How Much Do Companies Spend On Loyalty Programs

Introduction

Customer retention is the most efficient growth lever an e-commerce brand can pull—but loyalty programs come with real costs and choices. More than 90% of companies run a loyalty program today, and many brands find that the investment pays back multiple times over when designed and managed correctly. At Growave, we help merchants turn retention into a growth engine while keeping tech complexity low with our "More Growth, Less Stack" philosophy.

Short answer: The cost of a loyalty program varies widely depending on program type, scale, and whether you buy a ready-made solution or build custom. Small businesses can launch effective programs for a few hundred to a few thousand dollars annually, mid-size merchants typically budget several thousand to tens of thousands per year, and enterprise-level or bespoke programs can climb into the hundreds of thousands annually. The most reliable way to predict your spend is to map your program design, expected member activity, and the platform and people you’ll need to run it.

This article walks through every cost component you should plan for, practical budgeting frameworks to estimate spend, program types and their typical price ranges, and how to measure ROI so you can justify the investment. Along the way we’ll show how a unified retention solution can replace multiple point solutions and cut running costs while increasing impact—visit our plan pages to explore our plans and pricing if you want to compare real options as you read.

Our main message: loyalty programs are a scalable investment—if you design them with clear goals, realistic budgets, and the right technology, they will increase customer lifetime value, reduce acquisition pressure, and deliver sustained growth.

Why Loyalty Programs Are Worth the Investment

The economic case for retention

Retention is efficient. A small increase in retention or frequency can multiply profits because acquiring new customers is far more expensive than selling to existing ones. Loyalty programs do three things that make them profitable:

• Increase customer lifetime value (CLTV) by encouraging repeat purchases.
• Boost average order value (AOV) through tier incentives and bonus-point events.
• Create referral and advocacy channels that lower acquisition cost (CAC).

Those gains compound. When members buy more often and refer friends, you capture more revenue from a familiar, lower-cost audience. That’s the core rationale for budgeting seriously for loyalty.

Behavioral drivers that make loyalty programs effective

Loyalty programs work because they change customer behavior through clear incentives and emotional connection. Well-designed programs combine:

• Points and rewards (transactional incentive).
• Tiered status (psychological motivation to retain higher status).
• Exclusive access and personalization (emotional value).
• Social proof and UGC (increases trust and discovery).

When these elements are coordinated, members spend more, stay longer, and become advocates.

Why we build merchant-first retention tools

We believe merchants should get durable, merchant-first tech that doesn’t force a scattershot stack of niche solutions. Growave is built so retailers can run loyalty, reviews, wishlists, referrals, and shoppable UGC from one platform—reducing integration complexity, avoiding duplicate data, and delivering better value for money. That reduces hidden costs and helps you scale faster.

What Drives Loyalty Program Cost: The Full Breakdown

There’s no single price for a loyalty program—costs come from many places. Below is a complete set of cost categories to include in your budget.

Technology and platform fees

• Subscription fees for third-party loyalty solutions (monthly or annual).
• Setup and implementation fees for custom configurations.
• Integration costs for CRM, email, POS, and analytics systems.
• Hosting, security, and compliance fees for self-hosted or bespoke builds.

Typical considerations:

• SaaS solutions often bill by store size, order volume, or active members.
• Some platforms include integrations and support in higher tiers; others charge extra.
• The simplest SaaS options can be as low as a modest monthly fee, while enterprise-grade platforms can cost hundreds to thousands monthly or require large one-time professional services fees.

Explore our retention suite to see how integrated tools replace multiple subscriptions and lower overall platform cost.

Reward and fulfillment costs

• Monetary rewards (discounts, cashback).
• Product giveaways and merchandise costs.
• Digital reward costs (e-gift cards, credits—transaction fees may apply).
• Shipping, packaging, and handling for physical redemptions.

Plan this as a variable cost tied to member behavior. Many brands budget a percentage of revenue (often 1–3%) for rewards. The exact number depends on the reward generosity and expected redemption rates.

Marketing and promotion

• Launch campaign costs (email sequences, paid ads, influencer promotions).
• Ongoing member-engagement campaigns (double points days, birthday bonuses).
• Onsite design and content to explain program benefits.

