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On the Seventh Day of Loyalty Marketing Nirvana: Calculate Loyalty Program ROI

Every company strives to calculate accurate ROI for their marketing programs. How else can you judge if your efforts are paying off? On Day 7 of loyalty marketing nirvana, we’re here to help you calculate the expected ROI of your loyalty initiatives. After this step, you will be able to clearly demonstrate the benefit of the program. Sounds like nirvana, right?

Because you’ve knocked steps five and six of loyalty marketing nirvana out of the park (building consensus and calculating total cost), Day 7 is easy because it’s just math. You can certainly keep it simple and run a profit and loss on your loyalty program. It’s a straightforward method for determining incremental revenues generated that also provides a summary executives can easily and quickly understand.

How can you go one step further in proving your loyalty program success? The key steps to help marketers understand ROI are outlined in the Loyalty Lab whitepaper, How To Measure Your Loyalty Program’s Incremental ROI.

Loyalty Lab recommends three ways to start looking at data in order to prove true incremental ROI. These three measurements are especially useful when attempting to calculate what loyalty program members would have spent if the program didn’t exist.

The first way is to compare members against nonmembers. This is a simple measurement, and it is also easy to show and understand. New customers are a particularly good segment on which to focus.

The second way of measuring loyalty program impact is to isolate and compare like groups. Like groups could be those who made one purchase over the first three months of a loyalty program versus those who made more purchases in that same time frame.

The third method of calculating true incremental lift for your loyalty program is to have a control group. Ideally this group would never be exposed to the loyalty program, so when you compare members versus nonmembers versus a control group, you will have a very clear picture of how the loyalty program drives revenue and ROI.

If your team prefers the simple profit and loss, then the math is easy. However, if they are looking for a little more detail about the loyalty program ROI, then these methods will help you deliver.

Our journey to loyalty marketing nirvana is almost complete. On Day 8, we will attempt to understand the sensitivity and risks of your loyalty program. Doing so will help ensure calculating ROI remains a blissful experience.

Have more questions about calculating loyalty program ROI? Tweet us @TIBCO with the hashttag #LoyaltyLab.

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