Measuring Up: Benchmarking Your Loyalty Program Against Industry Standards and Best Practices

Stop Chasing Industry Benchmarks Alone 

Go for the perfect mix instead.  

In the world of loyalty, industry benchmarks offer convenient metrics to size up a loyalty program’s success (or lack thereof). While they can provide a general sense of performance, relying on them solely can be, at best, misleading, and at worst, detrimental. How else can a program measure up? Today, we’re delving into why adding internal metrics can bring more to the table — and how to find your sweet spot of internal and external markers.  

Industry Benchmarks Alone Can Be Limiting

First, let’s look at industry benchmarks. While it’s a basic business tenet to see how your program measures up to industry standards, relying on them alone can paint an inaccurate picture. Yes, they give a 30,000-foot view, but by that very nature, they can lack focus on the unique details that are important to your brand, customer and program. Here’s why: 

• Generic Comparisons: Benchmarks offer broad comparisons that may not reflect a brand’s unique position or customer base. 
• Inconsistent Metrics: Different brands use varying metrics, making comparisons unreliable. 
• False Security: Achieving benchmark standards can lull businesses into complacency, hindering innovation. 
• Lack of Context: Benchmarks often lack the details needed to understand underlying factors and strategies. 

And, Sometimes, Just Plain Wrong  

In a worst-case scenario, common industry benchmarks can misdirect focus away from what truly matters. Here are a few pitfalls: 

• Short-Term Vision: Many benchmarks prioritize short-term gains like immediate sales, neglecting the long-term health of customer relationships. 
• Superficial Metrics: Membership numbers and similar metrics may be easily tracked but fail to capture the depth of customer engagement. 
• Ignoring Individuality: Benchmarks often overlook unique business goals, leading to misaligned strategies. 
• Stifling Innovation: The pressure to meet benchmarks can discourage creativity and risk-taking, essential for standing out. 

The Power Within: Internal Metrics 

Including internal metrics to your mix brings a comprehensive approach to loyalty program management. Because they align directly with unique business objectives, these metrics may provide a clearer roadmap for success — and allow for a level of customization to your brand and customer base for a more accurate assessment. Furthermore, internal metrics offer actionable insights based on granular internal data, allowing for a level of agility as market dynamics change. Lastly, metrics that focus on long-term value can translate to strong, lasting customer relationships.  

So, what metrics should your brand consider? Here are few that should be on your radar: 

Baseline Customer Data 

In other words, metrics that reflect your current customer behavior. These metrics include Average Transaction Value, Purchase Frequency, Customer Lifetime Value (CLV), and Customer Churn Rate. Understanding these metrics will provide a baseline for measuring the program’s impact. 

Program Cost Analysis 

These focus on the costs associated with developing, launching, and maintaining a loyalty program. It includes metrics like Initial Setup Costs, Ongoing Operational Costs, and Cost per Point/Reward. Tracking these costs will help you assess the program’s financial viability. 

Target Enrollment and Participation Rates 

These metrics set goals for enrolling new members and keeping them actively engaged in the program. Specifically, you’ll track Initial Enrollment Target and Participation Rate Goal. Meeting these targets is crucial for program success. 

Revenue Projections 

These forecast the expected increase in revenue generated by a loyalty program. It includes metrics like Increased Spend per Member and Projected Revenue Growth. These metrics can also help you gauge the program’s return on investment (ROI). 

Engagement Metrics 

Engagement metrics measure how well members interact with the loyalty program. They include site traffic, communication open rates, offer redemption rates, non-purchase engagement activities and more. High engagement indicates a healthy program that resonates with your customers. 

Customer Satisfaction and Feedback 

Understanding member satisfaction is key to program improvement. That means metrics like Member Satisfaction Scores and Feedback Collection Rates. Tracking these metrics will help you identify areas for improvement and ensure members have a positive experience. 

Referral and Advocacy Metrics 

A successful loyalty program will incentivize members to refer new customers and promote your brand – so that means including metrics like Referral Rate Targets and Net Promoter Score (NPS). High referral rates and positive NPS scores indicate strong customer advocacy. 

Reward Structure and Breakage 

The way you structure rewards and how often they are redeemed can significantly impact program costs. This section includes metrics like Reward Earn Rate and Breakage Rate. Optimizing these metrics will ensure you’re offering a rewarding program that’s also cost-effective. 

Behavioral Change Metrics 

A key benefit of loyalty programs is their ability to influence customer behavior. This section includes metrics like Behavioral Shifts and Cross-Selling and Up-Selling. Tracking these metrics will help you assess how the program is driving desired changes in customer behavior. 

Competitive Analysis 

Benchmarking your program against competitors’ programs is essential for staying ahead of the curve. By understanding how your program compares to others, you can identify areas for improvement and ensure your program stays both distinctive and competitive. 

If you want to talk to any of our loyalty experts, contact us here.