Loyalty Programs: Abundant, but driving ROI?

 

 

As more loyalty programs tie to mobile integration, the days of needing my key-ring to hold my reward cards will likely come to an end over the next few years. So, I won’t bore you with another image of endless reward cards hanging from one.

I’ve been around the loyalty arena for almost 9 years, so I’ve seen a lot in relation to how loyalty programs are structured. What I haven’t seen a lot of though is unbiased analysis of the ROI on loyalty programs. With companies paying millions of dollars to run their loyalty programs every year, I see few of them able to clearly articulate the ROI and value of the programs.

Do the hard cost rewards drive more frequency and transactions or do the soft rewards?

  • Hard rewards hit the budget bottom line, whether it’s a gift card, music download or item to be shipped, there is a cost the owner of the loyalty program pays.
  • A soft reward doesn’t cost the company from a monetary perspective, but could have huge value to the customer. A great example is Southwest Airlines A-List status, I’ve traveled less over the past two years and definitely miss this perk. Because I was on the road three out of four weeks for many years, it had enormous value to me, much more than the segments I had to fly in order to accumulate a free trip. Trust me, I like those too, but free flight perks I couldn’t use as frequently.

Or perhaps, they both have a role and purpose? If so, how do you know? If you’re running a loyalty program, I’d like to pose a few questions:

  • Can you clearly calculate and articulate the ROI of your reward program?
  • Do you know what rewards your customer value the most?
  • Is the loyalty structure in place driving loyalty or is it merely discounting purchases that would be made anyway?

If you have a loyalty program and want to learn more about measuring Loyalty ROI, you can reach me at .

Posted by Melissa Amedeo on 10/07