Customer loyalty is one of the most widely talked about topics today, and for good reason.
When it comes to where to buy products or services, your customers have unlimited choices at their fingertips. It’s tougher than ever to acquire and retain customers, but loyalty programs can be one of the biggest drivers of engagement – if done right.
In this Ultimate Guide to Loyalty Programs, you’ll learn everything you need to know to get started running a successful loyalty program that your customers will love.
It’s broken down into the following chapters:
Plus, there are lots of links to related loyalty program content and resources.
So, if you’re planning to launch a loyalty program, or even if you’re revamping your existing one, this guide is a great place to start.
Let’s dive in.
What is a Loyalty Program?
A loyalty program rewards frequent customers to encourage increased purchases and engagement over time, in addition to increased brand advocacy.
Loyalty programs achieve this through rewards, discounts, and incentives that may not be available to non-members. In addition, perks like sweepstakes, contests, offers, rebates and social kickbacks keep members engaged after signup.
Ultimately, these programs come down to providing value to your customers that enhance the relationship on both sides.
Related content: The Best Retail Loyalty Programs and What You Can Learn from Them
A Brief History of Loyalty Programs
Loyalty programs aren’t new.
They have been around for a few hundred years. In the U.S., our ancestors were rewarded for purchases with copper coins (and later, more cost-effective green stamps) that could later be redeemed for products.
One could argue that these traditional programs were very similar to what brands offer today, which involve consumers spending over time and collecting points that can be redeemed for rewards later.
As loyalty has evolved, with tokens being replaced by digital rewards, the premise remained the same: Spend over time and receive a reward later.
What has changed the most today are consumer expectations.
It’s no longer enough to offer a “one-size-fits-all” loyalty program. Given today’s consumers’ heightened expectations and infinite choices in the marketplace, brands need a true custom end-to-end loyalty solution to meet modern customer engagement challenges.
Why A Fantastic Loyalty Program is More Important Than Ever Before
Nearly 70% of consumers say their loyalty is more difficult to maintain than ever before.
That means that your loyalty program is more important than ever before.
Your customers have more choices than ever. It’s easy for them to find any product or service they want, at the best price, with the best delivery options, with just a few taps on their smartphones.
Competing on things like price and location just doesn’t cut it anymore. That’s why differentiation and personalization through your loyalty program are critical. But with the end of third-party cookies on the horizon, collecting valuable customer data is getting tougher.
Your loyalty program is a powerful tool that can help solve these challenges in several ways. You can use it to:
- See higher ROI from program members
- Collect valuable first-party data
- Differentiate your brand on a new level
- Create brand advocates
- Generate brand awareness organically
It’s no secret that it costs a lot of money to acquire net new customers. Retaining existing ones is much more cost-effective. According to industry data, it can cost up to five times as much to acquire a new customer as it does to keep a current one.
It makes sense that customers who love your brand keep coming back for more, but it takes work to make this happen. It’s not enough to acquire members. Your loyalty program has to offer enough value to keep them engaged not only initially, but for their entire customer lifecycle.
And to do this is to know your customers and optimize your program through data and analytics.
When a customer opts into your loyalty program, you can begin collecting valuable zero- and first-party data about them. Chances are they’ll be more willing to share their data because they are already loyal to your brand.
Data like demographics (name, age, gender, location), household information (income, marital status, children, home market value) and personal interests (hobbies, charitable donors, etc.) can help your brand figure out what they value most.
This member data can also be used to create look-alike modeling to identify potential consumers outside of your database that may enjoy similar offers based on key characteristics.
You can also offer points or special rewards to your members in exchange for non-transactional actions like filling out surveys. This is a great way to uncover what they love about your program or areas where you can improve it.
This loyalty program member data is the key to differentiation – offering relevant rewards and personalized offers that your unique customers will love and tell others about.
Nearly 90% of premium loyalty members would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits.
By offering an awesome loyalty program, your members turn into brand ambassadors which creates a loop – Driving more member acquisition and revenue on its own (if you keep enhancing your program over time).
