How to measure and analyze the success of your customer loyalty program and optimize it

After deciding the type of loyalty program you want and figured out the most appropriate marketing strategy for ensuring that you reach your goals, you want to get an overview of your loyalty systems actions. Without measuring and critically analyzing your loyalty systems outcome you cannot optimize it.

Even when done everything in the best way possible, by creating a killer loyalty program, and promoting it in the most effective way, you want to see your results. You’ll therefore need to understand which are the simplest and most-useful metrics helping you to determine the success of your loyalty program. Other than that, we’ll show you how you can improve on these metrics with simple and minor optimisations.

Let’s have a look at the metrics helping you to determine the success of your loyalty program and how to easily optimizing them.

1. Repeat Purchase Rate

Simply put, the repeat purchase rate is (RPR) the amount of clients returning to your website / store for a further purchase. It’s an excellent way measuring customer loyalty, as numbers demonstrate that repeat clients are converting 12 times the pace compared to new ones.

How to calculate your repeat purchase rate:

Good Range? Generally a 20–40% RPR is considered a good range.

You could do better? Check out which activities will boost your repeat purchase rate:

Engage with your customers through email campaigns: Specific email follow-up campaigns with unique offers can assist to increase your website’s repeat purchases.

Offer the right incentives: Encourage your clients to create repeated purchases through your loyalty program by rewarding them for various online or offline actions. Incentives through loyalty programs can motivate customers to repeat buying in your store or online.

2. Redemption Rate

Redemption rate (RR) shows the amount of clients who redeemed their benefits by making use of their loyalty points or free offering schemes.

How to calculate your redemption rate:

Good range? Generally, no lower than 20% is a good range.

You could do better? Check out which activities will boost your redemption rate:

Use location-based marketing: Should you have a location-based shop you can leverage on triggers to give clients coupons / rewards based on the location your store is located, thereby enhancing the rate of redemption.

Reward Points for various actions: provide more range in how clients can earn points. Social shares, referrals and their birthday can all be grounds for rewarding clients.

3. Active Engagement Rate

The active engagement rate shows how many people are “actively engaged” with your loyalty program by the total number of clients you have. Compared to the following participation rate, we suggest to differentiate the active engagement rate with customers who are not only participating in your loyalty system but actively engaging with it by, for example, inviting their friends to the loyalty program, sharing posts on social media, and referring the brand in many other ways.

How to calculate your active engagement rate:

4. Participation Rate

Similar to the active engagement rate, is the participation rate. All you need to do is divide the total number of customers by the number of program members you currently have. The higher the % the better your participation rate is.

How to calculate your participation rate:

Active engagement as well as participation rate indicates how many are actively involved by points gained and redeemed. In order to enhance commitment rates, you should also concentrate on customer behavior. Therefore, ask yourself: Does your customer frequently browse certain reward categories? Are they more than others visiting certain regions of your site? By using these outcomes you can create targeted emails for your customers, as an example, where you can nudge your clients to buy or redeem.

5. Average Order Value

A further and great way to measure the success of your loyalty program, is the average Order Value. The average order value provides you with a dollar amount to show the average amount your clients spend on individual orders.

How to calculate your average order value:

Should you want to increase your AOV, think about the following options:

• Volume discounts: on a minimum spending you can provide volume discounts. For instance, if you spend $50 get $5 off, if you spend $100, get $10 off.
• Packaged deals: it can help increase the AOV by providing packaged or bundled deals. You can provide a buy 2 and get 1 free offer.
• Give additional points if someone reaches a certain order value.

6. Revenue per User

Last but not least you want to know the revenue per user. For that you’ll ask yourself; How do my customers affect the bottom line? Do they buy? And how much does each customer spend? and the answer is the revenue per user: a number that shows the rate of conversion and income produced by each user / subscriber / customer.

How to calculate your revenue per user:

Not satisfied with the outcome? Then make use of the following strategies to improve the revenue per user:

• Raise cost of price: do you charge enough? That’s the question you need to ask yourself. To increase revenue per user, you can raise the prices of your offered goods.
• Raise transaction size: among the most effective methods it is to increase the overall size of the purchase. Some of the methods such as cross-selling, upselling and selling volumes can be used to raise the average size of the transaction, thereby boosting revenue per user.

7. Customer lifetime value

It is not difficult to see why customer lifetime value (CLV) is rapidly becoming the king of metrics. CLV measures the value each customer will bring to your store over their entire life instead of looking at individual purchases. CLV is thus an excellent way to evaluate the general health and future performance of your store.

How to calculate your revenue per user:

The above equation shows how often a client connects with your shop and purchases at your store and how long they stay a customer. All of this, does strongly affected the customer’s lifetime value. It really makes it an excellent way of measuring the customer loyalty, because it demonstrates you if your clients are becoming more loyal over time.

With the CLV you will have a benchmark to measure if your loyalty program ultimately increases customer loyalty and commitment. Remember: they can be categorized as loyal if a client purchases frequently and for a long time!

8. Net promoter score

another simple way to measure customer loyalty is through the NPS (net promoter score) survey. It will ask your clients how likely they would recommend your brand to their friends and family on a scale from 1–10. Anyone who responds with a 9 or 10 is regarded to be a promoter, while those who respond with 7 or 8 are passive promoters. Detractors are regarded as customers who specify 6 and under.

How to calculate your NPS:

FYI: By subtracting the amount of detractors from the amount of promoters, you can calculate your final NPS rating, providing you an idea of how many clients would be happy to recommend your shop favorably. This sort of study is a really nice measure of how committed your client base is, as loyal clients are way more likely to refer you to their colleagues and family.

In a company’s general achievements, customer loyalty is essential. That’s why it’s crucial to think about how to improve relationships with your clients, stimulate their loyalty, and increase development, reputation, and revenues, whether your company is large or small.

Evaluating customer loyalty is much easier than most company owners recognize, and ensuring that your objectives and your overall project(s) are on a good track, it is a needed step.

Of course this is no finalized list of measurements, but more a list of possible options that with which you start tracking your loyalty system. Every company should choose individual KPI’s appropriate for their business. Other than that, you should never consider working with loyalty programs that look good on paper, but have nothing to do with accomplishing your goals. Keep evaluating your loyalty programs metrics as often as possible and then you can be confident that you are growing a solid and loyal customer base.