
Before sharing calculations and investment metrics to justify a B2B loyalty program, it’s essential to consider the critical focal point of the ROI discussion – program costs. We have to break down the costs through the entire program scope and proposal stages to defend the cost to stakeholders and get great programs over the line – it’s part of our day-to-day business!
The four main cost areas of B2B programs are:
This is where the ROI conversation begins, as the program’s ultimate cost must deliver relevant sales improvements and financial returns against the ongoing expenses.
Your reward choice will influence the program’s ROI through sales performance. Still, the budget is usually accrued from sales, and costs can differ.
Since 1996, our loyalty and incentive program has consistently delivered our clients an average ROI ranging from 2:1 to 4:1. In fact, growth incentive programs can even see ROI reach double digits, especially when built around self-funded rewards. This potential for high returns should motivate you to invest in and optimise your B2B program.
The simplified formula to calculate your ROI is:
Customers sales profit increase over program period last year – Yearly program costs including rewards ÷ Yearly program costs in rewards x 100%
This is the easiest way to review active customer growth or sales retention over the program’s lifespan, including program costs. However, it does not consider the actual sales and customer performance influences. Your business can apply this formula to an individual customer to understand their lifetime value. It allows you to review the customer’s sales increase against the rewards earned.
Access to sales data allows you to set a sales baseline and monitor the incremental growth your B2B loyalty or incentive program has delivered through the value increases and emotional connections built within your customers.
Your program also provides other trackable metrics, such as customer engagement, repeat purchase rate, and customer satisfaction. While ROI is critical to financial and growth reviews, these other metrics lead to more comprehensive performance and insight goals that go hand in hand with growth.
Target-based incentive programs can deliver a higher overall ROI. They can have sales metrics to reward participants over and beyond a defined sales period or traditional organic growth. This protects your business from paying a reward cost unless your customers meet defined sales goals.
Your brand can influence and motivate customers’ expected behaviour through your target design. This expectation allows your program manager to construct the program around individual customers, customer groups, and varying channels for maximum benefit.
Your program can significantly benefit your brand’s bottom line by reducing customer churn. With a conservative estimate of a 2:1 ROI, every dollar invested in the program returns $2 to your business from your customers. This level of customer retention is a powerful indicator of your program’s value. It should give you confidence in your business strategy.
A business will pay 75% more to gain a new client than retain an existing one. Retention is a massive return in dollars alone, and customer churn is far more costly than just considering the lost revenue.
This metric is harder to define within a formula; however, a B2B program focusing on rewards and benefits gives you an alternative price reduction to win deals. The value earned through the program will open up rewards to influence sales and wallet share.
If you’re confident that your offerings, a loyalty program can keep customers them and offer them more.
Instead of discounts and price matches, conversations can be based on points or rewards earned from purchases. This keeps margins high, and customers engaged.
While this metric cannot be incorporated into a financial formula, the importance of building an emotionally connected customer base who advocate for your brand and program is worth its weight in gold.
Your program can be an efficient and effective marketing tool for building a reliable customer database. It allows you to personalise your entire marketing output—both communications and UX—and reduce any potential growth left behind.
Your program is a valuable source of customer data, which can be challenging to gather in some industries. Your B2B program efficiently gathers the customer’s individual data and behavioural and purchase activity data—these are used to award values and fulfil rewards.
Understanding these interactions and segments allows you to personalise communications, recognise the customer’s individual value, and suggest rewards based on past behaviour. This all drives sales.
Personalisation has been discussed previously. We regularly discuss the importance of segment-based marketing, which drives customers’ communications on how and when they want them. Your program communications will see higher open rates than typical marketing sends based on personal rewards and insights. This can provide an ROI-justified avenue to create and strengthen sustainable relationships with your target audience.
Your program’s ROI is critical to your brand’s development and success. By understanding this and the other relevant metrics defining your business’s success, your program can develop and evolve, shaping a specific impact on customers and sales.
When your sales market is unpredictable, your program should adapt alongside it. Your ROI may vary over time, as reward values and customer sales behaviour can change based on a fluctuating market or other external economic factors.
It’s always a good idea to regularly review and assess your program’s ROI to ensure that it is providing a positive return. The information gathered from these reviews can help your business make informed decisions about the program’s current state and perform ongoing optimisation to achieve the best possible results.