Related content: Why Loyalty Programs Are More Important Than Ever
What Type of Loyalty Program is Right for Your Brand?
As loyalty programs evolved, several different categories of loyalty programs have popped up. From simple points programs to multi-tiered loyalty ecosystems, each has its pros and cons, and some are better than others depending on your goals.
Points programs are the most well-known type of loyalty program, and most brands have one.
The value proposition is simple: Consumers spend money over time to accumulate points that can be used for discounts, free products and experiences after enough have been accrued.
Although these programs are extremely popular, many of them are similar which makes differentiation difficult. Still, there is little barrier to entry for customers to sign up and these programs excel at collecting valuable data.
- Free to join equals low barrier to entry for customer acquisition
- Excellent at collecting valuable zero- and first-party data
- The perfect entry point into your larger loyalty ecosystem – a great way to use engagement tactics to turn occasional customers into more frequent ones
- More difficult to use for brand differentiation because rewards need to be funded
- Often don’t provide the instant gratification that modern consumers want (i.e., need to collect points over time for rewards later)
- Don’t always provide enough value to dramatically increase customer engagement
Coalition Loyalty Programs
Coalition programs combine the loyalty programs of two or more brands to offer one program experience to consumers.
From a consumer perspective, these programs can offer a lot of value because they can spend at one place and earn rewards to use at others which is very convenient.
For example, they may purchase coffee at one brand and use the points for gas elsewhere. Or they buy clothing at a retailer and then use the points to get a free appetizer at a restaurant chain that is also part of the program.
This is appealing to consumers, but from a brand perspective, this model can be a double-edged sword.
While brands can get more overall exposure from teaming up with other complementary but non-competitive brands, they may not always have access to all the data they want, and the focus can become about the program itself and not the individual brands.
Part of what makes loyalty programs so important to brands is their ability to provide deep data on their best customers which can then be used to personalize offers and optimize the program.
Recently, some brands have been experimenting with partnerships where each brand has its loyalty program but the ability to earn and spend rewards are shared, which could be the next evolution of coalition loyalty programs.
- Great customer experience – they can earn rewards to use at more places which gives them more choice
- Member brands get increased awareness and potentially access to a larger customer base
- It may be more cost-effective with several brands sharing the resources needed to run the program
- Customer data may be owned by a coalition company itself or not shared as deeply between brands
- More difficult to differentiate with your unique loyalty program
- Risk of members spending with other brands but only redeeming rewards with yours
Premium Loyalty Programs
Premium loyalty programs are the latest evolution of loyalty programs. While they’re not new (Amazon Prime launched in 2005), there has been a rise in these programs (i.e., Walmart and Best Buy) – and for good reason.
According to a McKinsey report on loyalty programs, members of premium loyalty programs are 60% more likely to spend more on your brand, while free loyalty programs only increase that likelihood by 30%.
That’s because these programs offer instant gratification and enhanced benefits – for a fee.
Related content: What Makes Customers Willing to Pay for a Loyalty Program?
In these programs, your top customers pay a recurring membership for access to better benefits that are available 24/7 from the moment they sign up. Rewards like instant discounts, free shipping with no minimum, and VIP experiences offer the best your brand has to offer.
But these programs aren’t for everyone.
For the more casual customer, they may not want to pay the fee. And building, launching, and managing a premium loyalty program is vastly different than a traditional points program. It takes a specialized skill set and not many loyalty vendors have this experience.
Related content: Is Premium Loyalty the Right Choice for Me?
- Instant gratification and top benefits appeal to your top customers
- Member fees can be used to subsidize the cost of the enhanced rewards
- Proven to increase ROI, AOV and purchase frequency
- High barrier to entry for some customers – harder “sell”
- Potential for a higher volume of billing and customer service issues
- Requires a specialized skillset to build and manage – much different than pure points programs
At the end of the day, there is no right or wrong answer – Every brand is different and so are your customers.
One approach to consider is offering an end-to-end tiered loyalty program that offers one (or multiple) free points-based tiers with the option to join a premium tier.
