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Loyalty Programs

How to Measure the Effectiveness of Your Loyalty Program

Written by 
Brad Davis
December 6, 2019

Struggling to figure out if your loyalty program is actually making a difference to your customer retention? Don’t worry – you’re not the first!

With so many parts working together to create a thriving business model, sometimes it can be difficult to separate the individual cogs in the machine and determine what’s working and what isn’t.

The overall success of a brand’s loyalty program can be hard to measure. At Stamp Me, we thought we’d help you measure the effectiveness of your loyalty program by asking yourself these four questions.

1.     Are new customers consistently signing up?

- Check your registrations.

queue of customers

It’s one thing for your existing loyalty program members to be regularly engaging with your business, accruing points and redeeming rewards; but is your loyalty program helping you acquire new customers?

An effective loyalty program should always be working for your business, constantly enticing new customers to join your program. If you’ve noticed a slump in loyalty program registrations, it could be for a number of reasons – all of which are easily resolved, thankfully!

The main reason is likely to be a lack of promotion. If you’re running a physical store, make sure your loyalty program is promoted throughout the shop – posters in the windows, signs at POS, and train your staff to enlighten customers on the many benefits of becoming a loyalty program member.

For online businesses, you can ensure customers are made aware of the loyalty program by heavily promoting it throughout the website, and prompting customers to enjoy a discount on today’s purchases by joining the loyalty program at checkout.

Another extremely useful method for acquiring new customers is to incentivise your existing customers to refer their friends, family and colleagues.

Offer customers extra points towards their next reward for inviting others to join the loyalty program, or for rating their experience with the program and sharing on their own social media pages for everyone to see (which brings us to our next point).

2.     Are customers giving good feedback on your loyalty program (or any feedback at all)?

- Ask your loyal customers for their two cents.

customer feedback

Obviously, you want your loyalty program to be as enticing to your customer base as possible, right? The best way to achieve this is through listening to what customers are saying about your program, and adjusting it accordingly.

If you’re not receiving any feedback on your loyalty program, how do you know if it’s working? Feedback is an ideal gauge of a loyalty program’s efficacy.

Encourage your loyal customers to provide as much feedback as possible – both good and bad. In fact, criticism is going to be more helpful in the long-term success of your loyalty program.

Generally, customers appreciate having their voice heard, and their opinion valued. Most of your regular customers will be more than happy to offer praise and criticism on different aspects of your loyalty program, which will give you an idea of how effective it is (as well as indicating what needs improvement).

Make sure customers have a way of communicating with your brand via the loyalty program, and incentivise customers to use it. Remember, the best loyalty programs allow two-way communication between the business and the customer.

3.     Are customers making purchases based on tailored offers?

- Check your conversion rates.

Perhaps one of the biggest drawcards of a loyalty program (from the business’s point of view) is that, with every new purchase a customer makes, your company has the opportunity to get to know that customer a little better.

Every transaction is logged and documented in the database – who, what, when, where, how, etc. This allows you to send each customer personalised offers that are most likely to appeal to their specific needs.

4 W's

As an example, Stamp Me offers businesses a digital loyalty app solution that has the capabilities to send automated push notifications, SMS and emails to loyalty program members with exclusive offers, limited-time deals and even recommended products.

These targeted messages are unique to each customer, and they’re generated based on what the customer tends to buy, what days they usually come in, what sides or accessories they add to their main order, and so on.

Push notifications are now responsible for driving nearly 10 times more users to make a purchase. If your customers appear to be immune to these tailored offers, then your loyalty program is not providing them with the personalised shopping experience that it should be.

Use these targeted messages as a way to assess the effectiveness of your loyalty program, and its ability to directly engage individual customers.

measuring customer feedback statistics

Consider creating a mock account under your loyalty program, put a few transactions through the account and see what kind of targeted messaging the dummy account-holder receives. If it’s not hitting the mark, your loyalty program’s personalisation needs some work.

Customers crave a personalised shopping experience these days, so measuring your tailored offers is a crucial aspect to measuring your loyalty program as a whole.

4.     Are you noticing a spike in business during typically slow periods, as a result of strategically-timed offers?

- Send out a test offer.

quiet cafe in low sales period

What’s your weakest sales period of any given day, or your slowest day of the week? Let’s say you typically experience a drop-off in business between 2pm and 4pm on weekdays.

Try sending a push notification or SMS message to your loyalty program members at noon on a Monday, prompting them to pop in between 2pm and 4pm any day this week for a free X with any purchase of Y, or a half-price Z, or free upgrades… whatever seems like an enticing offer to you.

If you experience a spike in sales between 2 and 4 this week, you’ll know that customers are paying attention to your loyalty program, and willing to take you up on spontaneous rewards and exclusive offers.

If you don’t see any noticeable difference in your typically slow sales period, then your loyalty program is failing to engage customers for whatever reason.

push notification strategy

McDonald’s uses its mymaccas app to engage customers prior to key meal times, in an effort to put the Golden Arches front-of-mind right when you’re starting to consider what to eat for lunch, for example.

Of course, it’s worth noting that this “test offer” technique isn’t without its flaws – a cafe is always going to be busier at lunchtime than halfway through the afternoon on a weekday, when everyone is back at work. Similarly, a bar is going to enjoy more business on a Friday night than it will on a Tuesday night.

Give this technique some consideration before figuring out the best way to apply it your business.

In general, pay attention to the data and look for patterns.

searching for patterns

While the four points mentioned here are a good indicator of how well your loyalty program is engaging your customers, our advice at Stamp Me is to generally keep a close eye on the data that your loyalty program produces. It’s an invaluable tool for getting to know your customers, and discovering how to satisfy their needs.

  • Monitor your signups to reveal whether your promotional material needs sprucing up.
  • Observe the data for ongoing engagement to determine if customers are signing up, but then quickly losing interest in the program.
  • Keep an eye on referral rates to inform you if people are talking about your brand or not.

Digital loyalty apps provide businesses with an unrivalled insight into their customers, as well as making on-boarding and regular engagement remarkably simple and convenient for both parties.

Not only does a digital loyalty app make things like targeted marketing, spontaneous offers and two-way communication a breeze, but it also makes it incredibly easy for a company to measure its brand loyalty and customer retention data.

For more information on monitoring and improving your loyalty program, check out our other articles on How to Get Customers to Join Your Loyalty Program, 10 Ways to Improve Your Customer Loyalty Program and 7 Tips for Creating a Successful Loyalty Program.

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