Loyalty programs are highly measurable and can provide you with plenty of data. However, it can be easy to miss what’s most important.
That’s why it’s essential to determine your key performance indicators (KPIs) in order to measure and improve your program’s success, make informed decisions, and gauge if your actions are generating desired results.
KPIs can vary from one program to the next. Although there’s no one-size-fits-all solution, here are a few things to keep in mind in order to get a better understanding of what makes your program work:
The scope of your program
This is mostly about volume, including the number of total, active and inactive members, new acquisitions, and more.
KPIs need to be compared to data outside your program. For example, the number of program members must be compared to the number of clients you have in order to get a clear picture of your program penetration rate.
These KPIs also enable you to follow the evolution of your member base. However, these alone will not provide you with a full look at your program’s performance.
A good loyalty program will encourage customers to make purchases at your store. That’s why it’s important to understand and track your customers’ behaviour—both transactional and not.
When it comes to transactions, try to track such indicators as lifetime value, visit frequency, average basket, and basket quality. This will help you better understand the monetary relationship that your customers have with your brand. You should also track not only what each target group buys but also what they don’t buy as well as what they no longer buy.
As well as transactions, look for indicators that help you better understand your customers’ commitment and satisfaction rates, such as via the Net Promoter Score (NPS).
Breakage and redemption rates
The redemption rate represents the percentage of points/miles given out that have been used to redeem a reward. Inversely, it’s important to follow the percentage of unused rewards, which is referred to as the breakage rate.
Always keep in mind that your customers use of rewards is good for business. By taking advantage of their rewards, your members receive a benefit that they associate positively with your brand. This in turn increases their rate of engagement. If your redemption rate is too low, it probably means your program isn’t attractive to members and, therefore, isn’t performing well.
Ultimately, you want your program to be profitable—which is why your return on investment (ROI) is so important. Other KPIs are also important to keep in mind, including additional revenue per member, additional margin, and acquisition cost.
The key takeaway? Tracking your KPIs is necessary in order to better understand and maximize your program’s performance. Be sure to analyze data so that you can spot trends and see how each piece of information relates to each another