A base of loyal customers is a profoundly valuable asset to any business, organization, or brand. They offer frequent purchase cycles, higher profit margins, a steady customer base, help in attracting new customers, and build a positive brand reputation through word-of-mouth marketing and other marketing techniques. According to HubSpot, if customer loyalty marketing results in higher customer retention by just 5%, it helps boost profits by 25% to 95%.
Undoubtedly, strategizing and implementing a loyalty program requires thorough market research, vigorous planning to increase customer engagement, and huge investments. But the question lies in measuring the success of a customer loyalty program. Although brands invest in taking comprehensive initiatives to make a successful loyalty program, the brands must also measure and review loyalty programs for more effective results.
So, how can a brand measure or review its loyalty programs?
- Net Promoter Score: NPS or net promoter is a customer loyalty and satisfaction measurement tool that helps brands understand the customer preferences and know how likely they are to recommend your product or service to others on a scale of 1-10. This score is a powerful metric that presents a correlation between a company’s growth and high NPS scores and helps brands work on fundamental customer interactions. Thus, companies try hard to deliver high-quality services to achieve high scores. According to Clevertap, companies who score high in an NPS survey grow more than 2x the rate of their competitors.
- Measure CLV: To have a high CLV, you need to cater to the demands of your customers so that they continue to make repeated purchases from you. It is the key metric that tells you about the financial value, the loyalty of each customer, helps in brand growth, and brand sustainability. CLV is determined by multiplying your customer value by average customer lifespan. CLV is the best way to understand the needs, wants, and demands of your target audience. It helps you gain more loyal customers. Acquiring a new customer is between 5x and 25x more expensive than retaining an existing customer. So, calculating CLV always seems a great idea to improve the marketing of a brand.
- Redemption rate: RR counts the number of customers who have redeemed their point-based loyalty rewards as cash or by receiving free offers. To measure RR, the total number of customers who redeem their rewards is divided by the number of customers that have earned those rewards. In case the results are lower than 20%, then the brands should offer various ways that allow customers to earn points. Moreover, retailers can use location-based marketing to offer coupons/rewards to customers based on their location. It helps in improving redemption rates.
- Average Order Value: AOV or Average Order Value is calculated by dividing the total income during a given period by the total number of orders made by a customer. It is a very critical metric for all business types used to scale profits and revenue growth. It helps a business to keep track of every dollar that is spent on each order across all sorts of business marketing channels. It also encourages markets to come up with pricing and marketing strategies that help boost their brand and customer value. When customer acquisition costs rise, it becomes significant for businesses to higher the AOV for all economic purchases.
As per general loyalty review program statistics, 65% of brands use loyalty marketing to acquire new customers. These loyalty programs are a definite way to increase customer retention, customer acquisition, brand growth, boost a positive brand image and reputation, and help brands to understand the customer persona. After reviewing the loyalty programs and their success, according to a Harvard Business Review survey, 57% of businesses make building stronger emotional brand connection their priority. On the other hand, 50% of the business models use loyalty programs to gain deeper insights and data about their customers.
These methods will not only help brands to analyze the success of your loyalty programs but will also give you answers on why it is important to review the success of loyalty programs.