Loyalty Review Program – Measuring Effectiveness of Loyalty Programs

by Bistriti Poddar |

There’s an old adage, ‘what gets measured, gets done’. Same is true for loyalty programs. Loyalty programs over the years have become a vital part of a brand’s overall marketing strategy because the payoff is significant. Leveraging loyalty programs results in incremental profits, improved customer experience and competitive advantage. In the last few years, brands like Starbucks, Sephora and DSW have proved that loyalty programs are the need of the hour because they can benefit greatly from the data collected. But it’s also important to evaluate their effectiveness and success through loyalty review programs or strategies. A Forrester report said that 30% of companies found it challenging to measure the results of a loyalty program. 

Once you have decided the kind of loyalty program you want to launch for your customers, and are aware of the marketing strategies that are required, it’s time to critically evaluate the outcome by having a loyalty review program or system so that you can most definitely optimize it.

Here are some loyalty review program metrics to gauge the success of your loyalty program

  • Keep a track of your program penetration percentage. It’s important to determine the percentage of transactions that is represented by loyalty member transactions. Quite obviously, the higher the percentage the better it is. While a new program will initially have a relatively lower percentage, as the program matures, it should push above 50% otherwise there are challenges that you must cater to. Some of the best programs will go over 90%. Also a downswing in the penetration is a cause for alarm. 
  • Unless you have a high percentage of customers who make a single, high-value purchase, rewards redemption percentage should be high, this is one of the most critical loyalty review program metrics. And if it plummets over time, that indicates you need a strategy to better engage with your customers. 
  • Percentage of earning members should be anywhere between 25%-40% of total members. If it’s lower than that, it means most members find it difficult to earn a reward which also means poor member engagement, insufficient customer data collected and less revenue impact. Also, if it’s over 40%, it shows that it’s too easy to earn a reward and that’s not ideal either. 
  • According to COLLOQUY’s annual Loyalty Census, an average of 54% of loyalty program members are inactive. The other 46% of members are actively engaged to varying degrees. By measuring customer awareness, understanding and participation in your program through a survey, you will understand the degree of customer program engagement. When you want to do a competitive analysis, knowing the active participation level of your loyal member base is quite a powerful tool. 
  • Another important loyalty review program metric is to understand the impact it has generated on your customers’ motivation to spend. 

Some other baseline metrics to consider are communication call to action rates, NPS score, CLV, AOV, share of wallet percentage, sales uplift, analyzing the frequency of visits, positive social media activity, customer satisfaction so that you can gauge the affinity for your brand and the like. With these indicators, you can easily assess what’s working and what needs improvement.

Annex Cloud’s seasoned and experienced team has successfully launched multiple global loyalty programs. Our team strategizes and works with customer teams to provide marketing best practices as well as expertise to create an appropriate go-to-market strategy when launching their reward program. Our global implementation team recently launched the INA Loyalty program for MOL Group, a large multinational oil and gas company, in their Croatia market that garnered extremely large press and media attention. 

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