This way, you have all the bases covered and have something to offer all your customers.
How to Determine Your Loyalty Program Benefits
According to the 2022 Premium Loyalty Data study, 91% of consumers who are satisfied with the special benefits offered by a retailer’s premium loyalty program will likely choose that retailer over a competitor that is offering a lower price.
The benefits of your loyalty program are important. They’re the reason why your customers sign up and they can make or break engagement.
But where do you start?
First, it’s important to understand the types of benefits.
Types of Loyalty Program Benefits
Loyalty program benefits can be broken into two buckets: transactional and experiential.
Many brands today focus on the latter, but both types of benefits are equally important and build emotional connections for different reasons.
Transactional Loyalty Program Benefits
Transactional benefits are the gateway into your loyalty program.
They include benefits like discounts, shipping incentives, free products, and other transaction-related perks. All these things make your customers feel like savvy shoppers. Getting a good deal makes your customers feel good and that builds an emotional connection.
More than half of consumers say instant discounts (63%) and free shipping (69%) are the perks that motivate consumers to join premium loyalty programs.
Examples of transactional loyalty program benefits
- Monthly coupons for members
- Discounts (either instant or after points accrual) on products and services
- Free or discounted shipping
- Free products
- Buy 10 get 1 free
Experiential Loyalty Program Benefits
While transactional benefits are essential in getting people to join your loyalty program, experiential benefits deepen your customer relationships.
These benefits are highly unique to a brand and its customers. These are VIP perks that aren’t available to non-members. And deeper emotional connections are built through exclusive benefits – they make your members feel special.
Examples of experiential loyalty program benefits
- Members-only events (fitness classes, excursions, makeup classes, etc.)
- Early access to sales, events and products
- Unlimited free tech support
- Chances to win a vacation getaway
- Priority entry (skip the line) or early check-in
Rewarding Between Purchases
While all loyalty programs have some type of points economy or membership component for members to earn rewards, it’s also important to engage your members in between purchases.
Our 2022 Customer Loyalty Data found that only 17% of loyal customers posted about their favorite brands using their hashtags/handles in the past 12 months. And only 24% provided feedback/filled out surveys from their favorite brands.
But we also found that 72% of consumers said sweepstakes would motivate them to provide personal information to a brand and 56% said contests would do the trick.
Getting creative with incentivized engagement can also help spread the word about your brand and collect better customer data.
For example, The North Face XLPR Pass™ program rewards its members with points for referring a friend, downloading the app, and using the app to check-in at a National Park or a National Monument.
Members can also share their gear out in the wild by using the hashtag #neverstopexploring and tagging The North Face in their posts for a chance to be featured.
Your brand can use incentivized engagement strategies like these to keep nurturing relationships in between purchases.
The Right Mix of Loyalty Program Benefits
At the end of the day, your customers do the math.
Is it worth giving up their data for the benefits that come with joining? And in the case of a premium loyalty program or tier, are those benefits worth investing in?
That’s why it’s important to understand your customers and figure out what they value most. Offering the same benefits to everyone doesn’t work.
The best loyalty programs combine transactional and experiential benefits to create an enhanced experience.
How to Determine the Success of Your Loyalty Program Through Goal Setting and KPIs
It may seem obvious that the goal of any loyalty program is customer retention, but there is a lot more to it. Setting clear loyalty program goals and KPIs, whether big or small, is essential for success.
Short-Term and Long-Term Loyalty Program Goals
The first question to ask when goal setting is: What does our brand want from this loyalty program?
It may be tempting to jump right in, but it’s critical to understand the purpose of the program to ensure that you get buy-in from the top and you can benchmark in the future.
Many C-level executives are interested in short-term goals and wins in loyalty programs. Is the program increasing AOV? What about purchased frequency? How are members engaging versus non-members?
And those are all important goals to measure against, but some of the most important wins aren’t directly monetary.
Long-term goals need to be around increased engagement over time. And that is impacted by zero-party data collection, brand advocacy and ultimately evangelism.
