Back to All Posts
Loyalty Programs

How Do You Know if Your Loyalty Program is Working?

Written by 
Brad Davis
June 16, 2021

You might have a killer loyalty program, but how do you know if it is actually working to retain more customers and build brand loyalty?Aside from seeing customers accruing points and redeeming rewards at checkout, it can be difficult to get a clear understanding of how your loyalty program is performing in the grand scheme of things. And without understanding how it’s performing, how can you understand what aspects of it need tweaking or improving?Any decent digital rewards platform (like Stamp Me, for example!) will provide you with a whole host of valuable data and analytics that produce actionable insights for your business.However, there are two simple metrics you can easily calculate, and they’ll tell you two very valuable things about your loyalty program – how many customers are participating in the first place, and how many are seeing it through to the point of redemption.With just these two pieces of information, you can identify how well your loyalty program is performing.

How do I determine my loyalty program’s participation rate?

how do you know if your loyalty program's participation rate is working

To figure out your loyalty program’s participation rate, simply divide the total number of loyalty program members by your total number of customers.This will tell you not how many customers are enrolled in your loyalty program (that number is likely to be much higher), but rather how many customers are actively participating in it.The average consumer is subscribed to more than 13 loyalty programs, but only actively participates in less than 7 of those programs. If you assess your rewards program based on how many registrations you have, you won’t gain an accurate idea of how it’s truly performing.If your participation rate is lower than 23%, there are some techniques you can employ to drive this percentage up. At Stamp Me, we’ve noticed that many businesses build registrations much faster by offering an upfront signup incentive, like a free gift or a discount on today’s purchase. The businesses that do this build registrations three times faster than those that don’t.Once these members are signed up, it’s important to make sure your rewards are realistic and attainable, otherwise interest will immediately wane and you’ll end up with a high enrolment rate but a low participation rate.

How do I determine my loyalty program’s redemption rate?

how do you know if your loyalty program's redemption rate is working

Your loyalty program’s redemption rate can be calculated by dividing the total number of loyalty points redeemed, by the total number of loyalty points that your business has issued.This metric tells you how much engagement your loyalty program is getting. Low engagement means your program is successful in building registrations and initially encouraging repeat purchases, but then failing to keep customers hooked.There are a number of reasons why this might be the case, and there is no shortage of businesses that failed to keep loyalty program members engaged due to easily rectified mistakes in the rewards structure.At Stamp Me, we’re well-versed in how to boost engagement through a variety of useful strategies.

Here are some quick tips on how to increase your loyalty program’s redemption rate:

  • Surprise and delight your customers with spontaneous gifts and random rewards along their loyalty journey
  • Acknowledge milestones like birthdays, signup anniversaries and other notable moments in their customer experience with your brand
  • Use personalization to provide them with a tailored experience that appeals to their specific needs and preferences
  • Regularly reassess your points-and-rewards structure to ensure it is continuing to hit the mark in regards to what your customers actually want from your rewards program
  • Use gamification to add a fun and exciting element to your loyalty program – “gotta catch them all”-style Menu Challenges, for example, or a social media competition to build hype among your existing customers
  • Provide your loyalty program members with a seamless omnichannel experience, for a convenient and cohesive customer journey that leaves them feeling valued by your brand
  • Engage customers directly via their mobile devices, with a well-structured digital loyalty app

Remember, consumer behaviour is a constantly evolving phenomena that shifts with the progression of technology and other factors. Personalization is increasingly important, with 66% of customers now expecting tailored communications from the brands they shop with (according to Salesforce).

How do you know if your loyalty program is working?

queue of customers at POS

At the end of the day, a decent loyalty program should encourage customers to earn points and redeem them. By only focusing on one or the other, you risk achieving neither.

Use the two metrics mentioned in this article to get a snapshot of how your loyalty program is performing, and then have a brainstorm about how to incorporate the ideas we suggested for boosting participation and rewards redemption in the long term.

Email Course: 7 Days of Customer Loyalty

Sign up for our free, 7-day email course and become a customer loyalty expert!

We’ll also send you loyalty tips, trends and resources from time to time (which you can opt out of whenever you like).

Thanks! We've sent the course straight to your email!
Oops! Something went wrong while submitting the form.