Are Your Customer Loyalty Plans Really Working?

by: Nichole Gunn August 31, 2021

Whether you want to run a strategic B2B loyalty program, or you only have one because your competition has one, your loyalty plans aren’t guaranteed to work just by virtue of existing. Even those big-name B2C loyalty programs that seem to run by themselves require management, planning, and assessment. A customer loyalty program has the potential to increase sales and customer retention while offering B2B buyers a memorable experience that motivates them to do more business with you. But you risk all this being for nothing if you can't prove the loyalty plan's value when it's time to assess. So let’s answer the big question: how do you know if your loyalty plans are really working?

Track a specific goal for your loyalty plan.

You can’t determine if your loyalty plans are working without first defining what “working” means to you. Your goal may be to increase customer retention rates. Perhaps you want to increase customers’ range of product purchases. Loyalty plans are made to achieve goals like these. However, you should be more specific. If you want to increase customer retention, for example, answer questions like:

  • How much do you want to increase retention by?
  • Within what time frame do you want to achieve this retention rate increase?
  • How will you measure retention rate increase?
  • Do you want to increase retention rates within a specific customer group? If so, which one?

Answering questions regarding the who, what, why, and how of your incentive program goals will help you narrow down your goal.

performance tracking customer loyalty plans
Performance tracking tools help you measure the progress of your loyalty plans.

Identify the loyalty plan's KPIs.

Once you have a goal for your customer loyalty plans, you should identify the key performance indicators (KPIs) that measure your progress toward that goal. KPIs are typically divided into leading and lagging indicators. Leading indicators predict where you’re heading, while lagging indicators measure what you’ve already accomplished. There are two main reasons to track both kinds of KPIs:

  1. You know what metrics to track during your program’s run. If you see causes for concern, you can intervene immediately and change up or improve your approach
  2. You can be reasonably sure some other factor hindered your program’s success if your KPIs remained consistently positive but your loyalty plan still didn’t meet your goal. Maybe your goal was unrealistic. Maybe it wasn’t the right time.

Having an example of a successful loyalty program can help figure out what KPIs you should hit. Partnering with a loyalty program provider should give you a big advantage here. Work with a loyalty program provider who has years of experience working with companies like yours to create successful loyalty programs. Data and best practices from past loyalty programs' success can be used as benchmark examples to measure your loyalty program against. For example, you should enable you to figure out what a healthy program registration rate is after one year of running your loyalty program.

Show your return on investment (ROI).

The ultimate indicator of your loyalty plan’s success is a positive ROI—i.e. the financial returns yielded by the plan were greater than its cost. You should experiment with different investment and audience numbers in the planning phase or use an ROI calculator to determine the most profitable loyalty program structure.

Often, strictly focusing on the loyalty plan’s financial ROI doesn’t tell a complete story. Other than completing its primary goal, here are a few things that can tell you whether or not the loyalty plan worked (or could perform much better in the future):

  • What was the biggest contributor to achieving main goal?
  • Which strategies most directly (and indirectly) influenced customer behaviors?
  • Did participating customers’ purchases increase more than other customers’ purchases?
  • What indirect positive results did your loyalty plan have? For instance, did you see an increase in inquiries about products or services? An increase in website traffic?

Customer loyalty plans have the potential to be highly unique, tailored to your specific business objectives. Take this uniqueness into account when planning, managing, and measuring your plan. Looking beyond broad strokes and at the intricacies and nuances of your objectives will reveal both insights and opportunities—and these can give you an immense advantage over your competition.


About Nichole Gunn

Nichole Gunn is the VP of Marketing at Incentive Solutions, an Atlanta-based incentive company that delivers advanced, agile B2B customer loyalty and channel sales incentives programs.