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9 loyalty & rewards program metrics you should be tracking

Loyalty program goals differ across industries. Banks want to be top of wallet, airlines want to increase ancillary spend and wellness programs aim for increasing employee engagement. Despite these differences, their success depends on one common denominator -- loyalty program metrics.

Success is in the numbers.
Is your loyalty rewards program living up to all it can be? Are you keeping track of important metrics and using them to draw conclusions and make program changes and improvements? You should be. Below are nine rewards program metrics to track program performance and prove success.

  1. Activation rate –is the number of new members joining your loyalty program. Even longstanding rewards programs should be adding new members periodically. Low or drastically declining activation rates indicate a troubled program. 
  1. Usage rate (earning velocity) – Are members using the program? Keep track of how often they make purchases or perform other activities to earn points and, more importantly, redeem points for rewards. 
  1. Time to first spend–is how long it takes new members to spend their points (hint: the shorter the better). New members spending points quickly is a good indicator of high purchase frequency (more purchases = more points to spend) and that they see value in the program. 
  1. Frequency – refers to both current and desired member behaviors and is used to set program benchmarks and goals. Current behaviors are what your customers are doing now, such as frequency of purchase or frequency of interaction. Desired behaviors are what you want members to do – like “increase frequency of visits, spend or engagement by 20%.

  2. Breakage rate –is the percentage of points issued that are unspent (divide total number of points unspent by total points ever issued). Breakage is inevitable, but a rate higher 50% is a red flag your members aren’t using the program (read: aren’t engaged). 
  1. Churn rate – or attrition rate, is the rate at which customers leave a business, or in this case, a rewards program. Long periods of inactivity (usually 18 months) or cancellations are measures of negative churn. 
  1. Inactivity rate – is a measure of the time elapsed since a member’s last interaction with the program. Keep an eye on inactivity rates – prolonged inactivity leads to negative churn. 
  1. Redemption – Usage rate is important, but if your members are holding onto all their points (read: not redeeming), that means they’re not engaging. Redemption is the “aha” moment when a member cashes in hard-earned points for something they want – it’s when they experience the value in your program and your brand. 
  1. Advocacy – Beyond your Net Promoter Score (which measures whether someone would recommend your business), social sites like Yelp and Foursquare help you go a step above that to see whether someone actually did recommend your business and what they had to say about it. You can also monitor what people are saying about you and track brand engagement with analytics tools built into social sites like Facebook, Twitter and LinkedIn. These candid comments on social can help keep positive momentum going among your fans’ networks, or help you understand where improvements can be made.

Aim for the “bell curve”
The best way for loyalty program managers to track program success is to use all the program data and loyalty metrics listed above. A quick snapshot of successful rewards programs should look like a bell curve: The lower section of the curve represents low usage or inactive members; the middle is engaged users; the end is super-users. If most of your users are on the left end of the curve, your program is in trouble. Learn more about signs of a troubled program here.

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Tags: rewards programs, loyalty programs

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