Four ways to measure loyalty
Loyalty programs can help businesses retain customers, but they can also be expensive. In order to justify the spend, marketers must constantly assess these programs.
An attractive offer might entice someone to sign up for a loyalty program, but what happens next is equally important. When US Bank converted its credit card from a Northwest
Airlines WorldPerks Card to a US Bank branded Visa, it measured how many customers converted, whether or not they activated their accounts, if they retained their balances and their spend behavior.
“We looked at if they activated their card and then just put it in their sock drawer or if they activated it and used it,” says Bob Daly, SVP, retail payment solutions at US Bank.
US Bank also looks at redemption. “People think that when customers redeem that is when we have to pony up and pay the bills, but we think redemption is a good thing because it is highly correlated with retention,” says Daly. Delta also reviews mileage redemption to gauge the success of SkyMiles. Delta members redeemed more than 230 billion miles last year.
The most common metric for measuring loyalty is a frequent one across the marketing disciplines — sales.
Marketers examine how many sales their loyalty members drive, how often they make purchases and how large their transactions are. Next they measure these against the costs required to run a successful loyalty program.
Delta reports that 8.5% of revenue miles fl own with the airline last year were for award travel.
“It's important that the program helps improve the airline's financial performance, and we've delivered on that front as well,” says Beatriz Sims, manager, Delta SkyMiles Program.
Loyalty marketers also track how many members they have and how many of them are active, an important clarifying factor. They also consider how their membership grows over the years and how often members recommend friends to join.
“If a person brings others into a program or if they are influencing others, their value is higher,” says Henry Harteveldt, analyst and VP at Forrester Research.
“They also measure engagement.
For example a bank would measure how many accounts a customer has, such as a checking account, a mortgage, a savings account, IRA and so on.”
“We also analyze quantitative survey data to verify we're rewarding customers, and we've seen steady increases in our customer satisfaction scores,” adds Sims.
This includes measuring the progress a customer makes within the tiers of its program. For example, an airline might measure to see if members are moving upfrom a Silver to a Platinum standing in their program.