How to Achieve Return on Investment ( ROI ) from your loyalty programme

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Companies launch loyalty programmes to achieve the following:

  • Acquire new customers
  • keep existing customers
  • Grow these customers into large and more lucrative customer – in a nutshell, get your customer to spend more!

However, Return on Investment ( ROI) is the main business objective of any loyalty programme.

Measuring ROI for your loyalty programme

To determine the ROI of a loyalty programme requires knowing and understanding the costs associated with your loyalty programme and the increment increase in revenue as a result of the programme.

A strong ROI is where the incremental revenue outweighs the cost . The ROI keeps getting better with a well-run loyalty program.

So lets take a closer look at each of the elements that plays a role in achieving the targeted ROI.

The COST of implementing a loyalty programme

Software  & technolgy

All loyalty programmes require a a platform that your customers can access to get and/earn their rewards. This can be designed in-house or outsouced. The cost will vary depending on the complexity and support required.

Design 

Designing a strategy and business case for the loyatlty programme is important. What will the programme look like? What behaviour are you trying to influence?

What is the name of the programme? Will there be an app? How does the customer earn and burn their rewards? These are only some of the considerations when designing the loyaty programme.

Marketing 

How are you going to promote your loyalty programme to both exisiting and new customers? How will the programme be promoted for both launch and on an going basis?

Rewards

Rewards is the biggest investment of your loyalty programme. What are does your customer have to do to get a reward and what will that reward look like?

How will Incremental Revenue be achieved from your loyalty programme?

Incremental Revenue will be achieved by :

  • Loyalty Uplift
  • Promotional Uplift
  • Using Data Insight to motivate members to behave in a more profitable way
  • Improve customer retention
  • Driving Brand Awareness through all communication
  • The Customer lifetime Value
  • Referral and Net Promoter score

Loyalty Uplift

Loyalty Uplift is the incremental revenue attributed to the member’s engagement in the programme and the change in behaviour motivated by the desire to retain a reward.

Some experts would break Loyalty uplift down further into Engagament uplift and Incentive uplift.

Engagement uplift is the incremental revenue earned from engaged members of the programme; those customers that behave differently because the programme provides them with value in return for their loyal behaviour.

Incentive uplift is the incremental revenue earned as members change their behaviour to attain a reward.

Companies can maximes loyalty uplift with a well designed programme and a suitable selection and costing of rewards. Companies need to continue to monitor these components to identify how well the programme is driving change in behaviour and maintaining an engaged membership that is motivated to spend more.

measuring the ROI for your loyalty programme

Promotional Uplift

Promotional Uplift is the incremental benefits of promoting the right offer to the right customer at the right time. Loyalty programmes allow companies to achieve promotional uplift if they are using the data insights effectively. The benefit of promotional uplift is easily measured on a campaign-by-campaign basis using traditional database marketing techniques.

Data

The ability to collect customer data is a core benefit of any loyalty program. Typical data includes what the customer purchased, aswell as the location and frequency of purchase. Building such a rich customer profile will support the tailoring marketing messages, both in-store and through other channels such as email.

Brand Awareness

A great brand awareness strategy requires a multi-faceted approach to improving brand engagement with past, current, and future customers. In a world where 70 percent of buying experiences are based on how the customer feels they are being treated, it is incredibly important that brands establish a loyal following of active customers. All loyalty communication must be consistent with your core brand values.

Customer Retention

Not only are we trying to achieve incremental growth but the goal of a loyalty programs is to help companies retain as many customers as possible. It is important to remember that customer retention begins with the first contact a customer has with a company and continues throughout the entire lifetime of the relationship.

Customer Lifetime Value ( CLV)

Customer CLV (Customer Lifetime Value) is a prediction of all the value a business will derive from their entire relationship with a customer. 

Referral

A referral is the highest honor a customer can give a business. It also happens to be one of the most effective forms of marketing in existence. Net promoter Score is a loyalty metric used to determine how likely a customer is likely to recommend a company’s service or product.

Conclusion

A improved ROI is achieve when the incremental revenue from your loyalty programme far outweigh the cost associated with the programme. A strong ROI is where the incremental revenue outweighs the cost. The ROI keeps getting better with a well-run loyalty program.

 

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Posted in Loyalty & Rewards

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