Successful programs require ongoing investment to drive signups and keep members active. Expect higher spend during launch and seasonal peaks.

Staff time and training

• Program strategy and management (loyalty program manager or part-time allocation).
• Marketing campaign creation and copy/design.
• Customer support handling members’ questions and issues.
• Data analysis and optimization.

Small merchants often divide responsibilities across existing roles; growing programs usually benefit from a dedicated manager or a cross-functional retention team.

Implementation and customization

• Custom UI/UX work, email templates, and microsite or account pages.
• API work to connect loyalty data to internal systems.
• Testing and QA for checkout and redemption flows.

Implementation often represents a one-time cost but can be significant if integrations are complex.

Analytics, reporting, and experimentation

• Tools or analyst time to track member cohorts, redemption rates, CLTV uplift, and ROI.
• A/B testing costs for messaging and reward structures.

Good measurement is a requirement, not an optional extra—without it you won’t know which parts of the program are profitable.

Fraud prevention and compliance

• Monitoring for misuse (fake accounts, duplicated referrals, coupon abuse).
• Legal and privacy compliance costs (GDPR, CCPA) and secure data handling.
• Systems or staff to suspend suspicious activity.

Loyalty programs can be attacked for easy financial gain; plan appropriate safeguards.

Maintenance and ongoing platform updates

• Regular updates, bug fixes, and feature improvements.
• Support fees or retained agency time for iterative work.

Even SaaS solutions require ongoing attention to keep the program fresh and functional.

Typical Cost Ranges by Business Size

Below are practical ranges for annual spend tied to realistic program designs. These are ranges—your actual budget will depend on choices above.

• Small merchants and local retailers
  • Estimated annual spend: $500 – $8,000
  • Typical setup: SaaS tier with built-in loyalty, limited marketing, staff time absorbed by existing team.
  • Rewards budget: modest, focused on discounts or free-shipping perks.
• Growing e-commerce brands (mid-market)
  • Estimated annual spend: $8,000 – $60,000
  • Typical setup: mid-tier retention platform, custom templates, targeted marketing, some dedicated staff hours.
  • Rewards budget: invests in higher-value incentives and double-point events.
• Large brands and multi-channel retailers
  • Estimated annual spend: $60,000 – $250,000
  • Typical setup: advanced platform plan, multiple integrations (POS, CRM, CDP), cross-channel marketing, dedicated retention team.
  • Rewards budget: greater variety of perks, physical merchandise, and VIP events.
• Enterprise or bespoke programs
  • Estimated annual spend: $250,000 – $1,000,000+
  • Typical setup: fully custom platform and mobile app, global deployments, advanced personalization, white-glove support.
  • Rewards budget: premium benefits, strong experiential incentives, large-scale marketing.

These ranges reflect typical combinations of platform fees, people costs, and program spend, and assume ongoing management rather than a one-off pilot.

Program Types and Their Cost Profiles

Different formats have different cost structures. Choose a format that matches your goals and budget.

Points-Based Program

Description: Customers earn points linked to purchases and activities, redeemable for rewards.

Cost profile:

• Low-to-medium platform complexity.
• Predictable reward cost if you define redemptions tightly.
• Strong for driving AOV and repeat frequency.

When to choose: Good fit for most online retailers starting retention work.

Tiered Program

Description: Customers progress through levels (Bronze → Silver → Gold) with rising perks.

Cost profile:

• Higher ongoing reward and personalization costs.
• Requires more creative campaigns to motivate movement between tiers.
• Good for elevating high-value customers.

When to choose: Brands with clear spend segments and strong repeat buyers.

VIP / Paid Membership

Description: Customers pay a fee for enhanced benefits (free shipping, exclusive content).

Cost profile:

• Upfront perceived value is critical; requires strong benefits to justify fee.
• Can offset reward costs via membership revenue.
• Requires polished customer experience and strong retention communications.

When to choose: Brands with differentiated service or margin to support member perks.

Cashback / Credit Programs

Description: Customers receive a percentage back as store credit.

Cost profile:

• Highly predictable per-transaction cost but can add up with scale.
• Works well for customers who prefer cash-equivalent value.

When to choose: High-margin businesses or subscription services.

POS-Integrated Programs (In-Store + Online)

Description: Loyalty linked across physical tills and online.

