What’s the ROI of: A loyalty programme

What’s the ROI of: A loyalty programme

Some use a traditional points system. Others manage to cleverly incorporate other aspects of their marketing – for example, extra rewards or discounts

Some use a traditional points system. Others manage to cleverly incorporate other aspects of their marketing – for example, extra rewards or discounts if you download their app, or when you follow them on Twitter. Others offer freebies after a certain amount of money has been spent or a certain amount of visits have been made. Whatever type of loyalty programme you want to run – it’s always key to look at the ROI. Just what is the ROI of a loyalty programme anyway?

Unsurprisingly, that’s a tough one to answer in one article. You could sell pizza or pipe labels. You could want to engage 1000’s of lapsed customers with footfall, or would be happy getting more followers or influencer traffic. You might want an instant cash out – or be more keen on a long term points accrual.

The game is always changing, too. An associate professor at Queensland University of Technology Business School Gary Mortimer says  to SmartCompany, the big game at the moment for supermarkets is generating “attitudinal loyalty”.

“Everyone is doing these [rewards] cards, and it’s measuring transactional loyalty — so, how frequently a customer is coming into a store,” Mortimer says. “They need to focus more on relational loyalty, like maybe giving people a surprise discount at the checkout, just because they’ve come in to see you … or doing good things in the community, creating positive word of mouth.”

But it’s still key.  Paytronix put it well:

“From planning and launching a loyalty program to managing it over its lifetime, it is crucial to know how the interactions between costs and revenue in a return calculation impact your bottom line. A clear understanding of how loyalty programs produce revenues and related costs enables restaurateurs to adjust program levers until they strike a profitable relationship between incremental revenues and incremental costs. Armed with this information, decisions regarding the value of reward levels and subsequent promotional offers can be justified with quantified results.”

So – what you do is key to your success, but some kind of measurement is key. We want to help, so we’ve dug about into some key insights around loyalty programme ROI.

Ulta – 23 million members and 90% sales attribution

According to the Motley Fool, Ulta Beauty’s sales jumped 25% last year with an 11% gain in customer transactions, and average spending per visit improved by over 5% combined to produce a 16% increase in comparable-store sales in 2016.

“The beauty retailer plans to rely heavily on a loyalty rewards program that takes a page out of Starbucks’ playbook. It already boasts 23 million members, and engagement levels are through the roof. Over 90% of sales last year were to customers who were active members of the loyalty program.”

Amazon – 85 million loyal Prime members up from 63 million

According to Investors.com, Amazon has an estimated 85 million Amazon Prime members, up 35% from 63 million a year ago, according to Consumer Intelligence Research Partners. CIRP estimates that 63% of Amazon shoppers are now Prime members, spending $1,300 per year on the site, compared with about $700 per year for non-members.

On top of that, According to BusinessInsider Amazon has been building out a payments ecosystem that allows customers to make convenient payments in-store via Amazon Pay Places via the Amazon app. As well as being encouraged to add cash to their Amazon accounts and the ability to earn rewards, essentially giving these users a banking account, the business launched with a focus on loyalty – with new rewards program in the US that gave Prime members 2% cash back when they load money into their Amazon Balance via a debit card or attached bank account. By giving these users incentive to easily add funds to their accounts, Amazon could find more consumers willing to spend online and in-store via Amazon’s payment offerings. This would allow Amazon to earn on these transactions, similar to PayPal, which charges merchants fees as high as 2.9%. ”

Predator Nutrition – 23% monthly points redemption 

Zinrelo’s loyalty rewards program has assisted Predator Nutrition to achieve an impressive 25% increase in Average Order Value (AOV) for loyalty users and the company also doubled the per- customer revenue for loyalty users.

The company launched the Predator Nutrition Reward Program rewards its users for multiple interactions on the website such as purchases, recommending to a friend, reviewing products and following on social media networks such as Twitter, Facebook, Instagram etc. They found that customers who engaged with the loyalty program have 25% higher AOV and over 2x more revenue per customer as compared to non- loyalty users. On top of this, the growth rate of the engaged customers is three times higher than the overall customer acquisition rate and Predator has managed to grow its base of engaged users, thus improving profitability.

“We’ve been impressed by the results that the Zinrelo loyalty rewards program has delivered,” commented Phil Slater, Head of Marketing at Predator Nutrition. “The high redemption rates that we’re seeing emphasize the popularity of the unique rewards program, with 23% of the points rewarded in any given month being redeemed.”

Tavern in the Square

Tavern in the Square, a restaurant business launched the Tavern Insider loyalty program, using a version of the Paytronix mobile apps for IOS and Android. Growing from an average of 300 people per week on the Tavern Insider program, the mobile app meant that on average, one thousand guests per month downloaded the new app and registered to join, rapidly increasing membership to 23,500 in just 12 months. Today, mobile members now account for half of member transactions and using robust analytics the restaurant has calculated that gift card promotions through the loyalty scheme had tripled gift card sales and a “we miss you” campaign drove $96,000 in revenue with a $9,000 investment.

 

Dominoes

In late 2015, Domino’s announced the launch of Piece of the Pie Rewards, its first digital customer loyalty program in the USA, and with US sales rising 9.5% at established stores, this could hint that loyalty works well for the brand, especially as Domino’s CEO J. Patrick Doyle said the overseas numbers (in the UK) was part of the reason for the disappointing results and that the company is working on remedies, including trying to get more people there to order pizza online. This could indicate successful results from the same rewards programme that saw the USA fly forward over and above predictions.

 

Further Reading:

https://www.loyalty360.org/

Maritz Motivation – The 5 Most Important Design Criteria for Your Loyalty Program. ROI Isn’t One of Them.

Paytronix – The Art of ROI

For Customer Loyalty – Only the best will do 

More Incentive and Motivation News:

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