THE CLARUS Blog

What Your Loyalty Management Data is Telling You (With 10 Example KPIs)

If you have a loyalty program or plan to launch one, a big question on your mind is:

What loyalty management data should my platform provide so I can accurately gauge program success and target areas for optimization?

For example, what is the AOV? Is that improving for loyalty members?

What is the usage? What benefits are members using most and how often? This will determine if people like the program and engage with it.

What is the program’s conversion rate? What is the Lifetime Value of your members?

These KPIs (Key Performance Indicators) dictate the health of your loyalty program and reveal who your best customers are.

Tracking these key metrics is crucial to ensure the ongoing viability of your loyalty program while identifying areas for improvement.

When figuring out what loyalty management data is important in your system, these 10 KPIs will help you keep a pulse on your program and provide insights into how to optimize it.

 

1. Join Count (Or, New Member Acquisition)

New members are the lifeblood of any loyalty program, so acquiring them is critical.

While this KPI is simply the number of new members that join your program during a certain period, what it tells you goes much deeper.

If this number starts to fall or is low from the get-go, it raises some questions:

  • Is my program easy to understand?
  • Does the marketing around my program resonate?
  • Do my customers find it easy to sign up?
  • Are my in-store associates educated about the program and are they getting customers excited about it?
  • And in a premium loyalty program that customers are paying to be in, does the value proposition make sense?

Making it easy for consumers to join your program, and showing its value, is the best thing you can do to impact join count.

 

2. Conversion Rate

Conversions are defined as the number of joins a loyalty program receives from its online marketing efforts.

Conversion rate is an important metric because it not only reveals how effective online marketing is, but it also shows if the program’s benefits are enticing members to join.

If this KPI is low, it’s a good indicator that you should revisit your marketing efforts.

  • When am I asking people to join the program?
  • What mediums am I using to tell customers why they’ll get value out of the program?
  • Is my message resonating?
  • Are my associates well versed in the features and benefits?

Healthy conversion rates elevate loyalty program engagement, retention, and encourage brand advocacy.

 

3. Member Retention

The only thing more important than converting costumers into members is retaining them in the program. Retention means the length of time members stay with a loyalty program.

It can cost five times as much to attract a new customer than to retain an existing one.

In a traditional free loyalty program, members will simply stop using the program if they aren’t getting value from it.

In a premium loyalty program that members are paying for, they will cancel or choose not to renew.

Either way, if the retention rate is low, it’s time for you and your loyalty partner to work together and figure out how to enhance the program and add more value.

The goal is to have a long retention rate because this means the program is truly adding value to members’ lives.

 

4. Churn Rate

Churn is a term you don’t want to use much as it relates to customer loyalty. It’s the opposite of retention.

Churn simply means the percentage of members that cancel their memberships per month.

As mentioned above, most traditional loyalty program members will simply stop using the program rather than cancel their membership.

This can make determining a true churn rate tricky.

But in a premium loyalty program, where members are paying a recurring fee, a high churn rate means you need to take action now.

A high churn rate is usually a symptom of members not getting value out of your program or getting the wrong types of benefits.

If this KPI is high, you should survey your members and look closely at your data to see what benefits they’re using and where they feel more value could be added.

Like trial cancel rate in a premium loyalty program, you want a low churn rate because that means members enjoy the program’s benefits and don’t have a reason to cancel.

For traditional loyalty programs, it also means you’re adding new members faster than you’re losing current members.

This is why it’s critical to continue adding to and optimizing your loyalty program to keep up with changing consumer expectations.

 

5. Member Engagement

This KPI is the most important one for any traditional or premium loyalty program.

If members aren’t engaged, they won’t use the program very often or at all.

This KPI shows which program benefits your members are using.

A high figure shows that members are enjoying the program’s benefits thoroughly.

If the rate is lower, it’s time to do some reevaluating.

Are there certain benefits that can be cut and replaced with others?

Do members feel they’re not getting enough value of out the program? Is it taking too long to earn rewards?

Product usage ties into all other KPIs. If members are actively using the program, all the KPIs should skew in a positive direction.

The more members that use the program, the more value they see, and the longer they stay with the program.

 

6. Purchase Frequency

Successful loyalty programs will result in your members spending more as they shop more.

As members use the program more and earn rewards more often, they are more likely to shop more frequently.

For example, that’s why Amazon Prime members spend $600 more per year on average than non-Prime members.

And when members invest in joining a premium loyalty program, they become your best customers and want to make sure they’re getting the most out of it.

 

7. Average Order Value

One of the biggest benefits a traditional or premium loyalty program can bring retailers is an increase in average order value.

When members earn rewards back to your brand for engaging with the program, it is proven that they will spend above and beyond the reward dollar amount and above a retailer’s current AOV.

This KPI certainly is critical to judge the overall success of any loyalty program.

If you compare it to the AOV of non-members, it’s easy to see how much value your program is bringing to your bottom line.

 

8. Incremental Margin

This KPI is vital for the long-term health and viability of any loyalty program because it focuses on profitability.

If your program doesn’t show a positive incremental margin by the end of its second year, you might not be driving enough top-line revenue and/or your program costs are too high.

If this is the case, lower your program costs and consider a program that offers value outside of monetary rewards.

This KPI determines the attractiveness of your program and its flexibility. It also shows how a brand can personalize the program to various members.

With a loyalty program, if your rewards don’t spark increased spending from your members, make adjustments.

For the program to be profitable and sustainable, your members must contribute more dollars than the company invests in funding the program.

The most profitable loyalty programs invest more in their best customers and this point speaks directly to premium loyalty programs.

Premium loyalty programs target a brand’s best customers and, once those customers become members, they receive valuable benefits and engage with the brand frequently.

 

9. Customer Lifetime Value (CLTV)

From a premium loyalty perspective, Customer Lifetime Value, or CLTV, is a comprehensive metric that shows the projected value of members in your program.

In premium loyalty programs, the most important component of LTV is the trial cancel rate. The lower the trial cancel rates, the better prospects for future program success.

That means your members are enjoying the product and will likely stick with it. A higher CLTV signals the product is healthy and helps you build better relationships with your members.

It’s important to understand how much each member is worth over the lifetime of his or her membership.

To calculate a member’s CLTV, combine the average number of months a customer stays in the program with the cost per month, and that gives you the total lifetime value of each member.

 

10. Refunds

Like in all businesses, it is important to focus on refunds and make sure they are low.

This KPI is unique to premium loyalty because traditional loyalty programs are free for members.

Premium loyalty programs are designed to offer heightened value and instant benefits to members, so monitoring refunds help ensure that this is accomplished.

If refunds are high, it means too many people aren’t seeing the value in the program.

In this case, you need to rethink your benefits mix and value proposition.

 

Loyalty Management Data Is the Key to Identifying Your Best Customers

Data analytics and clear KPIs form the foundation of any successful loyalty program.

Each of these KPIs can’t be taken in isolation because they are all tied together and equally important.

If you monitor these KPIs regularly, your brand’s loyalty program will not only be successful, it will thrive.

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