What are the benefits and challenges of using a third-party loyalty platform vs. building your own?

Most people choose Third-party platforms unless they are a tech startup that already launches a lot of software on a regular basis. The key test when launching a loyalty program is to gauge demand for the program. This is done by crafting a theory after doing customer interviews, reviewing market trends and identifying challenges in the business. Launching on a platform should allow for faster testing of the theory on demand. Ideally, design a simple to understand program that addresses a few challenges identified when creating the theory on demand. From there, pick a vendor that fits the design of program and works with your existing tech stack. Start with the design and work backwards to select the platform.

If you choose a third-party loyalty technology vendor, you’ll be licensing ready-made software. This kind of technology tends to be more sophisticated and come with loads of out-of-box capabilities. Plus, to stay competitive, vendors generally introduce new innovations constantly. Third-party technology represents the golden middle: they require active planning and cooperation on the company’s behalf, yet the technology itself is readily available, so there is very little development required in order to launch. This is especially true for pure-play loyalty technology providers. And because companies are only paying for the technology, it’s more cost-effective than delegating the entire project to an agency.

Buying is generally cheaper than building software in-house. The main reason for the "build" is the level of control, allowing businesses to tailor loyalty solutions to overarching vision and company requirements. 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. 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.

Choosing a third-party provider can bring lots of benefits; a ready-made solution that you can start using straight away, a roadmap of features that will continue to roll out onto your programme and experience and knowledge of loyalty programmes across sectors that you can benefit from. Using a third-party platform may mean there are some compromises you have to make and you should talk to the provider to see how you could use their functionality to still achieve your objectives. When looking for a partner to work with, question their security and data management process, their roadmap of features, how they handle deployments and how you can receive consultancy and insights to use to adapt your programme.

Developing proprietary technology may be expensive and time-consuming, even for large enterprises, and there's a risk that the product may become outdated. We've seen many cases where companies opt to shift from custom-built legacy loyalty systems to more agile, maintenance-friendly SaaS platforms. You can select a 3rd party loyalty platform that allows you to create bespoke loyalty programs through minor customizations and configurations. However, the loyalty landscape is rapidly evolving, with consumer expectations varying. Plus, with technological advancements in areas like web3 and AI. Therefore, choosing a technology partner who is innovative and understands your specific loyalty needs is crucial for staying competitive.

In-house or DIY technology means that you have to dedicate your own resources to developing the loyalty program, from coding the loyalty engine to building the interface. On the plus side, the end result is tailored to your specific needs. The downside, however, is that there’s a higher risk of your technology — and innovation in general — stagnating. Although delivering a custom platform that meets customer expectations is becoming more and more challenging as technology gets more sophisticated, a large number of brands still prefer this route. According to Antavo's Global Customer Loyalty Report 2023, 52.3% of loyalty programs are managed by in-house technology.

Co-creation is a vital part of building a successful loyalty platform for any company. Since the company understands its customers, it can provide valuable input in creating a custom-designed solution. While this process may take longer than an off-the-shelf solution, it ultimately results in a platform that better meets customer needs, driving higher engagement and loyalty.

Building your own loyalty platform with an in-house custom software solution should enable your business to achieve a unique, personalised programme, tailored exactly to your needs. The success of this approach however will depend on a number of factors including the knowledge and skill level of your internal resource, the ability to adapt and flex your programme as your customer's needs change and the ability to innovate and learn from other programmes to ensure that your programme is kept fresh and engaging. If you do choose this route, we would recommend consulting with external providers during the build and planning phase to ensure you are mitigating any risks that others have learned through experience.

Opt instead for an industry specific platform, acting as SaaS. It will solve your immediate challenges while they are building the tools you'll need a year from now. You will save in costs, and people time and benefit from requests made in the past by similar clients worldwide.

Another aspect is having staff that is capable to develop your custom platform. What will happen long term if those who develop the platform leave the company. Will others be able to pick up developing the platform without sacrificing quality? These are factors to consider when developing in-house or buying from major companies.

Build vs buy will always yield debate when introducing new tech into an organisation, and outside of the common arguments (more innovation from collaborating with best in-class, flow of new features, tried & tested, scalable etc), there's also the ability to learn and collaborate from a wider community than just yourselves. Working with a loyalty platform partner who facilitates the bringing together of non-competing retailers (e.g. grocery retailers in different geographies) regularly, to share ideas, results and even future thinking, means you have access to a like-minded network - which shouldn't be underestimated. Our product-led and Exec communities regularly receive praise & gratitude, with the mindset we are all 'in it together.'

Consider the time to market, and all the additional sales you can generate at the earliest using a Turn Key solution. Partner with a company with proven track records in your industry, a company who understands your challenges and has built tools for your specific needs.

Pros and cons for each option Third-Party Loyalty Platforms: Expertise: built by professionals who understand Loyalty programs. Cost-effective: Avoif high development costs, and the need for an in-house tech team. Fast implementation: With a ready-to-use solution, you can launch your loyalty program faster, saving time and effort. However, there are also challenges to consider: Lack of customization: 3rd party platforms have limitations when it comes to tailoring the loyalty program to your brand and customer needs. Brand association: Depending on the platform your customers may associate your loyalty program with the platform provider rather than your brand