The takeaway is not to narrow your focus on transactional metrics, but to look at overall engagement over time. Think about how to reward loyalty program members for social shares, filling out surveys and advocate for your brand in other ways.
Loyalty Program KPIs
The next step is setting clear KPIs that can be measured against to make sure you’re achieving your program goals. Some of the most important loyalty program KPIs are:
- Member acquisition
- Retention rate
- Churn rate
- Reward redemption rate
- Purchase frequency
- Average order value
- Customer lifetime value
- Incremental margin
- Refunds (Premium Loyalty programs)
Looking at these metrics regularly will give you a good pulse on how your program is performing. For example, if your member acquisition rate isn’t growing, it could indicate that your value proposition doesn’t make sense, or you simply need to focus more on program awareness.
If your reward redemption rate is on the rise, it could mean that the rewards aren’t valuable enough or it simply takes too long for members to earn anything.
These loyalty program KPIs act as your barometer to make sure things are running smoothly and to alert you when something needs exploring.
Related content: The 9 Most Important Loyalty Program KPIs
Keeping an Eye on Your Loyalty Program Goals
Once your goals and KPIs have been set and your loyalty program launches or relaunches, the work begins. This is when optimization takes a front seat.
When it comes to running a program that your customers love, you can’t have a set-it-and-forget-it mentality. You must monitor, measure, and modify.
Related content: Loyalty Program Goal Planning – Are You Set Up for Success?
Using Customer Data to Plan Your Loyalty Program
Once you’re ready to start planning out the construct of your loyalty program, the best place to start is by turning to your customers. The point is to create something that they’ll love.
There are five steps in using customer data to plan your build.
1. Project Your Loyalty Program Enrollment Numbers
The first step is figuring out enrollment numbers, and historical customer data can help you project this.
Look at customer response rate data like purchase data, preference data and email responses to estimate total program joins for the first year and beyond. You can use these data points to establish baseline program benchmarks to measure its success after you launch.
Using a mix of quantitative and qualitative data will give you a good mix of behavioral and emotional data points to guide your planning.
Projecting your loyalty program enrollment is critical to figuring out your loyalty strategy. For example, what types of benefits should you offer? Should you include tiers? How should you craft your messaging strategy to build awareness?
When all your data points are combined with demographic customer data, you start to paint a picture of your members, which leads to developing valuable benefits and messaging to engage them in the future.
2. Develop Your Point Economy
The next step is figuring out your point economy – the transactional, spend and event-based behaviors that dictate the actions your program members will take to achieve outcomes.
And within this economy, you can offer various tiers that reward differently for different members. Each tier is based on behaviors by your members which, in turn, control the entry, the benefits and rewards received and what members are required to do to stay in the tier.
For example, a member who spends under $1,000 a year may receive points and other traditional benefits like early sale access and exclusive offers. Members spending more than that, or paying the membership fee for a premium tier, may get discounts on every order and free shipping with no minimum spend.
A point economy can also help segment your members into different groups based on what they share and what makes them different. You can segment based on data like purchase history, spending habits, average order value, demographics and other factors.
Establishing a point economy helps you communicate with different segments in relevant ways and encourages members to level up over time.
3. Determine the Structure of Your Loyalty Program
Along the same lines, now is the time to establish how your program will be set up – specifically around tiers.
Will you offer a traditional points program that is free to sign up for? Will you offer tiers? What about a premium tier where your best customers pay a fee for the best possible brand experience?
If you have identified multiple valuable target customer segments for your program, adding tiers can be used to differentiate the benefits and rewards for each segment which can drive more engagement over time.
With this model, you can reward higher volume and lower volume purchase customers differently which encourages incremental spending. It wouldn’t make sense to offer top-tier benefits to your least transacting customers. On the other hand, your best customers wouldn’t feel valued receiving basic benefits.
When you give your loyal customers options, it creates a holistic loyalty ecosystem with different tiers that members can aspire to. It offers something for all your customers, not just a single segment.
