Loyalty Program Performance Indicators: What to Look For

Aug 16, 2013

Loyalty programs are like people. They get run down, can become ill and require a remedy or corrective treatment. I spoke with Margaret Meraw, Kobie Marketing’s Vice President of Loyalty Operations about the current state of loyalty program health and what signs to look for when a program needs help.

Why has loyalty program customer engagement dropped?

In the current loyalty landscape, there are more programs available to consumers than ever before. Members are spending more time, money and efforts across a wider spectrum of loyalty programs, yet engagement has become stagnant. The recent COLLOQUY’s 2013 Loyalty Census underscores this point. While loyalty program membership grew 27% between 2010 and 2012, active member participation rates hovered around 44% in 2012, a 4.3% drop from 2010. Even in long-standing loyalty programs, members may become less engaged over time as offers begin to feel stale or they’re not personalized and the loyalty experience suffers as a result.

What are the best indicators of a well-performing loyalty program beyond active customer engagement?

Increased activity is a great indicator. Whatever the program entails, whether it is additional bookings on an airline or with a hotel brand, increased credit or debit card usage or increased retail spend, these are all indicators of a well-performing program. Another performance indicator is the level of engagement in terms of customer interaction with the brand. This could include opening emails or correspondence on a frequent basis to spending more time on the program’s website getting the latest news and updates. It’s also important that members are incentivized to redeem their rewards and not just earn them. When you add up all of these factors, the result will be a well-performing loyalty program; customers will be engaged with the brand, actively utilizing multiple channels and using the currency they’ve earned through the program.

What are the indicators of a poorly performing program?

When members become apathetic about participating in a program they feel has lost its relevance to their needs or no longer provides added value, it’s a sure sign that a program is struggling. Apathy is a loyalty program killer: it impacts member behavior and experience and leads to decreased engagement such as less activity with the brand, fewer email opens or responses to surveys, less frequent online or physical store visits and lower overall spend. If engagement and all the behaviors it drives decrease, then you know you have an issue of poor performance.  

What steps are needed for loyalty programs to achieve operational excellence? Do these differ for a program that’s run in-house and one that’s run by a company like Kobie?

There are several things that benefit a member in terms of operational excellence. One, of course, is delivering what the brand said it would deliver by the time it said would. For example, if the program says that customers will receive their points within a certain amount of time, the brand needs to deliver on that promise. It’s also necessary for a program to be easy to access with currency that is easy to redeem. The easier it is to redeem currency and engage within the program, the easier it is for members to come back and say, “Wow, this is a program that really works for me.”

The differences we have seen (and experienced firsthand) between in-house and third party providers is that outsourced loyalty programs tend to increase operational excellence. One of the reasons is due to the contractual obligations required to meet and often exceed specific service level standards, potentially resulting in financial penalties against the outsourced provider if those numbers are not met. When a program is managed in-house, there may be fewer burdens to ensure service levels are achieved. Outsourced programs are held accountable or often penalized for not achieving standards, so it makes sense that third parties will be incentivized to meet those service levels, more so than most in-house managed programs.

The bottom line

High membership numbers don’t guarantee a loyalty program’s success. Member engagement is far more critical to a program’s long-term health so programs should be looking for any indicators that show a decline in engagement levels – and act before it’s too late.

If a loyalty program is struggling, how can it recover to reach its fullest potential? And how can a program determine which channels are the most effective for increasing customer engagement? We’ll explore this in an upcoming post very soon. In the meantime, feel free to share your thoughts about improving loyalty program health in the section below or contact us at info@kobie.com.