My major as an undergraduate was in accounting. I have always enjoyed working with numbers. So, when I decided to get into the loyalty business, it was natural for me to see the value and power of numbers as it relates to loyalty programs. So many marketing and advertising efforts are difficult, if not impossible, to quantify as far as financial impact. How much traffic and business did you generate from that radio spot, TV ad, or magazine advertisement? And is it sustainable business over time?
First, let’s define ROI. As most of you know, it’s an acronym for “return on investment”. You start by estimating the various costs to launch and run your loyalty program. This includes award costs, administrative costs, software, collateral, and any other direct cost items to run your program. Then, you need to understand what your current customer profile is as it relates to number of customers, average spend, current attrition rates, etc. Finally, you look at research data to project the impact of your loyalty program on your customer’s average spend, visits, and attrition. These assumptions need to be customized to your specific product and market; as well as how your program is designed as far as goals and objectives.
What should you expect?
First, we feel that any program you have should have at a minimum, a positive ROI. In fact, we have client programs that have over 900% ROIs! These results were measured by a third party firm and based on actual data, not assumptions. Your CFO should welcome and encourage you to have a solid loyalty program as it means more revenue and profits for your company.
Second, make sure you establish baseline assumptions before you launch your program. You can then track results against these numbers, and if results are soft, you can adjust and change your program to meet the goals. This can be done by things such as targeted promotions, member activation efforts, enhancing the award structure, and improved employee training about the program.
Third, you can have a positive ROI as early as the first year of your program. With a move to digital programs and less of a need to build from scratch and not needing a lot of expensive collateral and print mail, we are seeing positive ROIs in programs in year one or two at the latest.
So, like our featured video regarding c-store loyalty programs demonstrates; the impact of changing a simple number like upping by 5% the number of your customers that go inside to pay versus paying at the pump can have a dramatic impact on your bottom lime and create a very positive ROI for your program. If you’re curious to see how an ROI would look for a potential loyalty program offered in your business, talk to one of our sales reps. We think this process of building and maintaining an ROI is key to a sustainable and effective loyalty program for our clients.
Curious about a loyalty program? Download our free whitepaper on 8 Questions to Ask Before Starting a Loyalty Program and get all the answers.
Brent HarmsFounder & CEO