loyalty expert talk #3

Marketing Insights by Iain Pringle

How to Measure The Effectiveness of Loyalty Programs

With 20 years of experience in the loyalty industry, Iain Pringle, managing partner at New World Loyalty, has curated his expertise by working with multiple industry giants such as Shell, Avios and British Airlines. Working in various industries gives him a broader perspective when it boils down to the effectiveness of loyalty programs.

But how do you measure a program’s success? What indicators must businesses use to track a loyalty program’s profit? From Iain’s perspective, it is all about the return on investment.

The Impact from the Pandemic

According to Iain, the greatest threat to every company’s loyalty program is currently the COVID-19 pandemic. Many companies made difficult decisions during this time to merely keep their businesses alive. However, some of these choices jeopardized their customer loyalty.

Iain says it best – emotional loyalty can be seen as a warehouse of goodwill. Companies spend years building that emotional loyalty. But one tough decision can ruin that warehouse and prompt customers to look elsewhere.

Companies have the difficult task of making choices that allow them to survive through this pandemic while still building their warehouse of goodwill. Now more than ever with the constraints from the pandemic, companies need to analyze the effectiveness of their marketing actions and loyalty programs. They need to make the necessary changes to retain the customer loyalty they’ve spent years developing.

"Loyalty is like a warehouse of goodwill and, over the years, brands build upon that. It's important that the big decisions around your loyalty program don't diminish the warehouse to the point where it becomes negative on the customer."

The Metric to Measure Loyalty Programs

To measure the effectiveness of loyalty programs, companies need to look at their return of investment (ROI). According to Iain, ROI has 2 facets – the science and the art measurements

The science

The science behind ROI is ensuring your business does not lose money. You want to make sure that the costs of rolling out your loyalty programs or marketing initiatives do not exceed the benefits. To calculate ROI, follow this equation:

The art

The other way to measure ROI means analyzing your loyalty programs with a soft approach. From the art lens, you are looking at the impact that your loyalty programs or marketing initiatives have on customers. Do customers find purpose in your company? Are you building upon your emotional loyalty?

You can measure the impact of your initiatives from many different angles.  It’s encouraged to do so. Analyzing payment history, campaign analysis, or net promoter score (NPS) provides insight into the effectiveness of your actions. These indicators provide the information you need to change or keep your current loyalty initiatives.

Choosing the Right Goal for Your Brand

Keep in mind, the indicators you use also depend on your goals. For example, NPS was an essential indicator in the Orange and Stampix loyalty program. The 30 plus point increase in NPS exemplified the success and effectiveness of their loyalty program. Having a clear indicator to measure your impact is what you want to strive for.

Measuring the ROI from your loyalty programs is essential whether there’s a pandemic or not. From the science and art indicators of your ROI, you can utilize this information to make the required modifications. Ultimately, this will lead to better loyalty programs, effective strategies and greater customer loyalty for your brand.

This post is part of the #Loyalty Expert Talks, a Stampix original series: 20 minutes live chats with real stories and insights from the world’s finest retention & loyalty marketers.

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