When it comes to customer retention, one of the strategies that eCommerce businesses across all industries apply is using a loyalty program. The logic behind this being pretty simple – encouraging a customer to come back to your Shopify store to buy more in lieu of rewards. Rewards either being an exclusive discount, in-store points, store credits or more.
But despite the tactic having been proven to work at retaining customers, a lot of stores don’t see success with it. They either don’t have enough customers signing up for the program, not enough of them leveraging it or even coming back to check what rewards they can earn.
When it comes to customer loyalty programs, there is no one-size-fits-all approach. What motivates one’s customers to buy more, might not work for your brand.
The only way to know this is to stay up-to-date with how your customer loyalty program is performing.
Yes, we’re talking about doing some number crunching and optimizing your program to suit your customer’s interests.
Metrics to measure the success of your customer loyalty program
1. Enrollment rate
First things first, you need to take a look at exactly how many people are signing up for your loyalty program. This metric is indicative of whether your customer loyalty program promotions have been effective enough or not. It also shows how well you’ve been able to explain the benefits of your loyalty program to customers.
A good way to calculate the enrollment rate is to see the number of signups vs the number of visits your customer loyalty program page has received.
2. Participation rate
The next metric that you need to measure to see how your customer loyalty program is the participation rate. In this case, you’re measuring how many of the customers who have enrolled or signed up for your loyalty program, are actually engaging with it. Now, this number is often lesser than your enrollment rate.
To calculate this, you need to divide the number of program members who are actively using it by the total number of customers who signed up.
3. Redemption rate
Next up is to calculate the redemption rate, which essentially means how many of these customers who have signed up are using the rewards you’re offering. These could be in-store points or the store credits you may have given them based on their previous interactions. If they’re not using them, your loyalty program is not a success.
To calculate this, you need to divide the number of store credits that customers have redeemed by the total number of credits you have issued to those who have signed up for your loyalty program.
It’s basically the number of store credits spent out of the store credits issued.
Shopify stores running their loyalty programs with Flits find this easy to do. We give them an in-depth report on how many store credits have been issued and spent over a period of time. Get the Flits app now to see how.
4. Repeat purchase rate
You’ve implemented a customer loyalty program to be able to increase your repeat sales. So if you’re not measuring that, you don’t know if you’re succeeding at nudging existing customers to buy more from you. The more they buy, the greater their loyalty remains to your brand.
To calculate this, you need to divide the number of customers who have made more than one purchase from you in an year, but the total number of customers you got in the same time span. If you see a lower number, it’s time to start focusing on identifying your one-time shoppers and the reason why they haven’t come back to you again.
5. Active customer engagement rate
Now a loyalty program isn’t just based off on how many purchases a customer makes. It also includes rewarding customers for other actions like writing a review, rating a product, filling out their profile, creating a wishlist and more based on your strategy to boost customer engagement.
To truly understand if your signed-up customers are earning and spending the store credits you have given, you’ll need to measure what the active engagement rate looks like. That means, how many of your customers are actually engaging with your loyalty program and the actions stated under it.
You can calculate this by dividing the number of customers who engaged with your loyalty program in some way by the total number of customers who signed up for it.
6. Average spend per loyalty program member
Customer retention isn’t just about getting your shoppers to buy from you time and again. It is also about the amount of money they’re willing to spend making purchases with your brand. A good indicator of loyalty is when they’re making bigger purchases or high-value purchases from you as time passes.
This can be calculated by dividing the revenue you’ve made from customers who have signed up for your loyalty program, by the total number of customers who are in the program.
7. Customer retention rate
We’re pretty sure you saw this one coming. Since the goal of your loyalty program is to boost retention, you should be measuring the number of customers you’re able to retain out of those that you have acquired.
To calculate this metric, you need to first subtract the number of customers you have at the end of a defined time period from the total number of customers acquired in the same duration. Then you need to divide the result by the total number of customers at the beginning of that time period.
8. Customer lifetime value
Similar to but not the same as the average spend per program member, the customer lifetime value represents the total amount of money a consumer is ‘expected’ to spend on your store. This prediction is made on the total lifetime of this consumer with your brand from the day they make their first purchase on your Shopify store.
As Chartio recommends, you can measure the customer lifetime value using this formula:
Needless to say, the higher the CLTV, the more successful your customer loyalty program has been at retaining and keeping your existing customers engaged.
9. Referral or recommendation rate
The next measure of your loyalty program’s success may not seem directly related to it. But knowing that a happy customer tends to recommend your brand to their friends and family more, your referral rate should increase over time. If they’re recommending your brand or the products, their experience with you so far is positive.
To calculate this, you simply need to take a look at the number of customers who are actively engaging with your loyalty program. Then take a look at how many of them have used referral links to invite others.
10. Net promoter score (NPS)
Another success metric of a customer loyalty program is your net promoter score. If the members of your program are happy with it and with the eventual purchases they make, they’re more likely to rate their experience higher on a scale of 1 to 10.
If your NPS is on the lower end, it’s time to start requesting feedback from your customers. This will help you identify what your customer expects from your brand and how you can make their experience better.
11. Reduction in discounts
If a customer finds value in your loyalty program and your brand in general, they will stop seeking discounts to make purchases. Their purchase decisions will be made based on the experience they have with your store instead. In addition to that, they always have the store credits available to them in the loyalty program.
So take a look at how many customers have signed up for your loyalty program in a defined period of time. Then tally the number of repeat purchases you have driven with and without offering additional discounts on top of the store credits you offer.
12. Organic repeat customer rate
With so many options available to a typical online shopper, keeping consumers engaged is tough. They may sign up for your loyalty program for the benefits it has to offer. But whether they come back to it or not, is no sure-shot guarantee. You may have to implement retargeting and remarketing strategies along with other communication channels to remind them of these benefits and bring them back.
But a successful customer loyalty program is also one that consumers come back to on their own. To calculate this, take a look at the number of customers who signed up for your program and the average amount you spend on running re-engagement campaigns across all channels. Another way to measure this is by setting up Google conversion tracking to see how many people log in on their own to use their store credits vs those you drove in using other channels.
Always keep optimizing your customer loyalty program
One thing we have learned over time, by enabling thousands of Shopify stores’ customer loyalty programs is that you need to continually improve your strategy.
Be it the number of store credits you’re offering for different actions or the benefits you’re offering to the consumer to get them to sign up for it. Always keep a close watch on your metrics so that you know when your program stops to entice your customers.
Make smaller changes by understanding what they’re looking for and how it impacts the above metrics.
We’re going to keep exploring the other metrics that directly and indirectly indicate the success of your customer loyalty program.
So bookmark this article if you’re a data junkie too!