How to Measure Customer Loyalty Program

How to Measure Customer Loyalty Program

It is one thing to start a customer b2b loyalty program campaign. It is another thing to measure its relevance to the targeted customers and its implications on the business. But what are the standard ways to achieve the measurements of customer loyalty programs? How do you identify which aspects of the program are working and which ones are not? This article illustrates the topmost methods of measuring the progress of loyalty programs.

8 Measurements of Customer Loyalty Program

Below are the most critical measurable items that a good business marketer should ;

Total Membership

One sure way to convince your loyal customers that you know what you’re doing is to monitor the subscribers’ total number. This way, you can prepare for the enrollment procedure and process the eventual rewards. When you notice that the numbers are dropping in terms of new subscribers to the plan, it is time to implement some strategies to ensure that the process continues to grow. 

Redemption rate

By definition, redemption implies that a customer decides and takes action to redeem the accrued points in a loyalty program. The redemption rate measures how often people go on to redeem their prizes and rewards. This metric is important because, in some cases, loyal customers accrue points but fail to go all the way to redeem them. If such happens, it has not yet fulfilled the business owner’s intention, and the loyalty program is not working yet. 

As a business manager, you can calculate the redemption rate by adding up all the points redeemed by all the members, then divide it by the total awarded points so far. If the conversion rate is below 20%, it needs concern, and necessary steps have to be taken. For instance, you can check out the redemption process to ensure it is not too complicated and tiring.

Retention rate

The actual goal of a loyalty program, in the long run, is to retain as many customers as possible and keep them satisfied. Any other achievement is secondary, and failure to achieve this feat is indeed a failure of the customer loyalty program itself. However, the loyalty reward system’s progress may be somewhat slow compared to those who convert the acquired points to tangible rewards. 

Measuring retention rate allows you to understand the number of participants who failed to stay active despite the reward against those involved. You can then divide this difference by the number of participants in the previous measured period. Retention rate can be expressed in percentage. Note that the retention rate is a factor of a definite period and not in perpetuity.

Repeat purchase rate

How do you know the number of the same customers that are making repeat purchases? The repeat purchase rate function determines how many customers bought more than once within a set period, usually 365 days interval. Within that year, the number of those who made repeat purchases is your loyal customers. When you divide this total number by the total number of unique customers acquired within the year, you obtain your repeat purchase rate.

Customer Lifetime Value

The way to determine the customer lifetime value is first to determine the customer’s annual value. And the customer’s annual value is obtainable by multiplying the customer’s average order by the number of expected transactions in a single year. Subsequently, you can reproduce the result by the total number of years you expect the customer to remain active and buy from your business. The customer lifetime value obtained from the annual customer value is an essential metric for the loyalty program’s progress and productivity. 

Net Promoter Score Point

The Net Promoter Score (NPS) point is one of the advanced metrics for measuring how well your loyalty program is turning out. For instance, the NPS focuses particularly on loyal customers’ ratings into three categories: detractors, passives, and promoters. This rating is also done on a 10-point scale where those who score below 6 belong to the group of detractors. Those who score 7/8 are passives, while those who score 9 or 10 are the real promoters. 

How do you evaluate these loyal customers? The method asks a few questions about how satisfied the customers are and how likely they would recommend the business brand to friends and families. Eventually, NPS is obtainable by subtracting the total number of detractors from a total number of promoters. Then, divide this result by the number of customers that completed the unique survey and multiply by 100.

Active engagement ratio

The active engagement ratio shoots beyond those who are merely converting. But it compares the figure to the total number of participants in your loyalty program. For instance, when measuring the active engagement, you need to know the number of participants that are presently actively earning from their redemption points. 

When you get this figure, divide it by the total number of participants in the loyalty program. Depending on the business cycle nature and product or service, you can measure your active engagement ratio monthly or yearly. In each case, you need to think like the customer and make necessary adjustments. 

Participation rate

The participation rate in a loyalty program is one of the simplest and most fundamental metrics to obtain. At the launch of the customer reward program, there is a need to record those who register as program participators. Then, divide this total number of program participants with the overall customer base for your business. When you obtain this value, you get the participation rate. This participation rate allows you to see the need to communicate your loyalty program more, especially if the value is low. 

Statistics have proven that understanding loyalty program metrics is an essential factor in recording a successful campaign. It also allows the business campaign manager to optimize the available options to drive more conversion and more sales for the company’s profit. Each metric above has its importance and significance in the whole campaign equation. However, depending on the loyalty program method you employ, you may find some more useful metrics than others. Just keep your focus within the predefined goal, and the sky is just the starting point. 

Other Articles You May Like:
What You Need to Know About Comprehensive Arborist Reports Sydney
A Complete Guide About Finding Reliable Tree Removal Near Me

Leave a Comment

Your email address will not be published. Required fields are marked *