Cost profile:

• Integration costs can be medium-to-high, especially with legacy POS systems.
• Significant ongoing maintenance if multiple terminals are present.

When to choose: Omnichannel retailers who need consistent customer experience across channels.

Enterprise Custom Solutions

Description: Fully bespoke platforms, often with mobile apps and deeply integrated systems.

Cost profile:

• Very high upfront development and ongoing maintenance costs.
• Maximum control and customization.

When to choose: Global brands or verticals with unique regulatory or UX needs.

Gamified Programs

Description: Challenges, badges, leaderboards to increase engagement.

Cost profile:

• Higher creative and development costs to maintain novelty.
• Can produce strong uplift in engagement if executed well.

When to choose: Brands that can benefit from high-touch engagement and have the resources to refresh content.

Building a Realistic Loyalty Program Budget: A Practical Framework

We recommend budgeting across a small set of predictable buckets. Use these steps to build a one-year budget you can present to stakeholders.

Start with outcomes

• Define specific targets (e.g., increase repeat purchase rate by X percentage points, lift CLTV by Y% for members).
• Project the incremental revenue these outcomes create.

Map fixed and variable costs

• Fixed costs: platform subscription, implementation, any one-time professional services.
• Variable costs: reward redemptions, marketing campaigns, support hours.

Create conservative and aggressive scenarios

• Conservative: modest member growth and low redemption.
• Aggressive: rapid member growth and higher redemption rates.
• Model both to see ROI sensitivity.

Sample budget template (annual)

• Platform subscription and integrations: $X
• Implementation/customization: $Y (one-time)
• Rewards budget (estimated as % of revenue or projected redemptions): $Z
• Marketing and launch: $A
• Staff / contracted resources: $B
• Support and fraud prevention: $C
• Analytics and reporting tools: $D
• Contingency (10–20%): $E

Estimate ROI

• Forecast incremental revenue from members (uplift * member sales).
• Subtract total program cost to estimate net gains.
• ROI = (net gains – total investment) / total investment * 100

We include a robust analytics toolkit in our retention suite to make this tracking simpler and more accurate; see how our built-in loyalty and rewards features streamline measurement and budgeting.

How To Forecast Reward Liability and Breakage

A key complexity in loyalty budgeting is "liability"—the future cost of points outstanding—and "breakage"—points that go unredeemed.

• Estimate average points issued per member per month based on AOV and earning rules.
• Estimate redemption frequency and average redemption value.
• Use a conservative redemption rate for initial budgets; plan for “redemption shocks” during promotions.

Breakage reduces net cost but is unpredictable—plan for scenarios where breakage declines (e.g., improved member engagement leads to more redemptions).

Hidden Costs and Common Pitfalls

When estimating costs, watch for these often-missed items:

• Integration overruns: APIs and custom checkout modifications can take more dev hours than expected.
• Support surge during launches or promotions: plan extra customer support capacity.
• Promotional over-indexing: frequent double-points or heavy discounts can erode margin if not modeling incremental sales.
• Legal and tax complications: rewards can have tax implications in some regions.
• Data migration and reporting delays: transferring historical data into a loyalty platform is time-consuming.

Avoid these by building a realistic schedule, testing with small segments, and using a single solution that minimizes integration complexity—our retention suite reduces many of these touchpoints.

Choosing Between Build vs Buy

Three approaches exist: in-house build, agency-led custom development, or SaaS platform. Consider trade-offs:

• In-house build
  • Pros: Full control, tailored experience.
  • Cons: Long timeline, high development and maintenance costs, requires in-house expertise.
• Agency/custom dev
  • Pros: Faster than full in-house, external expertise.
  • Cons: High professional services fees, ongoing dependency on agency.
• SaaS retention suite
  • Pros: Faster launch, lower initial cost, regular feature updates, scalable tiers.
  • Cons: Less absolute customization (but many flexible platforms offer deep configuration).

We design our platform for merchant-first ease with enterprise options available to reduce total cost of ownership while delivering advanced features. If you’re evaluating options, use the checklist below to compare providers:

• How many core retention functions are included (loyalty, referrals, reviews, wishlists, UGC)?
• What integrations are native versus custom?
• How is pricing scaled as orders or members grow?
• What analytics are included and how easy is it to export data?
• What support SLAs are available?

