A customer loyalty program is – and should be – one that touches every facet of your organization to drive customer engagement at all points of customer interaction. This is no small investment! But how do you know if your loyalty program is really working – that all that investment is delivering true value to your company?

Traditionally, marketers have shied away from measuring the ROI of their loyalty program, regarding it as a cost center, simply ‘a cost of doing business.’ But now, most areas of marketing are carefully weighed and measured to determine the ROI using such metrics as open rates, click through rates, cost per lead, cost per acquisition … and a customer loyalty program should be no different.

So the question arises, how can you truly measure the business impact of your customer loyalty or engagement program?

There are several routes to achieving this goal. For example, some marketers apply a time series approach to measuring their program’s performance. In effect, a sample group of customers is selected for ‘testing’ and their performance is measured before and after specific loyalty marketing treatments are applied. While this approach can offer some insights into the effectiveness of a short-term campaign, it doesn’t allow for factors such as seasonality or other time-series biases.

One very effective method for program measurement is the use of an ongoing robust test versus control approach. In this case, a sample ‘control set’ of customers is excluded from receiving any marketing treatments, and their performance is compared to the test group that is exposed to the ongoing treatments from the customer loyalty program. This allows marketers to eliminate the time-based biases mentioned above, thereby allowing for measurement of the incremental lift created by their customer loyalty or customer engagement program, on an ongoing basis.

This test versus control approach is what we at Exchange Solutions do every day – and it’s why we are able to offer our clients the option of a performance-based fee structure to create new a loyalty program, or even optimize an existing one. Because we can truly measure the impact of our intelligent customer engagement approach, our clients know exactly what the ROI of their program is, and how well their program is working. And that makes our clients, and their CFOs, very happy.

The question “Can I Really Know if My Loyalty Program is Working?” is one of 10 key loyalty questions featured in our whitepaper “Innovations in Loyalty: 10 Key Questions You’re Probably Asking”.

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