Seven Metrics for Measuring Success in Customer Loyalty Programs

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In the modern business environment, you need to provide more than just a great product or service. Being able to connect with your target audience on a personal level can help to ensure your customers feel valued, and that their opinions and preferences have a significant bearing on the development of your offering.

That’s where customer loyalty programs play a key role in marketing strategy. The benefits of these loyalty programs are vast and varied as they help you to build relationships, retain your existing customers and increase their lifetime value to your company.

And the statistics reflect just how important these programs can be, to both business and consumer. For example, studies show that loyalty members contribute up 43% of sales, while 69% of customers say their choices are influenced by the loyalty rewards on offer.

But no two organisations are exactly the same, and success for one may mean something entirely different to another, depending on the product, industry and a host of other factors. With that in mind, here are some of the key metrics you can use to measure the effectiveness of your loyalty program.

Participation rate

Out of your entire customer base, how many are signed up to the loyalty program? If your participation rate is low, it might be time to review the way your program is set up, how it’s marketed or the type of rewards it offers.

Engagement rate

This is a way to look at the participation rate in more granular and relevant detail. It displays how many of your customers are actively engaged in using the program, as there are likely to be those who sign up but do not utilise it.

Redemption rate

This is a particularly common metric in ‘earn and burn’ programs, where customers redeem the points, coupons or vouchers they have accrued when making purchases. The redemption rate reflects how many points are redeemed in relation to how many are issued.

Incremental sales

Is your program having a direct effect on the number of sales you make? How many of those sales would not have happened if the program had not been in place? If these numbers are low, it’s perhaps an indication that the program is having little bearing on actual revenue.

Member value

As previously touched upon, increasing customer lifetime value is a major benefit of a loyalty program. If a member’s CLV is greater than that of non-members, the program is achieving one of its primary objectives.

Spend frequency

How often are your members purchasing your products or services? Those who have signed up to the loyalty program should be gaining access to the best offers and to new products before non-members, with the aim of increasing their spend frequency.

Referral rate

Your loyalty members can also prove invaluable as brand ambassadors. If they enjoy your product and the rewards of your program, they’re increasingly likely to recommend you to their friends and family. This in turn increases participation and engagement and generates further business.

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