If you want a quick, practical comparison, you can install Growave from the Shopify marketplace or explore our plans to see tiered features and how they align with common budget levels.

Reducing Cost Without Reducing Impact

Here are practical ways to keep costs under control while maintaining program effectiveness.

• Start simple and scale: Launch with a core points structure and a compelling welcome reward; add tiers and gamification once you see consistent member behavior.
• Use non-monetary perks: Early access, exclusive content, and community recognition cost less than physical rewards but can be highly motivating.
• Design for profitability: Offer variable redemptions (e.g., discounts conditional on minimum spend) to protect margins.
• Use integrated retention suites: Replacing multiple single-purpose solutions reduces recurring subscription costs and simplifies data flows.
• Automate communications: Use lifecycle automations to re-engage dormant members at low cost.
• Measure and iterate: Turn off or reprice offers that don’t deliver incremental revenue.

Growave’s approach is built on these principles—our unified retention ecosystem replaces multiple tools and reduces overhead while increasing the program’s strategic impact.

Measuring Success: KPIs to Track and How Often

To evaluate your program, make these KPIs part of your regular reporting cadence:

• Member conversion rate (non-member → member) — weekly or monthly.
• Repeat purchase rate for members vs non-members — monthly.
• Incremental revenue from members (baseline comparison) — monthly/quarterly.
• Redemption rate and average redemption value — monthly.
• CLTV lift for members vs non-members — quarterly.
• Marketing ROI for loyalty campaigns — campaign-level reporting.
• Churn or attrition among members — quarterly.

Maintain a control group or historical baseline to isolate the program’s impact. Our retention analytics dashboard makes cohort comparisons straightforward so you can focus on optimization rather than data wrangling.

How to Run a Cost-Benefit Scenario: A Practical Example (Framework, Not Fictional Case Study)

Follow this framework to model ROI without relying on fictional stories.

• Define the member segment and expected conversion rate.
• Estimate average spend per member and purchase frequency post-launch.
• Estimate the incremental lift the program will generate (e.g., members buy 20% more often).
• Calculate incremental revenue: existing revenue * uplift percentage.
• Sum annual program costs (platform + rewards + staff + marketing + support).
• Compare incremental revenue to total program cost to compute ROI.

This structure helps finance and leadership evaluate whether the program delivers acceptable returns under conservative and optimistic scenarios.

If you’d like hands-on help running these numbers for your store, you can book a demo with our team and we’ll walk through scenarios tailored to your business.

Operational Checklist: Launch To 90 Days

To reduce unknowns and control early costs, follow this operational checklist:

• Pre-launch
  • Finalize program rules, earn and burn flows, and legal terms.
  • Design member-facing pages, email templates, and in-checkout messaging.
  • Test end-to-end redemption flows and edge cases.
• Launch week
  • Soft launch to a subset (top customers) to catch issues.
  • Monitor support channels and escalation paths.
  • Activate launch marketing and welcome sequences.
• 30–90 days
  • Evaluate member adoption and redemption patterns.
  • A/B test welcome reward or point-earning accelerators.
  • Optimize communications to drive higher redemption at profitable thresholds.

This phased approach minimizes surprise costs and helps iterate toward a profitable, repeatable formula.

How a Unified Retention Suite Lowers Total Cost of Ownership

Using multiple specialized tools increases integration work, duplicate subscriptions, and fragmented data—each adds cost. A unified retention suite like Growave reduces:

• Subscription overlap by replacing 5–7 separate platforms (loyalty, referrals, UGC, reviews, wishlists, shoppable social).
• Integration expenses because data flows inside one ecosystem.
• Maintenance overhead and internal support time.
• Time to launch thanks to built-in modules and templates.

We’ve built Growave to be a merchant-first retention solution that streamlines operations while giving merchants the flexibility to grow. See examples of how brands implemented cohesive retention plans on our customer stories and inspiration pages to learn practical setups and outcomes.

Check our customer stories for program inspiration and proven approaches: explore customer stories and inspiration.

When To Invest More (And When To Hold Back)

Invest more when:

• Member behavior proves positive (higher repeat rates and CLTV).
• You have solid measurement and can prove incremental revenue.
• You’re entering new markets or adding channels that require better integration.

