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How Healthy Is Your Loyalty Program?

A healthy loyalty program is one that achieves its objectives, generally to help drive incremental profit through a combination of higher frequency, spend and cinema preference.

As with your own health, prevention is better than seeking a cure once illness sets in.  Here are some leading and lagging indicators to help you maintain your program’s health:

1. Measure Member Satisfaction

Implement the Net Promoter Score and ask members whether they would recommend your program to their friends or family, and what could be done to improve that likelihood.  NPS is a strong leading indicator of financial performance, since people tend to buy from those they like.  Monitor NPS on a quarterly basis and pay attention to member suggestions.  By combining NPS and customer profitability, you can identify at-risk high-value members, and respond to them as a priority.

2. Track Open and Click Through Rates

If your members don’t open your emails, it’s the equivalent of someone sending your call straight to voice mail.  They don’t want to hear from you and they may soon disappear altogether.  If they open your emails but don’t act, they’re aware but don’t care.  It’s important to understand if falling rates are due to the message, the way it’s written, when or how it’s delivered.  A/B testing can help you determine the most compelling offers and messaging for each campaign.

3. Monitor Active Members

For paid loyalty programs, an Active member is one whose membership is paid up.In unpaid programs, Active members are usually defined asthose who have transacted as a member over the past year.  You should constantly monitor the number and rate of members churning into Inactive / Expired status.  In addition, be aware of members who have slipped from their usual purchasing cycle, such as someone who usually comes once every 8 weeks on average, but hasn’t been for 13 weeks.  Understand these members and seek to win them back with a targeted offer.

4.Know the Bottom Line

Ultimately, loyalty should be profitable.  Calculate incremental revenue by using statistically significant control groups in all offer-based campaigns.  Determine campaign profit by subtracting associated costs.  It’s important to also monitor the cost of other benefits, such as points redeemed for tickets and treats.  Finally, fixed costs must also be accounted for.  If your program is not profitable, ask yourself whether:

  • your overheads too high?
  • you are giving away too much for too little in return?
  • your members are tired of the same old offers?
  • a competitor has lured members away with something more compelling?

As with your own health, you should look after your loyalty program’s health on a daily basis.  At the same time, it’s worth undertaking a more formal and extensive health check at least annually: a loyalty program physical, if you will.

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