Solving the build vs. buy dilemma in loyalty software development

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Building loyalty programs is a game of delivering unique value to your customers. New loyalty marketing trends highlight the need to find your own way, stand out from the crowd, and surprise your customer. The right loyalty program should fit your company's offering like a glove.  

For many years, entrepreneurs had to pick between buying ready solutions and building their own that were made from scratch. In the modern eCommerce market, the answer to the build vs. buy dilemma is no longer binary. To stay efficient, you must strike the right balance in customizing existing solutions to combine the advantages of both approaches and minimize drawbacks.   

Which path should your business take on a scale from building its loyalty software to buying it from a third-party provider? Let's start by exploring the pros and cons of each option. 

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Out-of-the-box loyalty programs 

Loyalty software aims to help your businesses build long-lasting relationships with their customers, incentivize repeat purchases, and foster brand advocacy. Out-of-the-box loyalty solutions are proven ways to do that if you're not afraid of providing the same things as many other loyalty programs. 

Buying a market-ready loyalty program does seem like a sweet deal. There are plenty of solutions on the market to choose from. All you need to do is to select a third-party provider that offers a pre-built loyalty program that fits well with your requirements. 

It’s ready to roll 

Ready-to-market software does what's written on the can. You can take it off the shelf and apply it to your business right away. It allows you to implement a cost-effective loyalty program quickly and efficiently. 

You don't need technical expertise 

The obvious advantage is that you don't need internal development resources. The third-party providers take care of updates, and their solutions scale as your business grows. 

Your loyalty program customization is limited 

Well, an out-of-the-box solution is not your own. If you have a strong vision and unique ideas about what you want it to look like, they might not match the provider's vision. Additionally, depending on their software architecture, it might be challenging to implement it as an extra feature. It limits your flexibility to deliver unique value and adjust your loyalty programs to your needs and brand identity. 

You might not have total control over the data 

International regulations are getting strict, and your solution must process data. Depending on the provider's data privacy policies, you may have limited control over data collection and analysis. Remember to analyze this issue before deciding on your new loyalty software. 

Custom-built loyalty software 

If you're focused on growing your loyalty strategy, you’ll always face certain technical limitations with out-of-the-box solutions. They may lack specialized tools to customize your offering or automate it. Customization allows your loyalty program to grow to ensure proper customer retention and acquisition. Facing those boundaries means that your business has outgrown the market-ready tech suite. You're gravitating towards custom software.  

Building your own loyalty software from scratch allows you to come up with any crazy idea and go with it. There's no doubt that it gives you the freedom to deliver your loyalty programs the way you want, but it might cost you a lot.  

It can be perfectly customized 

Building your own loyalty software involves lengthy designing, development, and implementation processes, but the result is tailored to meet the specific needs of your business. It's optimized for your desired list of features and perfectly aligned with your unique brand identity.  

The development process gives you control over all the aspects, functionality, and data collection of the loyalty program and allows it to plug into your systems and processes. 

It's expensive to build and maintain 

If you're thinking about building your own solution to avoid licensing costs, you might want to reconsider. While software development itself is expensive, the real argument in buy vs. build might be the high recurring maintenance costs of custom solutions.  

What’s more, you have to remember that building a solution from scratch is often a process of trial and error. While it builds your team’s expertise in loyalty software development, their main goal should be focusing on driving loyalty marketing actions and delivering outstanding customer experience. It diverts their attention, slowing them down and entangling them in long months of building your solution. Taking all that into account, developing software from scratch might be much more expensive than anticipated.

However, at a certain business scale, building your own solution might be worth it. If your experts already have some expertise in this field and you have spare developers warming the bench, leveraging all this will allow you to create custom loyalty software at a lower cost.   

It takes time to roll out 

Building software can be time-consuming. A long time to market pushes you into a couple of months of generating costs before you'll be able to show the first results from loyalty marketing. 

The middle way: customizing loyalty solutions 

Customizing an existing loyalty solution is a way to achieve a personalized loyalty program while keeping costs at a reasonable level. 

If you’re looking for a solution that will give you plenty of options and be easy to integrate with your architecture, the API-first approach is your ally. It encourages building your own ideas on top of the provided software. It’s a way for businesses to truly make the best of both worlds.

As an example, take a look at two of our customized projects built with Open Loyalty: 

Drop Tank case study 

The Drop Tank loyalty program was huge in scale, and it required adequate support in its loyalty software. The architecture was based on Open Loyalty, but it had to be plugged into Drop Tank's Oracle database and architecture. We built a cloud-based system based on Kubernetes that was able to process 300,000 transactions per day. 

You can find the details in the Drop Tank case study

Insurance provider case study 

In this case, the client had already decided on the Open Loyalty solution. They wanted to personalize it to check all the boxes while handling over 30,000 customers smoothly.  

We customized and implemented the project in three months. Read more in our insurance provider case study.  

Final thoughts 

"The ownership problem is the key question to answer. You should keep an eye on your company's goals, objectives, and key results (OKRs), even profit and loss, or whatever other indicator of success you use. Then, choose the components that will let you maximize it. " 

Piotr Karwatka, Build vs Buy – a winning CTO guide   

Building your loyalty program isn't simply outbidding your competition. You have to understand the unique value provided by your business, present it properly, and find the proper tools to stimulate buyers' decisions. 

Ultimately, the decision of whether to build or buy loyalty software will depend on your unique needs, resources, and goals. You must pick the sweet spot on a scale from the most cost-effective to the most personalized. Buying loyalty software from a third-party provider may be more cost-effective, while building in-house provides the best control and flexibility. To find that spot, you need to start with a sound loyalty marketing strategy.  

Customized loyalty software can be an efficient tool for driving customer loyalty and business growth. If you want to learn more about modern loyalty solutions, we're happy to help.   


Published March 2, 2023