One of the most frequent and difficult questions I have received lately is, “How do I measure the success of my loyalty program?” As organizations solidify relationship marketing strategies and technology support, loyalty has resurfaced as a valid objective but continues to be elusive to obtain. The question is not how to get started, but of all the possible metrics and definitions of loyalty, which is the correct one for me? I pondered these difficult questions during the holiday season, and I realized the similarities between my son’s attention to his new holiday presents and my clients’ questions regarding loyalty measurement.

Frequency

As any three-year old will tell you, Little Einstein is one of the hottest programs for the pre-school crowd. So, of course, we gave our son the Little Einstein characters Annie, Leo, Quincy and Lucy, along with their musical ship, Rocket. The Rocket talked, sang the theme song, mimicked the characters favorite lines and had a remote control to fly him. After receiving the toy, he played with the toy for four hours straight. No food breaks, no potty breaks (which was a different issue) and no naps. It seemed as if this toy were a winner. However, he didn’t play with it again for almost seven days.

Frequency is a fantastic correlation to loyalty because it implies that the customer is making a continuous investment in your organization. If you are in retail and you have confidence into your store and store associates, the more often you bring a customer in the store, the more likely they will spend increasing amounts. If you have an online presence that has unique and relevant features and content, customers will continue to visit your site and reward you with page views for advertisers or e-commerce transactions. When a customer is a given a choice and he chooses you most often, it can be a great metric for loyalty.

Multiproduct Customers

Cars, planes, helicopters, space ships and, most importantly, trains are a boy’s best friends. Some of the most common presents my son received were new accessories to his two train sets: Thomas & Friends and GeoTrax.

We seem to have every Thomas train and engine ever produced. We also have bridges, suspension bridges, train stations, little people that go into trains, helicopters, planes, landing strips and all types of tracks. It is the same story with GeoTrax. When my son wants a new train, piece of a train or train set, he only wants GeoTrax or Thomas. We also have the DVDs, computer games and corresponding URLs in all our home computer browsers.

Many organizations try to expand customer usage. Whereas old thinking was that each product or service line needed to be its own P&L and drive a business of its own, many organizations now see how their different products integrate with each other or drive sales to one another. The more channels a customer uses (online, retail, sales, customer service, etc.) and the more product lines a customer uses shows an engagement level above average. These loyal multiproduct customers will also reward their favorite companies by trying new products that the organizations are launching.

Feedback and Recommendations

  • An electronic limbo game that uses rotating string as the limbo stick and plays the limbo song ad nauseam.
  • A swamp monster with his own van that taunts children with evil incantations.
  • A balloon pump and colored balloons that you fill up and fly. The balloons make noise and spin around the room.
  • A set of very lifelike tools from Handy Manny and a great tool box.
  • A space shuttle, NASA van and two astronauts.

All of these toys have two things in common: he broke most of them within a week, but they were also the first toys he showed his friends when they came over.
Willingness to recommend and provide feedback are some key indicators to loyalty. In the real world, this information can be found through surveys, but more and more detail can now be found on customer feedback sites, blogs, message boards and social networks. New technology is helping organizations gain insight into these unstructured discussions by turning the data into structured analysis that shows customer sentiment, loyalty, brand attributes, awareness and interest.

Your definition of a loyal customer will determine how you measure the success of your loyalty program. There is no one metric to measure your program, but most companies will typically use a combination of the above metrics and more, including average order size or matrices of frequency and product breadth. Ensuring that marketing has access to the various customer metrics to evaluate their loyalty initiatives, including Internet discussions that reverse-engineers loyalty drivers, is the job of customer intelligence. By providing a complete selection, marketing can show their ROI metrics based on the most relevant indicators, which will change every time.

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