4. Create Your Rewards Catalog
One of the most important (and fun) steps is creating your loyalty program rewards catalog. Once you’ve followed the previous steps, you should have enough data to figure out what your loyal customers value.
Your customers want you to know them. They want to feel special and valued. Therefore, your rewards catalog should match your customer data.
If you’re an athletic apparel retailer like lululemon, it makes sense to not only offer members rewards like free shipping and products, but also classes. On the other hand, CVS CarePass offers product discounts, free shipping on prescriptions, and a 24/7 pharmacy helpline.
As mentioned above, it’s important to combine transactional and experiential benefits. People always love saving money. It makes them feel smart and it can cause them to join in the first place. But once they’re in your program, it’s the VIP experiences that make them feel special and make them want to remain.
Using your zero- and first-party customer data to get a 360-degree view of consumer demographics, psychographics, purchase behaviors and interests will help shape a relevant and targeted rewards catalog that your members will love.
Related content: How to Figure Out Your Loyalty Program Benefits Mix in 3 Steps
5. Optimize Your Loyalty Program Post-Launch
Your work doesn’t end once the rubber hits the road, and your loyalty program is out in the wild. It’s just the beginning.
After launch, it’s critical to monitor program data across the segments you’ve identified and measure the results against your KPIs. Consider what data can be collected and used from each engagement to deepen member relationships.
For example, are there certain members that exhibit heightened engagement and interesting behaviors? Can you create a new segment and communicate in different ways with those customers? Are these your brand advocates?
On the flip side, ongoing optimization entails looking at your KPIs to spot negative trends as well. Is enrollment down? Are the benefits being used in the ways that you intended? Is social engagement down?
These are just examples but keeping your finger on the pulse of your loyalty program after launch will ensure you’re always optimizing for success. And just because certain elements of your structure work well the first year, customer habits and expectations change over time.
Customer data is an essential element of a successful program – It’s built on it and optimized from it.
The Loyalty Program Soft Launch
Launching, or relaunching, your loyalty program is extremely exciting.
And launching it at full throttle might seem like the way to go. You and your team spent so much time planning and strategizing and planning. Why wouldn’t you go all out?
A soft launch can prove to be a smart move for three big reasons.
1. A Soft Launch Provides Early Insights
Think of a soft launch as a shakedown run – a period where you can get some early indicators of what’s working, what’s not working and what needs to be tweaked for greater impact.
Gleaning early customer insights is crucial to your future official program launch.
2. A Soft Launch Lets You Target Specific Segments
Testing your new loyalty program on a customer segment, ideally, the top 10% of your customer base, allows you to refine the overall program before it’s officially released.
Encourage your most loyal customers to offer honest feedback to you make any necessary tweaks before the full rollout. You can even continue to call on this group after the official launch to gain further insights and measurements.
One thing to remember is that you can leave the program in test mode for as long as you need to. By allowing time for feedback, you can use those learnings to optimize your pilot program to get maximum joins and engagement when it launches for real.
3. A Soft Launch Helps You Optimize Your Point Economy
In this way, you can optimize your rewards and benefits inventory. This gives you some time to see which lower value rewards are most interesting to members, and which ones aren’t performing, to better understand rewards inventory requirements.
This also allows you to see how many points are earned and used by different member segments, which can help with tier creation. You may find that some of the rewards you initially thought would make sense aren’t being used.
At the end of the day, gathering member feedback with a pilot program can offer incredible insights that can help shape the future success of your program. Addressing any issues before the program is rolled out to potentially millions of customers can alleviate issues down the road.
Should You Partner with a Loyalty Vendor?
This is one of the biggest questions to consider when launching a loyalty program. Some brands choose to tackle this entirely in-house, and some outsource strategy, build, execution, management, and optimization to a vendor.
Others do a combination based on internal resources and skill sets.
There’s no definitive answer because no two brands are the same and neither are their customers.
Here are three big questions to ask when making the decision.
What Are Our Internal Loyalty Program Capabilities?
This can be broken down into people capabilities and technology capabilities, with some overlap. Building, launching and running a successful loyalty program is a massive undertaking that impacts all areas of your brand.
