a.k.a. Membership Program Metrics. I needed some inspiration for some analysis I’m doing around member retention right now, and thought I’d glance at some good ol’ fashioned listicles to start.
Love this list of metrics to track around loyalty programs, which I’m adapting to Member Retention http://blog.cxloyalty.com/9-rewards-program-metrics-you-should-be-tracking. My comments are in red:
- Activation rate (a.k.a. Acquisition Rate)–is the number of new members joining your loyalty program. Even longstanding rewards programs should be adding new members periodically. Low or drastically declining activation rates indicate a troubled program.
- Usage rate (earning velocity) – Are members using the program? Keep track of how often they make purchases or perform other activities to earn points[…]. For us, this would translate into: are members using their discounts? are they opening member e-zines?
- Time to first spend–is how long it takes new members to spend their points (hint: the shorter the better). New members spending points quickly is a good indicator of high purchase frequency (more purchases = more points to spend) and that they see value in the program. Again, a pretty direct correlation here. While our members don’t accrue points, there is a time-to-first spend here that would be how long after their purchase/renewal of membership. I would also be interested in a time-to-second spend, since a lot of people join or renew specifically to get discounts on a particular performance — so that first spend would be automatic. The real test is how long it takes them to use the membership again.
- Frequency – refers to both current and desired member behaviors and is used to set program benchmarks and goals. Current behaviors are what your customers are doing now, such as frequency of purchase or frequency of interaction. Desired behaviors are what you want members to do – like “increase frequency of visits, spend or engagement by 20%. How often are members buying tickets? How often are they opening their emails?
- Breakage rate –is the percentage of points issued that are unspent (divide total number of points unspent by total points ever issued). Breakage is inevitable, but a rate higher 50% is a red flag your members aren’t using the program (read: aren’t engaged). I don’t think this one is directly applicable to us, but I’m interested in the idea of creating a proxy point system for breakage rate — a check in moment 3 months, 6 months, 9 months, 12 months after the membership is purchased in which the percentage of “worth” of their membership is calculated. If they bought a $65 membership, have they gotten their money’s worth in discounts and free admission yet? Filing this away into a “maybe set this up later” ideas bank. 🙂
- Churn rate – or attrition rate, is the rate at which customers leave a business, or in this case, a rewards program. Long periods of inactivity (usually 18 months) or cancellations are measures of negative churn. Yep.
- Inactivity rate – is a measure of the time elapsed since a member’s last interaction with the program. Keep an eye on inactivity rates – prolonged inactivity leads to negative churn. Similar to frequency, but measured in time as opposed to # of events. This is pretty novel, and something I’d like to set up.
- Redemption – Usage rate is important, but if your members are holding onto all their points (read: not redeeming), that means they’re not engaging. Redemption is the “aha” moment when a member cashes in hard-earned points for something they want – it’s when they experience the value in your program and your brand. Not sure that this is applicable, since again, we don’t use points.
- Advocacy – Beyond your Net Promoter Score (which measures whether someone would recommend your business), social sites like Yelp and Foursquare help you go a step above that to see whether someone actually did recommend your business and what they had to say about it. You can also monitor what people are saying about you and track brand engagement with analytics tools built into social sites like Facebook, Twitter and LinkedIn. These candid comments on social can help keep positive momentum going among your fans’ networks, or help you understand where improvements can be made. Great idea, I’d love to work with our social media department to measure whether or not our members are advocating for us on Facebook, Twitter.
Aim for the “bell curve”
The best way for loyalty program managers to track program success is to use all the program data and loyalty metrics listed above. A quick snapshot of successful rewards programs should look like a bell curve: The lower section of the curve represents low usage or inactive members; the middle is engaged users; the end is super-users. If most of your users are on the left end of the curve, your program is in trouble. Learn more about signs of a troubled program here.