How to Measure the Success of Your Customer Loyalty Program

Loyalty programs are an incredibly useful tool for retailers. Customers love them, and they provide a way for retailers to form deeper relationships with their customers. But many loyalty programs fail because they aren’t properly designed or monitored. This is especially true for online-only brands that don't have a physical presence in the customer’s home town. In this article, we'll show you how to measure your loyalty program so that you can tweak it to maximize its effectiveness and ROI while protecting against fraud and abuse of your rewards program by
hackers. Over half of Americans are members of loyalty programs. According to a study by Colloquy, over half of Americans are members of loyalty programs. The average household has 20+ loyalty program memberships and this number is increasing every year.

What is the goal of your loyalty program? It’s important to have a clear goal in mind when you’re developing your loyalty program. Are you trying to drive repeat purchases? Increase average order value? Or maybe get customers to spend more time on your site?
Whatever the case may be, it's important that this goal aligns with your business objectives and helps achieve them at the same time.

For example, if one of your main goals is increasing customer lifetime value (CLV), but there isn't much opportunity for repeat purchases within that timeframe–say an online retailer whose products are sold once per purchase–then it would make sense for them not only offer discounts but also create incentives for frequent visits like free shipping or free returns so that they can keep getting as much value from each customer as possible before they move on with their lives.
How do you define success?
Defining a goal is the first step in measuring success. A good customer loyalty program has clear,
measurable goals that are attainable and relevant to your business. These goals should be specific and
time-bound.
To help you create these types of objectives, we’ll use the SMART method:
 Specific – Your objective should be as specific as possible so that it's easy to measure its success
or failure (e.g., Increase revenue by 20% over 12 months" instead of "Increase sales").
 Measurable – You should be able to track how much progress you've made toward reaching your objective (e.g., sales numbers). If there’s no way for anyone else besides yourself or your team members who work on this project every day, then consider revising it until there is something
tangible related specifically only with this particular initiative being measured in some way shape form way–whether that means counting customers who sign up during open enrollment periods versus just using surveys filled out after opening day instead).

How often should customers receive a reward for their purchases?

The more often they receive rewards, the more likely they are to keep buying from you and share their experiences with their friends and family. The more often customers receive rewards, the more likely they are to buy other products from you as well. How much does the average customer spend over time in your store or on your website?
There are several ways you can measure the success of your customer loyalty program. One way is by looking at how much money customers spend over time in your store or on your website. This is a good indicator of loyalty, but it’s not the only one. Another way to measure success is by looking at customer satisfaction surveys that ask questions like
How likely are you to recommend us?" and "What could we do better? If people give positive answers
on these questions over time, then that shows they're satisfied with the experience they had with us– and therefore more likely to come back again in future purchases.

What factors lead to higher spending?
There are a number of factors that can lead to higher spending, including customer loyalty and satisfaction. Loyal customers are more likely to stay with your brand and buy from you again and again. Satisfied customers are also likely to become repeat buyers because they feel good about using your product or service, but there is an additional benefit: satisfied consumers also tend to refer others as well.

Customer experience is another important factor in driving customer retention rates–and by extension, increased spending from existing customers. A positive customer experience not only increases loyalty but also gives companies opportunities for cross-selling new products or services that complement their existing offerings (e.g., when someone buys a pair of shoes from Nordstrom Rack). Equally important is ensuring that all aspects of the customer journey–from discovery through purchase and beyond–are seamless; this ensures that users will continue interacting with the brand long enough for them to become loyal shoppers over time

Are new customers spending more than existing ones?
In order to measure the success of a loyalty program, you need to ask yourself this simple question: Are
new customers spending more than existing ones?
This may sound like an obvious thing to consider, but there are actually two ways that this can play out. If your loyalty program is points-based (think airline miles), then it's possible that new customers will spend more money than loyal ones because they're trying to earn enough points for a free flight or hotel stay. However, if your loyalty program offers discounts instead of points (think Groupon), then it's possible that loyal customers will be more likely to take advantage of those discounts and thus spend less overall than new ones who don't yet have any kind of discount in place yet!

How do you measure the return on investment (ROI) of your loyalty program efforts?
To measure the ROI of your loyalty program efforts, you'll need to look at multiple sources. You can measure ROI on the program itself by looking at how much revenue it generates and comparing that number against its cost.

You also want to consider measuring individual rewards as well as customer acquisition and retention efforts when determining whether or not your loyalty program is successful. For example: if someone earns a free dinner after spending $100 at a restaurant, but they never come back again because they don't like their experience there (or maybe they just don’t feel like going out), then that reward isn’t working very well for anyone involved! Loyalty programs are great tools that help retailers build deeper relationships with their customers, but without proper measurement and analysis, they’re just another marketing tactic instead of a valuable customer acquisition tool.

Measurement enables you to understand what's working and what isn’t so that you can make adjustments as necessary. It also gives you insight into how well your loyalty program is paying off in terms of increased sales or repeat purchases from existing customers.

Conclusion
Loyalty programs are a great way to build customer relationships and increase sales. But if you’re not measuring the success of your program, then you don’t know if it’s actually working or not. By tracking key metrics like spending and retention rates over time, you’ll be able to see how effective your loyalty program has been for attracting new customers or retaining existing ones.