Measure The ROI Of Customer Loyalty Marketing With These 5 Key Metrics

July 22, 2014 Lauren Licata

While we often think of customer loyalty marketing as a modern idea, tokens, exchanges, exclusive offers and other influencers trace back all the way to 1793. What started as tokens of appreciation, morphed into frequent flyer programs and paper punch cards. Today, digital customer loyalty marketing platforms make it easy for us as marketers and business owners to attract and retain loyal customers and to understand their value.

The olden days of customer loyalty marketing

History has shown that we’ve always known customer loyalty mattered, despite its difficulty to measure. Take a fictional local tavern owner in 1940 who gave wooden coins to regulars so that they could redeem them for free drinks later. What was the purpose of giving out coins? Well for one, it would almost guarantee the customer’s return to redeem their free drink. Repeat visits. The subtle “thank you” would improve the customer’s experience. Churn reduction. And they might even tell their friends about the tavern. Word of mouth marketing. All of these things lead to additional purchases and visits which increases the lifetime total value of the customer.

Then technology changed everything

While the wooden coins certainly served their purpose for the time, technology has reinvented the way businesses connect with their customers. Today’s customer loyalty marketing platforms make it easy to measure the ROI of a loyal customer. Instead of relying on coins or paper punch cards, digital platforms do all of the heavy lifting.

With 1 in every 5 people owning a smartphone around the world, millions of people are connecting with businesses digitally. Connected consumers are making their voices heard. If they’ve had a great meal, they let their Facebook friends and Twitter followers know about it. If they had a bad customer experience, watch out. They’ll likely share all about it on Yelp, Facebook, Twitter or on their blog. Gone are the days where opinions are shared with a couple friends and family members. Customer experience matters even more when opinions are shared with the entire world.

The ROI of improved customer experiences is hugely important

“Companies shouldn’t invest in customer experience because it seems like a good thing to do. They should invest in it because it drives long-term business success”, says Bruce Temkin, author of The ROI of Customer Experience.

The report shows a high correlation between customer experience and loyalty. According to the report’s executive summary, “customer experience leaders have more than a 16 percentage point advantage over customer experience laggards in consumers’ willingness to buy more, their reluctance to switch business away, and their likelihood to recommend. A modest increase in customer experience can result in a gain over three years of up to $382 million for US companies.”

5 key metrics for measuring the ROI of customer loyalty marketing

When embarking on customer loyalty marketing, the objectives you set and the measurement tools you put in place are key to your success. Having partnered with over 7,000 businesses to establish custom loyalty marketing programs, we recommend 5 key metrics to measure the ROI of your customer loyalty marketing program. We’ll take a closer look at each of the metrics below:

1. Total Visits: There are many ways businesses can drive additional visits. At Belly, we use a points-based rewards system. Customers return to accrue more points and save up for rewards that they actually want. Rewards vary from business to business, but the goal is the same – encourage customers to check in with each visit and save for rewards that matter most to them.

Total visits is a great metric to track because it doesn’t require integration into your POS system. You can measure how successful your marketing activities are at driving repeat business.

In this example, you can see when your customer, Katie B. first visited your business. You can also track when her most recent visit was, and send her custom marketing messages based on her visit history. For example, what if she hasn’t been back in 90 days? Send her an exclusive offer to return.

If you’re a current Belly customer, you can login to your Web Command Center for a full view of your customer’s visit history. Pretty neat, eh?

2. Repeat Customer Growth: At any given time, can you name the percentage of new vs. returning customers at your business? While customer acquisition is super important to the health of a business, it’s equally important to grow and measure repeat customers over time in order to increase the total lifetime value of each customer. If you use Belly, it’s easy to see your new vs. returning customers – as well as gender and age. Track your new vs. returning customer percentages over time to maintain a healthy business. What’s ideal? The answer unfortunately is that it depends. It depends on business maturity, industry and customer lifecycle. We typically see that our average merchants have a 40% repeat customer base – so make sure you keep this metric in check.

3. Churn Reduction: In startup world, churn rate is a metric that is talked about frequently. It’s the proportion of customers who leave or stop using a business during a certain time period. Churn is measured because it’s a possible indicator of customer dissatisfaction, cheaper or better offers from the competition, or more successful sales and marketing by a competitor.

Since customer experience is very important to customer retention in the world of small businesses, it’s critical to track your customer churn over time. One bad customer experience can cause your customers to look elsewhere, especially in a world of infinite choices.

To calculate your churn for a given period of time, take the number of customer you lost during the time period and divide it by the number of customers you started with during that same time period. The resulting percentage is your churn rate.

The goal is to reduce your churn rate over time by creating better customer experiences. Customer loyalty marketing programs should help you reduce churn over time, so it’s important to track this metric before launching your customer loyalty marketing program as well as during to understand its success.

4. Social Media Reach & Sentiment: Do you know if social media is driving new and repeat customers to your business? Do you know what your customers are saying about your business on review sites like Yelp?

81% of small to medium sized businesses use social media to develop loyal customers, but many have trouble dedicating time and resources to the channel. Customer loyalty marketing programs should automate word of mouth marketing for you. For example, Belly tracks the number of customers driven to your Facebook page, as well as the number of your customers who left Yelp reviews. Make sure you’re keeping up with the conversations about your business. Negative mentions could be costing you loyal customers.

5. Visits From Email Campaigns: One of the coolest things technology has enabled us to track is actual in-store visits from an email campaign. Historically, email service providers let us track open rates and click through rates, but we had no way of knowing who actually read the email and took action by making a purchase in store. Well times they are a changin’. Using Belly’s Campaigns tool, merchants can track the number of customer visits from email campaigns. Besides tracking email deliverability, opens and clicks, you can track customers visited and offers redeemed. Finally, we’re able to close the loop on email marketing and track the true effectiveness of our campaigns for driving repeat business and building your loyal customer base.

Closing The Loop On Customer Loyalty Marketing

Running an effective customer loyalty marketing program will pay dividends to your business by continuing to grow both new and repeat business year after year. Invest in customer experience by keeping your customers at the heart of your marketing strategy.

About the Author

Lauren Licata

Lauren Licata is a Product Marketing Manager at Belly. She's passionate about working with startups & organizations dedicated to solving today’s most pressing challenges. She's on the Associate Board at the American Cancer Society and serves on the Associate Council at Ms. Tech.

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