Hold back or optimize when:

• Redemptions are eroding margins without clear incremental sales.
• You’re over-discounting to drive adoption instead of designing valuable perks.
• Your measurement is weak—stop and fix analytics before scaling.

Reducing Risk: Pilot Approach and Governance

A phased pilot helps validate assumptions:

• Run a 90-day pilot with a limited member segment and capped rewards budget.
• Monitor core KPIs and operational load (support tickets, redemption issues).
• Decide on expansion only after the pilot produces a positive trend in retention or CLTV.

Effective governance matters—define who approves promotions, who monitors fraud, and who handles escalation. That reduces unexpected costs from mismanaged promotions.

How Growave Helps Control Costs and Maximize ROI

We build with merchants in mind because our mission is to turn retention into a growth engine without adding needless complexity. Key ways we lower your TCO:

• Single platform for loyalty & rewards, referrals, reviews & UGC, wishlists, and shoppable social—reduces multiple subscriptions and integration work.
• No-code campaign builders and templates that cut implementation costs and time.
• Built-in analytics that connect member activity to sales so you can measure ROI quickly.
• Scalable pricing with tier options and a 14-day free trial so you can test before committing—see plan details to compare what’s included.
• Proven tools for fraud protection, email integrations, and account pages that reduce custom dev needs.

If you want to see how your program could run on a single retention suite and get a realistic cost projection, book a demo and our team will work through your priorities.

You can also install Growave from the Shopify marketplace to begin exploring features hands-on.

Common Questions Merchants Ask During Budgeting

• How much should I allocate for rewards? Many brands allocate between 1–3% of revenue as a starting point, but model based on expected member behavior and redemption rates.
• Should we pay for a premium platform tier? If you need deeper integrations, multi-store support, or dedicated account management, a higher tier can save costs long-term by reducing custom development.
• How quickly will we see ROI? Many merchants see measurable ROI within 6–12 months if they design for profitability and measure effectively.
• What team do we need? Start with shared responsibility (marketing + e-commerce + customer support). Add a dedicated loyalty manager as the program scales.

If you want a tailored discussion for your store size and traffic, we recommend you explore our plans and pricing to find which tier lines up with your projected order volume and features.

Conclusion

Loyalty programs are not free, but when planned intentionally they are one of the most cost-effective engines for sustainable growth. Build budgets that include platform fees, rewards, marketing, and staff, and always pair investment with clear measurement. Wherever you are in the lifecycle—starting small or scaling to enterprise—prioritizing meaningful rewards, tight measurement, and a single, merchant-first retention platform will keep costs predictable and maximize ROI.

We’re trusted by more than 15,000 brands and hold a 4.8-star rating on Shopify because we focus on merchant-first design and measurable growth. If you want a solution that replaces multiple tools and lowers total cost of ownership while delivering powerful retention features—see plan details and compare options.

Explore our plans and start your 14-day free trial today. Explore our plans and pricing

FAQ

How much should a small e-commerce store expect to spend in the first year?

Small stores commonly spend a few hundred to a few thousand dollars in year one when using a SaaS retention platform and modest marketing. Keep launch expectations focused: a clear points structure, a welcome reward, and email-driven activation often produce the most predictable early returns.

What ongoing monthly costs should I anticipate after launch?

Ongoing costs include platform subscription, rewards liability tied to member activity, marketing for ongoing engagement, and staff time for management and support. For many merchants this ranges from a low monthly SaaS fee plus a variable rewards pool you manage as a percentage of sales.

Can a loyalty program pay for itself?

Yes—many merchants see positive ROI once membership adoption and repeat behavior lead to measurable CLTV uplift. The key is measurement: track incremental sales from members versus non-members and account for both platform and redemption costs.

How do I decide between a basic points program and a paid membership model?

Choose a basic points program if your priority is increasing frequency and broad participation. Consider a paid membership when you can offer premium benefits that justify a subscription fee and when your customer base values convenience or exclusive access.

If you want to run a budget model for your shop or see how our integrated features reduce complexity, book a demo or install Growave on Shopify and try the platform risk-free. Explore our loyalty features to see how integrated rewards and engagement tools can shrink your stack and grow CLTV.