Do we have the internal people in place to work on a loyalty strategy to acquire and retain members over time?
A Development Team that can handle building the program and making sure all systems work in harmony? A Marketing Team that can focus on program communications and awareness? A Data & Analytics Team to measure and optimize? And the list goes on.
Technology also comes into play. Will our solution be fully customized and branded or an off-the-shelf solution? What does the integration look like? What does that cost? How long will it take? Will our platform be easily customizable and able to offer incentivized engagements like sweepstakes and promotions?
What Type of Loyalty Partner Would Make Sense?
There are several types of loyalty vendors that can be broken down into agencies, platforms, and end-to-end providers. The right one for your brand depends on your resources and expertise.
Loyalty agencies can help with strategy, goal and KPI setting and consulting on the right platform for your brand. Some agencies also help with ongoing program marketing and retention strategies. Most are well acquainted with software platform vendors and can point you in the right direction.
If you’re looking for advice, consulting or help to manage an existing program, working with a loyalty agency could make sense.
Loyalty Platform Vendors
Loyalty technology platform vendors are typically SaaS companies that sell their existing platforms and may also provide implementation, data and support, usually at an additional cost.
If you are equipped to run your program, or are working with an agency, and simply need the loyalty platform, this could be a good option.
End-to-End Loyalty Providers
As the name implies, these companies offer the most comprehensive level of help with your loyalty efforts – from strategy to the actual platform to ongoing loyalty management.
Although these companies may offer standalone products and services, they are with you from Day 1 and provide all the end-to-end services needed to run a successful program.
What Traits Should the Right Loyalty Partner Possess?
If you decide that working with a loyalty vendor makes sense for your brand, there are several universal traits you should look for in any potential partner.
Experienced in My Industry
Your partner should be experienced in loyalty. That’s why you’re considering working with them. But look for a company that has experience in your specific industry.
While customer loyalty shares a lot of universal truths, what works well for travel and hospitality may be completely different than retail or CPG in terms of program constructs, benefits and goals.
Views Loyalty and Customer Engagement Holistically
Loyalty is not a tactic or a short-term play. Your partner should be thinking through the entire loyalty ecosystem. There are different strategies for acquisition, engagement and retention.
It’s important to work with a partner that can help you with the full lifecycle of the program as well – strategy, build, launch, management and optimization should all be part of the bigger plan.
Focused on Your Customers
It’s one thing to enroll customers in the program, but what happens after that?
In the past, emphasis was on acquisition. But today and in the future, engagement and retention are just as important. Make sure your partner is on the same page and focused not only on selling you a program, but also as invested as you are in making sure the program is successful over time.
Consumers today want to feel valued and special – it’s on brands to understand them and provide value.
Your partner should constantly monitor customer data and KPIs and deliver you analytics and insights. Crushing your KPIs is great, but it’s just as important to understand where there is room for improvement and optimization.
Understanding what has worked in the past isn’t enough. While analyzing historical data is essential, make sure your loyalty partner is keeping an eye on the future.
In an uncertain world where your customers have more choices than ever before, it’s important to stay ahead of the curve. While it’s impossible to predict the future, your partner must stay nimble and pivot quickly.
Working with a loyalty program partner isn’t right for every brand.
Some brands have the resources to handle it completely in-house. But for most brands, finding a trusted partner can influence the success of your loyalty program, even if it’s just taking the first small step and talking to a potential company to better understand where you stand.
How to Promote Your Loyalty Program
According to recent data, only 32% of consumers have participated in their favorite brand’s loyalty program in the past 12 months.
This is startling.
Why would less than a third of loyal customers participate?
Many brands simply don’t create enough awareness around their loyalty programs.
While it may seem daunting to go above and beyond your current marketing efforts by promoting your program, the good news is that you can repurpose many of the assets you already have.
Using Physical Store Assets to Promote Your Loyalty Program
Is there a more captive audience than people shopping in your stores?
Brands often use in-store real estate to promote sales and special offers. Why not apply this same strategy to your loyalty program?
