Measuring Rewards Program ROI
When it comes to measuring rewards program ROI, the ultimate goals are accountability and bottom-line results. You want to know what’s working, what isn’t, and how much each is costing you.
However, you’ve probably heard the adage of marketing professionals: “50% of our marketing is working, and 50% isn’t. The problem is we don’t know which is which.”
So, how do you reconcile the need to understand what’s driving results with the opacity of marketing impact?
Well, when it comes to loyalty programs, you have a distinct advantage. When done right, they are one of the most measurable forms of business expenditure and marketing ROI. Read on to learn more about crafting a measurable loyalty program.
The following five questions are the foundations for your measurement structure. Answering these will help you understand the strengths and weaknesses of your current capabilities:
1. What metrics do we have available today? And at what level of granularity?
2. Is this program going to benefit both clients and the bottom-line business?
3. Is there dedicated accounting for program costs, or is it derived from a larger budget?
4. What is the reporting process? (Examples to consider: cadence, content, parties responsible for compiling, etc.)
5. Is incremental return measurable? (Example: measuring an improvement in customer perception may be difficult if a voice of the customer survey is not already in place).
Once you know what you can (and can’t) measure, you’re ready for the next step.
Understanding Metrics Related to Program Goals
Once you know exactly what you want this program to deliver (increased engagement? improved lifetime value per customer?), it’s time to start thinking about what metrics will accurately measure those objectives. What these are will vary depending on your industry and the program type, but they should focus on determining whether you’re achieving the desired outcome.
Value: It’s a Two Way Street
To be effective, both the business and the customer must derive benefit from the program. Your initial program can start with nothing more than industry best practices and focus group feedback. However, the most effective programs continue to test and refine their strategy on an ongoing basis. Doing so allows you to adjust your value proposition and maximize your program impact.
Measuring Rewards Program ROI: Accurate Accounting of Costs
The baseline for any measurement of ROI is the program cost. As a result, an accurate and complete view of how much you’re spending (both to date and forecast going forward) is non-negotiable.
How complicated your accounting is will depend on the program type as well as your test-and-learn strategy. You may not require excess detail if you’re running a simple program. But you may need complex accounting if you’re spreading program cost across multiple cost centers based on segment.
Here’s the bottom line: Accurate accounting is necessary, but the complexity depends on the program.
Identifying the Bearers of News (Both Good and Bad)
In other words, who is responsible for pulling performance data related to the program? Where is the data coming from? And how often is it updated?
The industry trend is leveraging online platforms to pull data on an as-needed basis. Many platforms are capable of generating reports at a regular cadence, as well as providing data access for individual queries.
The real question is this: who is going to run all that? Will you have an in-house person with direct access? Or will you send query requests to your partner?
There is no right or wrong answer here. The important part is making sure you have an answer in the first place.
Running the Calculations
If you’ve followed all the steps we outlined above, you should have everything needed to calculate the ROI for your marketing loyalty program. We know it sounds like a lot of work; that’s because it is. But every step is essential for tracking your program’s effectiveness and maximizing the return on your dollars spent.
Need a Helping Hand?
These are the most basic things to consider when ensuring you have a measurable loyalty program. However, there’s so much more to take into account. Building a program that creates both a strong relationship with your customers and tangible bottom-line benefits is a real challenge. And it’s critical that you do it right.
Luckily, we’re here to help. Our team at Loyaltyworks would love to put our years of experience strengthening customer relationships and driving business value to work for you.
Get started today by giving the us a call at 1-800-844-5000. We’ll answer all your questions regarding measuring rewards program ROI, and craft a program that works for you.