8 KPIs to Measure the Effectiveness of eCommerce Loyalty Programs

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Like any other business activity, there are certain expenses related to the introduction and continuous use of the brand loyalty program. In order to see the full picture, it’s critical to analyze loyalty program-related expenses compared to the extra revenue that it brings to the company. They are software development, design, marketing, and the cost of special offerings themselves.

“In the world of Internet Customer Service, it’s important to remember your competitor is only one mouse click away.” – Doug Warner
Some loyalty programs extend return or exchange periods for their members, providing added convenience and flexibility. This benefit enhances customer satisfaction and loyalty.
Such programs aim to increase customer loyalty by incentivizing repeat purchases. By providing rewards, discounts, or exclusive offers to loyal customers, businesses encourage them to make frequent and ongoing purchases, thereby boosting revenue and customer lifetime value.
For example, Amazon can boast of a 93% level of customer engagement in their loyalty program as it meets buyers’ expectations practically to the full.
In order to keep customers back, Amazon:
By tracking key performance indicators (KPIs) such as customer retention rate, repeat purchase rate, average order value, and customer lifetime value, businesses can gain valuable insights into the performance and impact of their loyalty programs.

What is an eCommerce Loyalty Program?

Online loyalty programs offer a range of benefits to customers, designed to enhance their shopping experience and incentivize repeat purchases. Additionally, metrics like churn rate, engagement, referral rate, and Net Promoter Score provide a holistic view of customer satisfaction, advocacy, and program engagement. Prime members can enjoy fast and free shipping on millions of items available on the Amazon website. Is it related to an emotional bond with your brand or because of the extra value you offer?

Which Benefits Online Loyalty Programs Offer?

Have your customers started making more purchases as a result of an effective loyalty program? Make sure to track brand awareness and customer engagement rates in the loyalty program. Always control why customers participate in the program.

Exclusive Discounts

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Reward Points

When compared to retention programs, a loyalty program:

Free Shipping

Customer satisfaction must be in focus. Be it financial benefits or such benefits as free shipping, personalized offerings, etc.

Early Access to Products and Sales

(Learn more about introducing eCommerce loyalty software in Magento 2).

Personalized Offers

Here are some aspects to consider:

Extended Return or Exchange Policies

Here’s a brief overview of the process:

VIP Treatment

Additionally, Amazon offers a wide range of products and services as part of their loyalty program, which may include physical goods that can be shipped to customers as rewards or incentives.

Why Doesn’t Discount Program Equate to Loyalty Program?

It’s no secret that repeat customers bring more profit and have a high chance to become loyal. These metrics can also help analyze what motivates customers to make repeat purchases, which can surely play into your hands.  “What are the chances you’ll recommend our brand to your family and friends on a scale from zero to 10?”. While discount programs can be a part of a loyalty program, they do not solely define what a loyalty program is. A discount program primarily focuses on offering price reductions or special deals to customers as an incentive to make purchases.

• Lack of emotional connection: A loyalty program goes beyond transactional benefits by aiming to create an emotional connection between the customer and the brand. It focuses on building trust, engagement, and a sense of belonging, rather than just providing discounts.
• Multi-dimensional rewards: Rewards programs often offer a variety of rewards beyond discounts, such as exclusive access to events, personalized offers, freebies, or enhanced customer service. These rewards go beyond monetary value and provide a more holistic and personalized experience.
• Customer engagement and interaction: Loyalty programs encourage customers to actively engage with the brand through activities like referrals, social media interactions, or providing feedback. This engagement helps strengthen the relationship between the customer and the brand, fostering loyalty beyond mere discounts.
• Long-term relationship building: Rewards programs aim to build a lasting relationship with customers, encouraging them to become repeat buyers and brand advocates. This requires consistent efforts to engage and retain customers, beyond the temporary appeal of discounts.
• Strategic data collection: Such programs often collect data about customer preferences, purchase behavior, and demographics. This data enables businesses to personalize offers and improve their overall customer experience, leading to enhanced loyalty.

There are several highly regarded loyalty programs that have achieved great success and garnered positive feedback from customers.

• Do not devalue your items or services
• Do not compromise the ability to earn loyalty points/stamps
• Help you not lose in revenue by offering a discount
• Give clients satisfaction from earning extra

Rewards program members may gain early access to new product releases or special sales events. This exclusive access makes customers feel valued and creates a sense of privilege, fostering online loyalty and driving engagement.