Window and floor stickers can immediately grab the attention of shoppers as they enter your stores and walk the aisles. Complementing these can be bold and clear signage, along with signup kiosks, to build awareness and give people an easy way to sign up themselves.
Using the store PA system to talk about the benefits of the program, and properly training in-store associates to get customers excited about the program, are great ways to acquire new members.
And for existing members, these assets are a reminder.
Lastly, you can even get creative with your product packaging. Can you put a blurb and a signup QR code on your boxes or packing tape for online orders?
Using Digital Assets to Promote Your Loyalty Program
While your website may seem like an obvious place to promote your loyalty program, many brands don’t take advantage of their home page, products pages, or other pages to build awareness.
Can you put a special signup offer right on your homepage? What about showing member pricing or shipping benefits right on your homepage to demonstrate the value someone would receive for joining?
Social media is also a great place to reach your customers where they already are. Have you considered offering a sweepstake that gives someone the chance to win a product experience by signing up?
If you offer a compelling incentive to sign up, your audience will share it, creating even more awareness.
Current Customers and Program Members Can Promote Your Loyalty Program
Seventy-six percent of consumers say the opinions of friends and family impact their loyalty to a brand, so, surprisingly, this is sometimes overlooked. Your existing loyalty program members are some of the best advocates you’ve got.
Have you considered offering a referral program where members are incentivized and rewarded to get others to sign up?
You can also tap into your current email and SMS subscriber list similarly. If you are already effectively communicating with them, this is a great opportunity to make them aware of your program.
There is a lot you can do to promote your loyalty program without the cost of additional real estate.
Related content: How to Promote Your Loyalty Program Using 7 Assets You Already Own
Measuring Loyalty Program ROI
Almost three-quarters of companies invest between 2%-4% of their total revenue on loyalty and CRM – but what’s the return on that investment? How do you prove to your CFO that all the resources are worth the rewards?
Loyalty program ROI has been notoriously difficult to measure because there are different desired outcomes from your loyalty efforts. The best place to start is by looking at several core metrics:
- Member versus non-member behavior
- Average order value (AOV)
- Member enrollment
- Engagement rate
- Number of active and inactive members
- Amount of offers redeemed
- Current member attributed revenue
- Purchase frequency
- Customer lifetime value (CLTV)
While it’s critical to track those basic metrics, other intangible metrics around brand affinity are just as important. These metrics indirectly lead to revenue in the long-term and are harder to measure, but can be tracked through member satisfaction surveys, social shares and referring others.
When calculating ROI, it’s also important to understand the costs associated with building and running your loyalty program. This requires you to invest in a platform and the people to run it as well as the rewards themselves.
- Technology platform sourcing, implementation, management and enhancements
- Member communications
- Promotions and campaign management
- Member acquisition, activation, engagement and win-back
- Reward sourcing, management and redemption
- Benefits determination and management
- Currency accrual and Liability management
- Member care, satisfaction and issue resolution
- Program enhancements
- Reporting, analytics and business intelligence
- Partner sourcing and offer management
- Incrementality of member spend and other behavior
It’s difficult to calculate the ROI because every program is different, but there’s no reason for your brand to build a loyalty program that isn’t sustainable and doesn’t deliver the desired results. If you need help with this step, we’d be happy to talk through it. Feel free to reach out to us here at any time.
Related content: The Bottom Line on Loyalty Program ROI
A Successful Loyalty Program is a Huge Commitment, but It’s Worth the Results
Congratulations – you’ve made it to the end of The Ultimate Guide to Loyalty Programs.
If building, launching and running a successful loyalty program seems daunting, it is. But going forward, with customers having unlimited options on who to buy from, it’s a critical part of your overall brand strategy. It’s what can set you apart from your competitors.
But we are here to help.
We’ve worked with major brands like Johnson & Johnson and Lowe’s with different customer engagement solutions for over two decades, so we can help you every step of the way, even if it’s just an initial conversation.
If you’d like to talk about your loyalty program, reach out to our loyalty experts any time.