Nov 6th, 2019. Posted in: News
While having a loyalty program is the best way to build a strong customer base and grow the business, knowing whether it’s delivering the results as expected is vital to get the optimal outcome. Understanding the relationship between key metrics for loyalty programs helps you determine how engaging and financially sustainable your program really is.
Let’s check these below numbers to see if your program is doing its best.
The program can’t work if no one joins in. The participation rate calculates how popular and easy to use your program is.
A suggested average rate for a reward program is 23%, which means almost a quarter of the customers participate in the program. The number may vary depending on the industry you are operating on and your goals, but it sets as a good starting point.
Besides indicating how easy and simple to join the program as stated above, this rate also tells how valuable the customers perceive it to be. If they’re not fond of the rewards offered, they simply won’t join.
What does it mean?
It is one of the key factors in assessing program performance. It shows customer engagement, product satisfaction and has a huge impact on sales.
The average loyalty redemption rate is 13%. If your program’s rate is less than 13%, it is underperforming.
The redemption rate shows how worthy customers perceive the program to be. While a high participation rate is a win itself, it’s still far from the finish line. Low redemption rate demonstrates losing interest in the customers which leads to losing customers and losing sales.
For more detailed solutions, check out our post on how to enhance a redemption rate.
What does it mean?
A Return On Investment (ROI) tells if you’re making profits as a result of offering loyalty rewards.
(Revenue generated: Total of all purchases made by any customer that is attributed to the program
Rewards earned: Total of all rewards members have earned, but not redeemed yet)
If your ROI is greater than 1, your program is profitable. For digital service providers, the suggested number is 3.
If the rate is negative, your program is not financially sustainable. While you’re acquiring new customers, you’re ultimately losing money by offering rewards that are either too expensive or too easy to obtain. It could work for the goal of expanding the market where the growth is more important than profit situation, but it can’t ensure life-long development.
A loyalty program cannot grow by itself. Keeping track of these 3 metrics gives you a clear picture of your program performance and shed light on problems.