Loyalty programs have always been about getting customers to sign up. But that should only be the beginning of the relationship.
Ultimately, the goal of a premium loyalty program is not just about getting people to join, but about making sure they stay and engage. And that’s done by providing them with a ton of value.
That’s why after a client launches a premium loyalty program, our Analytics Department moves into high gear to assess key metrics that measure success.
Tracking these key metrics is crucial to ensure the ongoing viability of the program, and it helps reveal areas for improvement. It’s something we take pride in as a department and keeps the program moving along a steady and profitable path.
When examining a premium loyalty program, here are some of the key metrics the Analytics Department reviews to assess the health of the program:
KPI 1: Join Count
New members are the lifeblood of premium loyalty programs.
Programs need to continue to acquire members to continue to generate revenue. New joins show that the program’s benefits and marketing are resonating with consumers.
KPI 2: Conversion Rate
Conversions are defined as the amount of joins a program gets from its online marketing efforts.
Conversion rate is an important metric because it not only reveals how effective the online marketing is, but it also shows if the program’s benefits are enticing members to join.
KPI 3: Retention
The only thing more important that converting costumers into members is having them stay in the program. When we talk about retention, we mean the length of time members stick with a premium loyalty program.
At Clarus, the most important aspect of retention is the trial cancel rate. This is a bit unique to us.
Typically, when we build a premium loyalty programs, new members will have some type of trial period. During the trial, members can test for themselves if they enjoy the benefits given to them in the programs.
If there is a high percentage of members canceling in the trial stage, it shows the program needs to create more value for its members.
That means it’s time to go back to our retail partner and figure out how we can improve the program so that members find it more valuable.
Premium loyalty programs always try to keep the trial cancel rate as low as possible.
The goal is to have a long retention rate because this means the program is truly adding value to members’ lives.
KPI 4: Lifetime Value (LTV)
Lifetime Value, or LTV, is an encompassing metric which shows the projected value of members in our programs.
Like retention, the most important component of LTV is trial cancel rate. If the trial cancel rates are low, we can project a strong LTV. That’s a win-win-win.
It means our members are enjoying the product and will likely stick with it. That in turn and drives revenue for both Clarus and our retail clients through membership costs.
A higher LTV signals the product is healthy and helps us build better relationships with our clients.
KPI 5: Churn Rate
Churn is something that we don’t want to see in a loyalty program. It’s simply the percentage of members canceling in a given month.
Like trial cancel rate, if the program’s churn rate is low it means members are enjoying the program’s benefits and are not seeing a real incentive to cancel.
It also may mean the program is adding new members faster than losing current members. Like trial cancel, our goal here is to keep churn as low as possible.
KPI 6: Refunds
Like in all businesses, it is important to keep an eye on refunds and make sure they are low.
However, this is unique to premium loyalty because traditional loyalty programs are typically free for members.
Premium loyalty programs are designed to offer heightened value to members, so monitoring refunds helps ensure that this is accomplished.
KPI 7: Product Usage
Product usage shows us which benefits the program’s members are using.
In premium loyalty, we are consistently trying to keep our members as engaged as possible.
A high product usage figure shows us that members are enjoying the program’s benefits thoroughly.
Also, the Marketing and Product teams can view which benefits are most popular. If certain benefits are more popular with members than others, the teams may market more prominently the benefits with higher usage.
Product usage really ties into all of the other KPIs. If members are actively using the program, all of the other metrics should skew in the right direction, whether up or down.
Is premium loyalty right for your customers?
Never Set and Forget a Loyalty Program
The key to ongoing success for any premium loyalty program is offering an array of benefits that attracts and retains members.
Given the seven KPIs we use to analyze the health of any of our premium loyalty program, it boils down to providing relevant and compelling benefits that engage and retain members.
These metrics monitor the success of these benefits on a daily basis, which is critical for the long-term sustainability and success of any premium loyalty program.