Solving the build vs. buy dilemma when building loyalty solutions

The build vs. buy dilemma is a common one, faced by marketers and tech people. As more businesses embark on launching their loyalty programs, they are often faced with the question of whether to create their own loyalty solution in house or purchase an off-the-shelf loyalty software from an external vendor. While both come with their own set of advantages and disadvantages, the build vs. buy dichotomy is actually a false one - there is no longer the need to limit your business to one or the other. Instead, you’re better off both building and buying in order to ensure seamless customer journeys and maximum benefit for your end customers.

Key takeaways

• The build vs. buy dilemma is ultimately a false and an outdated one. Companies no longer have to limit themselves to just one of the two and can instead enjoy the benefits of both.
• When buying, buy things that are foundational, boring and that underlie every other loyalty program on the market.
• As for building, build things that are unique to your business and benefit the end user in a tangible way. Build things that will make you stand out from the competition, such as exciting interfaces, seamless integrations, memorable customer journeys and original features.‍
• Use headless software that follows MACH principles and composable architecture to help you deliver your loyalty solution.

Building loyalty program solution from scratch 

The build vs. buy dilemma has persisted for a while now, and it remains one that companies and many of our clients still ask us about regularly. This isn’t surprising given the wide range of, often overlapping, benefits and drawbacks of the two options. 

The “building from scratch option” is viewed as superior in certain circles for a number of reasons. The main one is the level of control, allowing businesses tailor their loyalty solution to their overarching vision and company requirements. This relates to both the design and development stages as much as any improvements that need to be made down the line, which could otherwise be impeded by the ready-made solution. 

Companies who decide to develop a bespoke loyalty software also tend to have a better understanding of their own customer base as well as the fact that providing more personalized customer experiences delivers a higher ROI.

Data is another important factor propelling enterprises to take on the “building from scratch” venture. Developing a loyalty solution internally offers freedom to choose both the tech stack and the place where the solution will be hosted, which is crucial for businesses with sensitive data and high security requirements.

For all its benefits, the main issue with building from scratch is its lengthy time to market, high costs of development and all the costs and resources associated with maintaining the solution in the future. More importantly, however, the venture is one that has expensive, unavoidable mistakes written into. While there’s nothing wrong with a little trial and error now and again, when it becomes something that drains your finances and distracts you from your business’ real goals - i.e. making your customers happy - then that’s a no-win situation by any standards.

A key issue with this approach is that it diverts your team’s attention into building a backend system, which is not essential instead of focusing on the most important part: creating unique and unforgettable customer experiences that will make the brand stand out from the competition.

Buying loyalty software from an external vendor

The “off-the-shelf” option offered by SaaS companies is one that also demands some compromises. However, what makes it particularly appealing to businesses seeking to invest in loyalty programs are the cost and resource savings, in addition to the quality assurance.

By purchasing a ready-to-use box solution, you receive a loyalty system that the vendor has not only invested a lot of money into, but has also been tried and tested by many many brands, providing you with a level playing field in terms of competing in the market and a faster time to market. The program will also be typically integrated with other systems and processes, such as POS and CRM systems, making it more user-friendly for both the business and its customers.

Relying on the experience of a loyalty software vendor means that you get to avoid a lot of the costly mistakes that you would have inevitably faced building a loyalty program application from scratch. 

The dilemma wouldn’t have been a dilemma for so long had the box solution also not had its set of drawbacks. One of them is the restrictions you face with regards to the level of control and customization you are able to exercise with a ready-made solution. 

The end result often is that marketers are forced to re-adjust their primary vision and compromise on the desired shape of their loyalty program solution due to the software’s limitations. As a result, you may not be able to offer the engaging loyalty program experience your customers would respond to. Instead, you’re left to rely on a cookie cutter model, leaving far too much to chance.

At a time when loyalty professionals - as found in our Loyalty Trends Report - increasingly report a lack of originality and a “sea of sameness” in the loyalty space, this is in fact a problem. It’s simply not enough to offer customers yet another iteration of the same thing with a different logo planted on it, and companies looking to compete should be pushing the envelope a bit more.

Additionally, vendors offer a lot of features that simply aren’t needed for double systems and that are already in place, for example, CRM, promotional engines, or marketing automation. 

‍And that’s all true in the case of legacy, all-in-one solutions based on a monolithic model, which may work when you’re just starting out, but as you decide scale up and expand your business, you’ll inevitably find the model restrictive and inflexible.

Scratch the build vs. buy dilemma - do both!

What if we told you the build vs. buy dilemma was no dilemma at all? What if you didn’t actually have to choose just one? 

Call us heretics, but we’re of the belief that the dilemma is ultimately a false one, and definitely an outdated one. This is also a viewpoint now shared by big players in the loyalty industry and beyond who understand exactly where their priorities lie: making their customers happy.

Instead of restricting yourself to either of these two approaches, it’s time to dismantle the whole dichotomy and give your business the chance to get the best of both worlds. What this means is building what is absolutely core and truly unique to your company, and diverting your resources into areas where you need flexibility, control and speed to adapt to your customer behaviours and business needs.

Your money is better spent going into developing engaging interfaces, jazzing up your customer journeys, investing in smoother integrations and original features, which will leave a lasting impression on your customers. This, after all, is the end goal of every loyalty program on the market.

On the other hand, when it comes to buying, buy only that which is common and foundational as opposed to reinventing the whole wheel. Buy that which is not the heart of your business: the standardized pieces that underlie every other loyalty program on the market. After all, there is little value in using up your resources, risking a longer time-to-market and setting yourself up for further costs down the line only to create something that has been solved already. 

To achieve true success with loyalty marketing, companies need to direct their focus to what really matters: delivering polished and engaging customer experiences instead of building backend components that are not visible or of tangible value to end customers.

The future of building fully customized loyalty program solutions fast with the API-first approach

With the API economy in full swing as investment soars, according to Forbes, companies are better suited than ever to pick and choose the blocks that make up their loyalty program solutions. The new generation of API-first and headless loyalty engines offers the ability to quickly build dedicated loyalty solutions based on ready-to-use loyalty and gamification features that can be easily merged with existing systems.

The headless approach enables the incorporation of user interfaces of any shapes, across all touchpoints, while also enabling a quick application of any required changes. Thanks to a flexible set of building blocks, enterprise clients can benefit from fast and seamless implementation of original and engaging loyalty features without many of the issues posed by legacy loyalty systems, facilitating highly personalized user experiences minus the usual trade-offs such restricted autonomy, scalability or customization.

Final thoughts

Thanks to advances in technology and the rise of the API economy, dilemmas such as the “build vs. buy” one are no longer dilemmas at all - they’re simply the remnants of an older way of thinking in both loyalty and beyond. This means that you are no longer limited to either option and can enjoy the benefits of both.

Choose the “build and buy” line of action where you can use the composable approach for building a loyalty solution; buy ready-to-use systems that follow MACH architecture, and focus the majority of your efforts on delivering memorable customer experiences that will set you apart from the competition and convert more customers than ever.

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To get some loyalty program inspiration, check out the Top 100 Loyalty Programs report, or peek into the future of the loyalty industry with our Loyalty Trends 2023 research.