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Every organization should consider building a profitable customer loyalty program to cultivate the relationships with their most loyal customers, generate more awareness of their business and increase the average amount their customers spend each time they visit.

Overall, the main goal of a customer loyalty program is growing long-term relationships into impactful connections that help move the needle for your business on an ongoing basis.

Loyalty Program Timeline 730x202 The step by step guide to measuring customer loyalty effectively

According to Inc., it costs a business about 5 to 10 times more to acquire a new customer than to sell to an existing one. The average current, loyal customer spends 67 percent more than a brand new one.

Regardless of how your customer loyalty program is structured, measuring its impact on your business is crucial to help determine what’s working and what needs improvement to drive more results.

1. Understand your audience

The first step to properly measuring the success of your customer loyalty programs is understanding your audience online and offline. 

The more information your marketing team has about your customer base, the more effective your loyalty programs will run and the easier they will be to continually measure.

By understanding who your audience is, their typical spending habits, their customer lifetime value (CLV) and more, the easier it’ll be to establish your initial benchmarks from this historical data.

2. Establish your goals

Once you’ve established who your customer base is and other vital metrics that shed light on where your company stands today, develop your goals to align your measurement practices from the start and communicate them across the organization.

Each goal, whether it be generating more sales or increasing long-term customers, should be properly matched with metrics to help monitor the success or failure of each part of your loyalty program.

The main metrics your business should focus on to understand whether your loyalty program is a success are:

  • Redemption: The most basic metric, which is the claiming of a coupon, promo code, deal or another feature of your loyalty program.
  • Activation: The number of sign up’s or newly active members using your program.
  • Sales: The amount of revenue generated from your loyalty program.
  • Growth: The increase or decrease in total number of members of your loyalty program.

3. Use powerful tools to automate measurement

To accurately monitor your loyalty campaigns on an ongoing basis, choose the appropriate toolkit to help automate your reporting and simplify the analysis of your programs.

For example, using Google Analytics can help your marketing team better understand the revenue generated overtime from your loyalty programs online from certain segments of your audience.

sumall email stack campaign 730x486 The step by step guide to measuring customer loyalty effectively

Most email marketing platforms also offer robust analytics to help a business better understand how their email campaigns as a part of the loyalty program impact customer retention. 

Email also allows for powerful segmentation of your customer list, which can provide your team with extensive data on the different demographics that make up your loyalty program.

The performance of your loyalty program subscribers with your emails as measured by delivery rates, open rates, click rates, bounce rates, conversion rates and revenue per email sent is another way your email platform can help inform your measurement efforts.

4. Analyze revenue potential of members and non-members

The revenue potential of members of your loyalty programs should be much higher than customers that are non-members, which is why it is important to consistently understand the ROI of your programs.

According to GetResponse, members of loyalty programs who respond to email generated 11 percent more revenue per email.

The customer lifetime value (CLV) should be continually analyzed to ensure you’re allocating enough spend to your loyalty program, adjusting the structure of your programs to best match your customer base while driving results and that you’re properly assigning different values to each segment of your customer base.

Each segment of your audience, also frequently known as a cohort, is based on groups with similarities in interests and behaviors that your organization should be measuring individually. Since each cohort is unique, how he or she will react to your loyalty programs will differ.

Focusing on cohort marketing with each stage of analysis of your loyalty campaigns will help your team better understand the results of your efforts as you measure the differences between cohorts that are members or non-members of your programs.

It’s all about organizing your data effectively to ensure it empowers your team with actionable insights that shed light on how your loyalty programs are performing for your business. This data can inform future progress, changes and innovation with your loyalty programs, as well as the overall success of your organization.

How are you measuring your customer loyalty programs effectively? What measurement tactics do you find the most successful for your organization?

Please share your experiences in the comments below. I’d love to discuss what works and what doesn’t from your perspective.