Why Doesn’t Retention Program Equate to Loyalty Program?

While there is no Felix Felicis for an effective eCommerce loyalty program, there are certain KPIs that will help you draw reasonable conclusions and make improvements. This is as important as keeping the promoters satisfied.

• Focus on repeat purchases vs. emotional connection: A retention program primarily focuses on strategies to keep customers coming back for repeat purchases. It often relies on incentives such as discounts, rewards, or special offers. In contrast, a loyalty program aims to create an emotional connection between the customer and the brand, fostering a sense of loyalty and advocacy beyond transactional benefits.
• Transactional vs. relational approach: Retention programs tend to be more transactional in nature, focusing on the immediate benefits that encourage customers to continue purchasing. In contrast, loyalty programs take a more relational approach, aiming to build long-term relationships with customers based on trust, engagement, and personalized experiences.
• Narrower scope vs. holistic approach: Retention programs typically focus on specific tactics to prevent customer churns, such as targeted email campaigns, re-engagement offers, or personalized recommendations. A loyalty program, on the other hand, takes a broader and more holistic approach, encompassing various strategies to enhance the overall customer experience and foster loyalty.
• Limited benefits vs. multi-dimensional rewards: Retention programs often offer benefits directly tied to repeat purchases, such as discounts on subsequent orders or loyalty points based on transactional value. In contrast, loyalty programs offer a range of multi-dimensional rewards that go beyond just discounts, including exclusive access, personalized offers, enhanced customer service, or experiential rewards.
• Engagement vs. repeat transactions: Retention programs primarily focus on encouraging repeat transactions from existing customers. While this is an important aspect of loyalty, true loyalty programs also emphasize customer engagement, interaction, and participation, which goes beyond the act of making purchases

These metrics show what percentage of customers actively and regularly participate in a program. Here, participation is measured by the way buyers earn and spend points within a certain period of time.

• Doesn’t simply keep customers despite their attitude to the brand but makes them loyal
• Creates emotional ties with the customers. It makes them choose your brand when compared to competitors
• Has a broader reach and includes more lifecycle components, such as customer development, retention, and win-back.

Tips for making the best of NPS:

Goals of eCommerce Loyalty Programs

Loyalty programs aim to turn satisfied customers into brand advocates. By providing exceptional experiences, rewards, and incentives, businesses encourage loyal customers to spread positive word-of-mouth, refer new customers, and promote the brand, thus expanding its reach and acquiring new customers. Charlie Casey, the CEO of LoyaltyLion, claims that the average ROI for companies they work with is from to for each spent on the loyalty program. This concerns both small and large companies.

Customer Retention

An eCommerce loyalty program refers to a structured marketing strategy implemented by online businesses to incentivize and reward customers’ loyalty.

Repeat Purchases

Personally, I just love when info about a loyalty program is easily accessible on the site or made available on social media. Besides being easy to understand, it keeps me updated on the benefits it offers.

Customer Engagement

These KPIs provide insights into various aspects of the eCommerce business, including sales performance, customer behavior, marketing effectiveness, and financial metrics.

Brand Advocacy

The ever-growing landscape of eCommerce has prompted businesses to adopt loyalty programs as a crucial strategy to foster customer loyalty and drive sustainable growth.

Data Collection and Insights

Here are some of the best loyalty programs:

Customer Satisfaction and Loyalty

Such programs provide valuable data and insights about customer preferences, behaviors, and purchasing patterns. By collecting and analyzing this data, businesses can gain a better understanding of their customers, personalize offers, and improve overall marketing strategies.

Competitive Advantage

The goals of rewards programs can vary depending on the specific objectives and strategies of the business.

Increase in Share of Wallet

For example, Flash Tattoos uses a subscription popup to offer VIP status, as well as 10% off the first purchase. More details on the company’s special offers are conveniently available right on the main page of their loyalty website.

Fighting Customer Churn

Surely, establishing an emotional bond must be an objective, and it’s not that easy to achieve.

Customer Attraction

Program members may receive VIP treatment, such as dedicated customer service channels, priority customer support, or enhanced customer care. This personalized attention enhances the overall shopping experience and strengthens customer loyalty.

Critical KPIs to Measure eCommerce Loyalty Program

This begs the question: So, this is probably the numbers you should expect from your loyalty program, at least. Detractors must be determined, as well as the reasons for their dissatisfaction in order to improve the way buyers see the brand.

