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How to Measure a Customer Loyalty Programme's Success

Successful customer loyalty programmes are a win-win for brands and consumers. They stimulate recurring revenue, while delighting customers with perks and rewards. But how do you measure success? And how do you keep improving customer loyalty programmes over time?

Social historians claim the first loyalty programmes involved beer tokens in ancient Egypt. But we’ve come a long way since then. In today’s competitive landscape, brands see sophisticated customer loyalty programmes as a key way to grow their business.

In fact, US companies spend a staggering $2 billion on loyalty programs every year, according to Cap Gemini.

To measure the impact of their customer loyalty programs, brands turn to a host of reliable metrics. Tracking data over time helps inform decision-making and shape customer loyalty strategic planning. The latest loyalty program platforms make this easy.

Here are 8 KPIs (key performance indicators), for measuring loyalty program success: 

  1. Customer Loyalty Programme Enrolment Rate
  2. Participation Rate
  3. Repeat Purchase Rate
  4. Average Spend Per Member
  5. The Lifetime Value of the Programme 
  6. Percentage of Sales From Loyalty Members
  7. Customer Retention Rate 
  8. Incremental Margin

1. Customer Loyalty Programme Enrolment Rate

If you have designed, launched, and marketed your customer loyalty programme efficiently, it will be discovered and enjoyed. This is how brands begin to build up a loyal following, and from the off-set, it becomes possible to collect first-party data. Most enrolment requires name, address, date of birth, and, of course, email address. 

The first measure of success is therefore the programme’s enrolment rate. How many people have signed up for this exclusive loyalty club? Even if they can enjoy free membership, the act of filling in their personal details brings people into your ecosystem. 

From that point, you can begin to engage with customers who have shared their personal details and agreed to be contacted. Measuring your programme’s enrolment rate and tracking how quickly it is growing over time is an obvious but nevertheless powerful KPI.

2. Participation Rate

Loyalty programme enrolment is a great start, but the real commercial value is generated when loyalty members begin to actively participate in campaigns.

By looking at the engagement rate metric, it becomes clear how many people are participating in a loyalty programme once they sign up. 

If a programme has high enrolment but low participation, more investment is needed in customer touchpoints and marketing communication to incentivize members.

Brands should ask whether rewards are too difficult to earn. Is the scheme lacking personalization? Is the customer loyalty programme being marketed effectively? Are programme members being reminded about their points? All of these factors can impact participation rates. 

Marketers can use participation rates to measure the effectiveness of their initial rewards strategy. Participation rate data can also be segmented by demographic group, or geographic audience. This will give marketing teams valuable insights into which parties are most likely to participate.

3. Customer Loyalty Programme Repeat Purchase Rate

Some loyalty programme members may only participate once. For example to take advantage of an attractive sign-up discount or deal.

This is why it is important to track the repeat purchase rate. This enables you to track the repeat purchase rate and measure ‘churn’ – otherwise known as user drop-off.

This metric helps marketers understand how much investment is needed to ensure members remain incentivized for the long term. Marketers can use data to find the sweet spot.

For instance, a balance must be struck between regular email communication and spamming. The repeat purchase rate metric helps identify regular users of the programme.

This sub-group of loyal customers can be targeted with tailored messaging and exclusive deals, to ensure they continue to participate regularly. 

Marketing experts say any repeat purchase rate in the 20-40% range should be considered successful. As more customers sign up for a rewards programme and make repeat purchases, there will be an increase in customer retention and loyalty.

4. Average Spend Per Member

The next metric to consider is the average spend per member. Whatever segment or sector your brand operates within, it’s not uncommon for consumers to alter their spending habits in order to claim loyalty programme rewards.

One study found that 66% of consumers modify the amount they spend to maximize points. It also revealed that loyalty members buy more often, and spend more than non-loyalty members, resulting in a 5-10% revenue increase.

Consumers may be making more purchases with a retailer to get the best loyalty rewards, discounts, and experiences. Customer loyalty programme members are also aware that rewards are reliant upon the amount they spend. A higher spend equals a higher accumulation of points. 

If seasonal points campaigns are part of a conversion-based programme, it should be easy to measure how much the average spend per member is boosted on the back of each campaign. 

5. Lifetime Value of the Loyalty Programme 

Lifetime value is a widely used metric for tracking the success of a customer loyalty programme. This metric takes into account how much people are spending and how often they're buying. It also shows how long customers stay active within the programme. 

Lifetime value is a crucial metric for improving what that loyalty programme is delivering. It can also be used to make key business decisions. For example, you can use customer lifetime value data to identify and target the most valuable customer segments.

6. Percentage of Sales From Customer Loyalty Members

Businesses may want to know the percentage of sales that can be attributed to their loyalty membership base. For example, a large retailer may find that 60% of their sales come from existing loyalty customers. 

If they want to grow that figure this metric can be used as a benchmark, giving the marketing department a clear view of whether loyalty sales as a proportion of total sales, are increasing or decreasing over time.

7. Customer Retention Rate 

The ultimate aim of any customer loyalty programme is an increased customer retention rate (CRR). It measures what percentage of customers stay with you over time. The higher your retention rate, the better you are at keeping customers loyal. 

This KPI is also useful for measuring the customer attrition rate. In other words, it measures the number of customers lost as a percentage of the total customer base, over a given time period. Typically, a brand will base its calculations on the number of customers it had when the loyalty programme was launched.

Remember, offering a loyalty programme doesn’t mean immediate results. Building customer loyalty takes time. However, when you do have a good customer retention rate, the results will be positive. 

Studies show that the probability of selling to an existing customer is 60 to 70%. This compares to the probability of selling to a new prospect, which is 5 to 20%.

Carefully measuring retention rates will help brands make better decisions about boosting loyalty programme engagement.

8. Incremental Margin From Customers

It almost goes without saying that it is worth tracking the profitability of a customer loyalty programme. If a programme doesn’t increase profits, it’s not sustainable as a long-term marketing strategy. Programmes need to driving top-line revenue. 

The cost of running the programme also needs to be taken into consideration. This KPI will help marketers understand profitability and help them decide whether a programme needs to be modified, revamped, powered up, or scaled back. 

For a programme to be profitable and sustainable, members must contribute more revenue than the company invests in funding the programme. Often this will depend on the rewards on offer, but it is also critical to treat loyal customers with the customized experiences they deserve. 

By offering personalized experiences as part of rich, high-quality content, you can engage more effectively with loyal brand fans.

Find the Right Loyalty Programme Partner

Most marketers today would agree that one-size-fits-all promotions in a generic loyalty rewards programme won’t cut it. With the right loyalty platform and partner, however it’s possible to get in touch with your customers’ unique preferences and purchases, and tailor offers to their needs. 

Epsilon, for example, has unparalleled experience and expertise when it comes to providing loyalty programmes with a compelling return on investment. We share more than 4 billion campaign messages every month with more than 600 million loyalty customers, on behalf of companies of all sizes building incremental value.

The right loyalty platform and partner will ensure your brand says the right thing at the right customer touchpoints to maximize customer loyalty. And by attaching strong incentives and a seamless, relevant experience, you can create emotional connections that last. 

If you want to convert casual customers into lifelong ones, Epsilon PeopleCloud Loyalty is designed to help you succeed.

Learn More About Loyalty Programmes

Download the Ultimate Guide to Building a Loyalty Programme