Apr 19, 2023

Loyalty Programs 101: The Metrics You Need to Know for Success

Ellie Bradford
April 19, 2023

Learn how to measure the ROI of your eCommerce loyalty program with these 5 key metrics. Make data-driven decisions and improve customer retention.


As an eCommerce merchant, measuring the success of your marketing campaigns can be challenging. You will want to see tangible results in terms of ROI and foster loyal brand advocates, who will spread the word about your product. 

Loyalty programs are fantastic marketing and can show you results right away. They work on a performance-based model, which means you only have to pay when you see some return. This allows you to track the outcome of your campaigns with ease. So when a customer recommends your business to someone and they make a purchase, you could reward them both with a voucher. It's a win-win for everyone!

To really experience the results, we recommend having benchmark numbers from your customers before launching the program. Also, we advise you to wait for approximately six months after the initial set-up of a loyalty program to realistically measure its success. But what exactly should you measure? In this article, we will outline 5 key ways to measure the ROI of your loyalty program.

The Loyalty Program ROI Checklist: Are You Tracking These Metrics?

Customer Acquisition Costs (CAC)

Acquiring new customers can be expensive, so monitoring the total amount of money your business spends on ads and marketing to gain new customers is crucial. 
Loyalty programs are the cheaper alternative to help your business attract new customers while retaining existing ones. It's a two-fold benefit to choosing loyalty. 

Customer Retention Rates (CRR) 

Customer Retention Rate is the percentage of customers who continue to do business with you over time. The cost of acquiring new customers is five times higher than the cost of retaining an existing customer. As a result, focusing on retention is a more cost-effective approach to business growth and success than acquisition. 

With the primary goal of a loyalty program being retention, businesses must track their CRR. 

Average Order Value (AOV) 

Average Order Value is the average amount a customer spends per transaction. By offering rewards and benefits with a loyalty program, you can encourage customers to increase their spending amount. For example, offering free shipping or a 10% discount on orders over $50 will encourage your customers to increase their order value to reach the added benefits. 

Customer Lifetime Value (CLV) 

Customer Lifetime Value is the total amount of money a customer is expected to spend on your products or services over their lifetime. The more time customers stay with your brand, the more loyal they will be and the more rewards they will get in return. It's a win-win for your brand and your customers!

Redemption Rates 

The Redemption Rate is the percentage of customers who use their loyalty program to redeem points and rewards. A high redemption rate indicates that your loyalty program is successfully engaging customers. For example, if your redemption rate is low, you may want to consider changing your reward options as they are not aligning with your customer needs. 

Customer Segmentation & Experimenting with Rewards

When analyzing metrics, it's crucial to remember that segmenting your customers into hyper-specific demographic categories can provide valuable insights into the performance and behavior of each customer segment.

Collecting additional customer data can help your brand build detailed customer profiles that you can consistently track and measure to improve your customer experience and service. This will help you to measure the ROI of your loyalty program and make data-driven decisions about its effectiveness. 

By analyzing the results, you can identify areas of improvement and optimize your loyalty program for maximum success. We recommend experimenting with earn and redeem options to try and test what works best for your brand and your customers. For example you might want to test short-time offers - this could include an exclusive offer that will expire after 30-days. Thus, being a short-term and quick fix way to identify what offers work well and could be implemented permanently within your loyalty program and what offers are not so successful. 

Another scenario to consider is a rewards campaign that offers double points for collecting rewards. In the event of a low take-up rate, it could imply that the campaign offer is either too restrictive, such as being limited to specific products, or not compelling enough to motivate the target audience to participate in the campaign.

Conversely, if a reward offer proves to be exceedingly successful, there's a possibility that reducing its value and exclusivity may diminish its significance to the loyalty program, ultimately resulting in a lesser impact on customer loyalty overall.

Make data-driven decisions about your loyalty programs success through measuring and tracking tactics

To summarize, a loyalty program can be a powerful marketing tool for eCommerce merchants to measure the success of their campaigns and drive ROI. By tracking essential metrics: CAC, CRR, AOV, CLV, and Redemption Rates, businesses can make data-driven decisions about the effectiveness of their loyalty program and, in turn, identify areas for improvement. 

Customer segmentation and experimenting with rewards can also provide valuable insights into the performance and behavior of each customer segment. Ultimately, merchants must strike a balance between offering attractive rewards while maintaining the exclusivity and value of their loyalty program to have the most significant impact on customer loyalty.

In today's competitive eCommerce landscape, a well-executed loyalty program can be the key to establishing a loyal customer base, increasing revenue, and building a sustainable business for the long term. Sign up for for free today to measure your success.