5 Foundational Loyalty Metrics to Track from Day One of Your Program Launch
A loyalty program that offers value never goes unnoticed. When it delivers satisfaction, it earns commitment. Having said that, according to Deloitte, 60% of U.S. customers say that they’d happily pay for loyalty programs if they gave them exclusive benefits and a refined user experience.
Modern customer loyalty blends emotional advocacy and repeat business. And this is very important for any business. Because happy customers stay loyal to your business, and they give a higher lifetime value as they stay longer.
So, let’s say you’ve now decided to build a loyalty program – smart move. But once you embark on how to build a loyalty program, how do you measure its success?
This guide highlights the key loyalty metrics you need to track to build a successful loyalty program.
The Importance of Loyalty Metrics
How do you define a well-built loyalty program? A loyalty program that gives customers what they want and has a metric system that keeps track of performance, sales, inventory, operations, etc. This helps boost customer retention.
The Top 5 Loyalty Metrics to Track
To measure your loyalty program, make sure to follow these five core loyalty program metrics:
1) Customer Retention Rate (CRR)
What It Measures: Customer retention rate quantifies the percentage of customers a business retains over a specific period. It’s a direct indicator of your ability to keep customers engaged and prevent churn.
Why It Matters: A high CRR signals customer satisfaction and strong loyalty. It’s often more cost-effective to retain existing customers than to acquire new ones. For loyalty programs, tracking this metric reveals that your incentives are compelling enough.
How to Calculate:
The formula is:
CRR=[(E−N)/S]∗100
Where:
- E = Number of customers at the end of the period
- N = Number of new customers acquired during the period
- S = Number of customers at the start of the period
How to Improve:
Focus on exceptional customer service, personalized communication, and ensuring your loyalty rewards genuinely align with member preferences. Regular feedback loops can also pinpoint areas for improvement.
2) Customer Loyalty Index (CLI)
What It Measures: Unlike a single metric, the CLI offers a broader perspective on customer sentiment and future behavior. It typically combines questions about willingness to recommend, repurchase, and try other products/services.
Why It Matters: CLI goes beyond transactional data, tapping into the emotional connection customers have with your brand. A strong CLI suggests members are not just repeat buyers but potential advocates. This is a critical loyalty program success metric, as it predicts long-term program viability.
How to Calculate:
CLI is usually derived from a short survey asking customers to rate their likelihood of:
- Recommending your brand to others.
- Buying from you again.
- Trying your other products or services.
Each question is typically answered on a scale (e.g., 1-6 or 1-10), and the average of these scores forms the CLI.
How to Improve:
Enhance the overall customer experience within the loyalty program, offer exclusive member benefits that add clear value, and actively solicit and act on feedback.
3) Enrollment Rate
What It Measures: Enrollment Rate tracks the percentage of eligible customers who actually join your loyalty program within a given timeframe.
Why It Matters: A robust enrollment rate indicates that your program is visible, appealing, and easy to join. If few customers are opting in, even the most well-designed program won’t yield results. This metric provides a crucial early signal of program appeal.
How to Calculate:
Enrollment Rate = (Number of New Loyalty Program Members/Total Number of Eligible Customers)∗100
How to Improve:
Simplify the sign-up process, clearly communicate the value and benefits of joining, offer immediate enrollment incentives, and promote the program across all customer touchpoints.
4) Average Order Value (AOV) of Members vs. Non-Members
What It Measures: This metric compares the average spend per transaction for your loyalty program members against that of non-members.
Why It Matters: A primary goal of many loyalty programs is to encourage members to spend more. A higher AOV among loyalty members validates the program’s ability to drive incremental revenue, making it a powerful loyalty program performance metric. It shows whether your incentives are motivating larger purchases.
How to Calculate:
- AOV (Members) = Total Revenue from Loyalty Members / Total Orders by Loyalty Members
- AOV (Non-Members) = Total Revenue from Non-Members / Total Orders by Non-Members
How to Improve:
Introduce tiered rewards that incentivize higher spending, offer exclusive discounts on larger purchases, or provide bonus points for reaching specific spending thresholds.
5) Net Promoter Score (NPS) Among Loyalty Members
What It Measures: NPS gauges the likelihood of loyalty program members recommending your business to others, categorizing them as Promoters, Passives, or Detractors.
Why It Matters: While CLI offers a broad view, NPS specifically targets advocacy. For loyalty programs, a high NPS among members signifies they are not just retained but actively championing your brand. This word-of-mouth marketing is invaluable for customer acquisition and program growth.
How to Calculate:
Members are asked one question: “On a scale of 0-10, how likely are you to recommend [Your Company/Brand] to a friend or colleague?”
- Promoters: Score 9-10
- Passives: Score 7-8
- Detractors: Score 0-6
How to Improve:
Address any pain points identified by Detractors, reward and recognize Promoters, and continuously enhance the loyalty program experience to adapt strong positive sentiment.
How to Interpret Customer Loyalty Metrics
Raw numbers are just the beginning. To extract actionable insights from your metrics for loyalty programs, interpret them through various lenses:
- Customer Tenure: Analyze how metrics change over the customer lifecycle. Are newer members behaving differently than long-standing ones? This can inform onboarding strategies and long-term engagement initiatives.
2. Customer Value: Segment members by their overall value (e.g., high-spend, frequent purchasers). Do your loyalty program metrics differ significantly across these segments? This helps tailor rewards and communications.
3.Channel/Source: Understand where your loyalty members are coming from (e.g., online, in-store, specific campaigns). This helps optimize acquisition efforts and personalize the loyalty journey based on their initial interaction.
4. Demographics/Geography: If relevant to your business, breaking down metrics by demographic or geographic data can reveal unique preferences and behaviors, allowing for targeted program adjustments.
5. Product/Category: See which products or categories resonate most with loyalty members. This can inform future inventory, promotions, and personalized recommendations.
Bonus Tips for Tracking Metrics
Simply tracking isn’t enough; purposeful engagement with your data is key.
- Invest in the Right Tools: Leverage CRM systems, loyalty platforms, and analytics software that can automate data collection, provide dashboards, and generate insightful reports. This streamlines the process and ensures accuracy.
- Define Your Benchmarks Early: Before launching, establish what “good” looks like for each metric based on industry averages, historical data, or specific business goals. These benchmarks provide context for your performance.
- Review Metrics Regularly: Don’t just glance at the data periodically. Schedule consistent reviews – weekly, monthly, quarterly – to spot trends, identify anomalies, and facilitate timely interventions.
- Experiment with A/B Testing: Don’t be afraid to test different program elements (e.g., reward structures, communication channels, bonus offers) with segmented groups. A/B testing provides concrete data on what drives better performance.
- Take Action on Early Insights: The true power of early metric tracking lies in acting on the information. If enrollment is low, address your sign-up process. If AOV isn’t growing, re-evaluate your incentives. Proactive adjustments based on data will define your program’s success.
Conclusion
Building a robust loyalty program requires a commitment to diligent measurement from its inception. By meticulously tracking foundational loyalty program metrics like customer retention rate, customer loyalty index, enrollment rate, the average order value of members versus non-members, and net promoter score among loyalty members, businesses gain a clear, actionable picture of their program’s health and impact.
