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    Customer Loyalty Measurement Strategies That Drive Program ROI Through the Roof

    Whether you're assessing the potential of your company's loyalty program or that of a quarterback, measuring future success can be difficult. Take, for example, Tom Brady. Love him or hate him, he's a household name now. By some accounts, he's the most winning athlete in sports history. But early in Tom's career, his success would have been almost impossible to predict. He was the 199th overall pick in the 6th round of the 2000 NFL draft (not a draft position indicative of his future performance). Imagine knowing in Tom's early years how successful he would become.

    Customer loyalty programs can have members with Tom Brady-like potential but they might not be easily recognizable. Knowing which customers will generate future profit is essential to your program's health. However, some of these members that have high future profit potential can be hiding in a low tier of your membership program. Just as Tom Brady's draft pick was not indicative of his future success, your most profitable members could be in an entry level tier not indicative of their future value. It's important to your program's success to identify individual customers' value to the program and hone your customer loyalty strategy.

    'Customer-Centric' Strategy

    The current trend in loyalty program management is focused around a 'customer-centric' strategy. This means knowing that each customer's wants and needs are different. Loyalty program managers are scrambling to learn what their customers want and how they want it. In theory, there's nothing wrong with this strategy — every program manager should know what customers want in terms of membership and how they want it delivered to them. But many fail to recognize the economic dimension of the 'customer-centric' strategy.

    Identifying the 20% of members that will account for 80% of your future profit and focusing your efforts around them will optimize the ROI on your loyalty program. Here are a few tips to keep in mind:

    • Your competition doesn't know who's going to move the economic needle — but you should.
    • Not all customers are created equal. Focus your efforts accordingly.
    • The key to 'customer centricity' is discovering which members are valuable.

    Identifying High-Value Members

    It's important to know that your loyalty program isn't made up of average customers; it's made up of many different individuals. Making the assumption that your program contains 'average' customers is dangerous. If you have a high-value customer that you equate to an 'average' one, you may fail to focus efforts on them and miss out on their lifetime value. When targeted individually and incentivized, high-value members are much more likely to respond positively. Keep in mind that when identifying high-value members, your program should:

    1. Understand that membership value is skewed
    2. Put a dollar value on how much the customer is worth to your program

    With an individual identification customer loyalty strategy, you can find the individual members that are of high dollar value to your program. Motivate them with specifically focused incentives and boost your loyalty program's ROI.

    Customizing your Strategy

    Formulate a customer loyalty strategy that works best for your specific program and boost your ROI. Make sure that this strategy is based around the golden rule of loyalty programs: 80% of your future profit comes from 20% of your members. Finding and utilizing the right technology tools can help you identify these individuals making up the 20% and put a dollar value on them. Once this is done, learn what they want and how they want it and market directly to them. This will all but guarantee a healthy loyalty program and boost ROI.

    So what do football and loyalty programs have in common? Identifying important individuals early on and maximizing their value can lead to huge success. Figure out who your loyalty program's Tom Brady is today and boost ROI in the long run.

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    Len Llaguno

    Founder and managing partner of KYROS Insights. I'm an analytics nerd and recovering actuary. I use machine learning to help loyalty programs predict member behavior so they can identify their future best customers, and recognize and reward them today.


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