Net Promoter Score (NPS)

Here are some critical KPIs to consider when measuring an eCommerce loyalty program: “All-in-one purchases” is the model that must be stimulated by such a program. These steps will let you achieve high ROI for your loyalty program: It has been proved that customers that are active with loyalty programs make 90% more frequent purchases and spend 60% more in each transaction. Moreover, the chances that such buyers will stay with the brand increase fivefold. Loyalty programs aim at decreasing the number of customers who chose to leave and paying special attention to the customers at risk. A good loyalty program becomes an attraction that helps retain customers. Loyalty program members often enjoy access to exclusive discounts and promotional offers, allowing them to save money on their purchases and feel rewarded for their loyalty. While the main goal of a loyalty program is to retain existing customers and increase the number of repeat orders, it can also be used as an instrument for customer acquisition through referral methods, such as emails, shareable URLs, social media, etc.

• Promoters (9-10 score)
• Passive buyers (7-8 score)
• Detractors (6 and less)

On average, three years is often considered to be an optimal realistic time frame during which loyal customers last with a brand in eCommerce. To retain eCommerce customers, consider the following strategies: Table of Contents That’s what you need to ask yourself and learn to calculate in order to measure this KPI. You’ll have to analyze what exactly motivates buyers and segment them depending on the obtained results.

• Bring personalization. The easiest way to measure NPS is to ask personalized questions right after customers’ interaction with your brand. Avoid asking general questions. Ask about the staff, for instance, instead.
  “How likely will you recommend our eCommerce store after your last interaction with our support team?” – Zappos.com, the online merchant that sells shoes and clothing, offers such a question to its buyers to ensure high customer service.
• Use follow-up questions. You can learn where your customers mostly come from or improve your business thanks to the questions based on negative customer experiences. Consider the following questions:
  “What is the biggest thing you dislike about our store?”
  “How did you first hear about our brand?”
  “What three things stopped you from completing an order the last time you shopped with us?”
• Use thank you messages. This kind of message must be different for the 3 above-mentioned groups of customers. When dealing with detractors, make sure to mention that you are ready to improve customer service and value their opinion.

Customer Lifetime Value (CLV)

By continually evaluating and adapting their strategies based on these KPIs, eCommerce retailers can drive customer online loyalty, increase revenue, and stay ahead in the competitive online marketplace. By tracking CLV, you can determine the long-term profitability of customers enrolled in your loyalty program, providing insights into their value and helping optimize retention strategies. To make a long story short, the retained customers may buy from you again, or they might not. The loyal customers, in turn, will choose your brand and encourage others to start shopping with you. As simple as that.

Active Engagement Rate (AER)

Measuring the success and effectiveness of an eCommerce loyalty program requires tracking key performance indicators that provide insights into various aspects of customer engagement, retention, and program performance. While the fundamental metrics and strategies for measuring effectiveness remain consistent, there may be specific features and capabilities within Magento that can facilitate the measurement process. Measuring a loyalty program on Magento follows similar principles to measuring loyalty programs on other eCommerce platforms.

• Uses a $0.16 marketing strategy. If a customer purchases an item and its price suddenly drops, Amazon credits back the difference. Doesn’t it show that the merchant puts a customer first?
• Stays creative. The company offered to pay a yearly fee to get 2-day free shipping. So, no matter whether buyers still have to pay, the feeling of being rewarded with free shipping does increase satisfaction.
• Timely diversifies. Do you remember how Amazon started? I do. First, they sold books only. Now you can get practically anything under the roof there. That’s probably why Amazon is one of the online marketplaces I’ve personally stuck to.

Repeat Customers Rate

However, some common goals include: Online rewards programs often tailor promotions and offers based on individual customer preferences and purchase history. Personalized offers make customers feel understood and appreciated, increasing their likelihood of making repeat purchases.

Monetary Bonuses

On the other hand, a loyalty program encompasses a broader scope, aiming to foster a long-term relationship between the customer and the brand beyond just discounts. It’s critical to create conditions that satisfy the customers’ requirements in certain categories. This is normally carried out through the system of bonuses and benefits. While measuring a loyalty program on Magento shares many similarities with other platforms, the specific features, integrations, and customization options within Magento can enhance the accuracy and efficiency of your measurement efforts.

