on February 25, 2022 Customer Loyalty Loyalty Data

What Are Your Loyalty Metrics Telling You?

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Loyalty metrics are key for gauging how your loyalty program is performing. These metrics are important to know and keep track of because  they keep you aware of the areas where your program is lacking and where it is thriving. When monitoring  the different aspects of your loyalty program performance, here are 5 metrics that you should keep on your list to track and measure.

 

1. Customer Engagement Score 

Customer Engagement Score is a number that measures how engaged your customers are with your brand and your program. Each customer has their own score, which is calculated based on their activity and usage of the products and services you offer. The exact factors used for calculating customer engagement score will depend entirely on what inputs you want to include and how much weight you assign to each event. Measuring CES is easier to understand because you are looking at one number rather than a group of different values. Typically marketers arrange for the combined inputs to provide a score between 1 and 100, with a healthy and happy member having a higher score. There are two ways to look at improving CES: increasing CES among members with a lower score and finding ways to keep improving the CES for members with mid-to-upper score range . 

For members with a low CES, you can improve their score using nurturing tactics such as: 

  • Personalized marketing with targeted ads and more relevant messaging
  • Promoting gamification to increase engagement
  • Gathering feedback using surveys and acting on them

For members with high CES, you can continue to improve the score by:

  • Looking for ways to expand their loyalty experience  
  • Removing upgrade friction for paid program benefits
  • Offering enhanced member perks such as premium feature trials or exclusive product offers 

It is important to look out for users on both ends of the spectrum, and monitor whether there is a spike or a drop in their Customer Engagement Score.

 

2. Redemption Rate 

Redemption Rate is the percent of points that have been issued and that were redeemed for rewards by customers. To calculate your program’s redemption rate, divide the number of points members spent on rewards by the total number of points issued for a given time period. 

To gauge whether your program has a good or bad redemption rate, know that between 15-20% is considered a good rate for most companies. If you have a high rate around or above 20% then that means that your platform is working because your customers are redeeming their points and engaging with your platform the way they should! However, be cautious if your rate starts to approach very high percentages. This could mean that you are being too generous when awarding your members points and or requiring too few points when redeeming for high value rewards. This is risky because it can increase operational costs and have a negative impact on your program’s finances over time. If this is the case then you need to examine how quickly or easily your program is awarding points and make careful adjustments to create more balance. 

If your rate is below 10% then your redemption rate is too low. This is a bad sign because it means a significant amount of your members are not redeeming for any rewards and thus not fully utilizing your program. This lack of participation can lead to higher rates of program abandonment. You should take a look at your rewards program and how you are marketing it to your members. Here are 5 ways to improve your loyalty programs redemption rate:

  • Create limited-edition or limited-time rewards to drive interest 
  • Send members reminders about how and when they can redeem
  • Have someone else test your redemption process for ease of use
  • Create more targeted messaging promoting your different rewards and their value
  • Give customers more opportunities to redeem points, such as entries into a promotion, product samples, donations and more.  

 

3. Point Breakage Rate 

Point Breakage Rate is similar to redemption rate; however it is the percentage of points issued that never get redeemed. This is caused by points expiring or members not possessing enough points yet to redeem for rewards. If your breakage rates are high (above 40%), that indicates that your customers are actively earning points but something is preventing them from redeeming their points. There are many different reasons for why your breakage rate is high. Some being that members’ points expire too fast; members don’t see the value in spending their points on the rewards available; or they never earn  enough points to redeem for anything due to highly priced rewards.

It is also important to note that high breakage could be a sign that your customers are finding it too difficult to participate in your loyalty program. However, there are plenty of ways to minimize point breakage:

  • Get creative with rewarding points by adding more ways to earn
  • Reward member engagement like product referrals or social sharing
  • Offer a better variety of rewards at staggered price points
  • Surprise and delight customers with free bonus points
  • Offer limited-time promotions
  • Ensure customers know how to redeem points
  • Proactively remind customers about point expiration dates 

 

4. Customer Retention Rate 

Customer Retention Rate is the percentage of existing customers who remain customers after a given time period. The way to calculate your program’s retention rate is by taking the number of customers at the end of a specific time period, subtracting the total of newly acquired customers during the same time period, and then dividing the result by your number of customers at the beginning of the time period. Multiple the final number by 100 to get your percentage. By calculating this, you are able to get a better understanding of which customers are being retained, start exploring what is keeping your customers loyal, and identify where you are able to improve on the customer service side of business. 

CRR shows the importance of building loyalty because as loyalty grows so does the retention rate.  If you have a low retention rate, that is the result of poor customer satisfaction and indicates there is something preventing your customers from staying loyal to your brand and program.  There are key steps your company can take to raise the customer retention rate: 

  • Conduct churn analysis that examines why customers are leaving
  • Build customer trust  and over deliver on customer experience
  • Utilize customer data to analyze retention rates by different customer segments and look for potential factors that might positively or negatively impact performance 
  • Identify opportunities to serve customers better and remember there is always room for ongoing improvements
  • Reward loyal customer actions and behaviors  

Focusing on raising your retention rate could increase your profits dramatically. This is because retaining customers is far less expensive than getting new ones. When looking at your rate it is important to look at a reasonable timeline. Growing retention will take time so as long as the metrics are going up then your company is doing what it needs. 

 

5. Participation Rate

Participation rate is used to determine what percentage of purchase transactions were made by a loyalty program member. To calculate participation rate, take the number of active loyalty program members and divide it by your  total number of customers. (Some organizations also calculate participation rate by taking the number of purchase transactions made by loyalty program members in a set time period and dividing it by the total number of purchase transactions.)  

Participation rate is important because it can indicate a number of good factors about your program: whether it’s easy to find and enroll, simple to use, and provides an enjoyable, worthwhile experience. A high participation rate indicates your program provides significant value for your customers that motivates them to join. The average rewards program has a participation rate of 23%, and anything above is excellent. 

If you need to improve your participation rate: 

  • Offer relevant and interesting rewards your customers will actually want to pursue 
  • Promote your rewards program across all your channels and throughout your website
  • Create email campaigns designed specifically to introduce new customers to your rewards program as well as promote program updates or new features to existing customers

This is one of the most important metrics you can have when starting and maintaining a loyalty program. This allows you to see how your program is performing. It is important that your participation rate doesn’t get below 15%. If this number gets too low then you will begin to see attrition and you will not be seeing organic increases in the number of loyalty users. If you are in the 20-25% range you are in a comfortable spot and should be confident in the fact that your program is succeeding. 


Want to know more about your loyalty program's metrics? We can help you! Reach out to us today to see what your next step should be!