Return on Investment (ROI)

Ultimately, the goal of a program is to enhance customer satisfaction and loyalty. By delivering a rewarding and personalized experience, businesses aim to create a strong emotional connection with customers, building trust, and fostering long-term loyalty. A loyalty program must be developed in the way customers see the extra value they get. This can be realized by offering: Implementing a robust loyalty program can give businesses a competitive edge in the crowded eCommerce landscape. By offering unique rewards and benefits, businesses can differentiate themselves from competitors and attract and retain customers who value the added incentives. You should aim at having as many promoters and as few detractors as possible.

• Estimate customers’ profitability. Taking into account the last 2 years (depending on buyers’ purchase cycle), estimate their profitability by subtracting all the expenses from the total revenue for each separate customer.
• Select the most profitable customers. There should be about 20% of them.
• Create these customers’ profiles to know what they like and where they come from.
• Search for a lookalike audience to target and attract.

Customer Satisfaction

Here are some reasons why a discount program doesn’t equate to a loyalty program:

• Extra discounts depending on customers’ tier
• Exclusive personalized offers

It allows measuring what value a customer brings to the company over a lifetime. CLV variations help evaluate the effectiveness of the loyalty program as you’ll see how often your customers make purchases and correspondingly stay with your brand. This helps see whether buyers become more loyal to the brand or not.

Brand and Program Awareness

Discount programs are undoubtedly effective. They attract customers and allow increasing sales, but these increases have a short life. Rewards programs fuel repeat purchases and build brand allegiance that lasts. How do you measure the effectiveness of a loyalty program?
A monthly/yearly estimation of the AER is a great way to evaluate the effectiveness of your loyalty program. As online shopping continues to gain momentum, companies are recognizing the importance of measuring the effectiveness of their eCommerce loyalty programs through key performance indicators (KPIs). Depending on what the customers answer, you’ll be able to divide customers into 3 groups: These metrics allow for calculating expenses that are related to promoting your loyalty program.

Measuring a Magento Loyalty Program

In order to estimate this score, you’ll need to survey your customers. By tracking specific metrics, businesses can gain invaluable insights into the success of their loyalty initiatives and make data-driven decisions to optimize customer engagement and maximize revenue. As eCommerce continues to thrive and customer expectations evolve, measuring the effectiveness of online shopping rewards programs has become paramount for businesses seeking long-term success.

• Integration with Magento analytics tools: Magento offers various analytics and reporting tools that can provide valuable insights into loyalty program performance. These tools can help track customer behavior, engagement, and program-specific metrics, allowing you to measure the effectiveness of your loyalty program within the Magento ecosystem.
• Customization and flexibility: Magento offers customization options and third-party extensions, allowing businesses to tailor their loyalty program to their specific needs. This flexibility extends to measuring the program’s performance, as you can customize reporting and tracking mechanisms to capture the desired metrics and KPIs relevant to your loyalty program objectives.
• Integration with Customer Relationship Management (CRM) systems: Magento comes with integration capabilities with CRM systems, which can enhance loyalty program measurement. By syncing customer data between your loyalty program and CRM, you can track customer interactions, purchase history, and program engagement, providing a comprehensive view of loyalty program effectiveness.
• Extension Marketplace: Adobe Commerce extension marketplace offers a wide range of loyalty program extensions and integrations. These extensions often come with built-in reporting and analytics features, allowing for more streamlined measurement and analysis of loyalty program metrics.
• Performance monitoring and A/B testing: Performance monitoring tools can help assess the impact of your loyalty program on website performance, conversion rates, and overall customer experience. Additionally, there are A/B testing capabilities, which allow you to test different loyalty program strategies and features to identify the most effective approaches.

Taking that the repeat customers spend 67% more than the new ones, keeping them both returning and loyal to the brand is critical.

Summary

Remember, the success of your loyalty program depends on continuous evaluation, adaptation, and delivering value to your customers. Yes, Amazon does offer shipping for certain loyalty rewards. Amazon has a loyalty program called Amazon Prime, which provides various benefits to its members, including free shipping on eligible items. Some key performance indicators (KPIs) for eCommerce include conversion rate, average order value (AOV), customer acquisition cost (CAC), customer lifetime value (CLV), cart abandonment rate, website traffic, and return on ad spend (ROAS). However, the specific rewards available and their shipping eligibility may vary based on the terms and conditions of the loyalty program or promotional offers. Creating a loyalty program involves several steps to ensure its effectiveness and success.

FAQ: eCommerce Loyalty Programs