How do you measure the impact of your referral and loyalty programs on customer retention and lifetime value?

To have an idea of how referral and loyalty programs affect retention and lifetime value set some clear goal like increasing repeat purchases or increasing customer lifetime. Get track metrics such as referral rate, average order value & customer retention rate over time. Compare these trends to what non participants experienced directly. Once I compared the average spends of loyalty program members over six months to non-members to boost retention. Goals were definied, and separation between what was working and how to improve using targetted metrics, resulted in more customer loyalty.

Define Key Metrics: Clearly define key metrics related to customer retention and lifetime value, such as churn rate, repeat purchase frequency, and average order value. Segmentation: Segment customers based on their engagement with the referral and loyalty programs. Compare the behavior and metrics of participants in the programs against non-participants. Referral Program Metrics: Track the number of referrals generated by participants. Measure the conversion rate of referred leads to customers. Assess the lifetime value of customers acquired through referrals.

Loyalty Program Metrics: Monitor the participation rate and activity level of loyalty program members. Analyze the impact of loyalty program benefits on customer behavior and spending. Evaluate the change in purchase frequency and average order value among loyalty members. Customer Retention Rate: Calculate the overall customer retention rate before and after the implementation of referral and loyalty programs. Compare the retention rates of program participants to non-participants. Lifetime Value (LTV) Analysis: Analyze the lifetime value of customers who participated in referral and loyalty programs. Compare the LTV of program participants to non-participants.

There are so many different types of incentive programs across various industries. The best way to select is determine what seems to be working in market for your industry. With the gaming industry expanding significantly, creating a gamified way to collect rewards can attract & retain customers. Offering products for free after several purchases (i.e a coffee shop where you collect points and then redeem for a free item) or where your purchase goes towards a good social cause (i.e. Toms, Warby Parker, National Geographic x TenTree). This allows people to feel attached to the brand & then collecting the feedback from customers and tracking repeat purchase behavior can help you tweak and shape the program going forward.

Customer Surveys: Implement customer surveys to gather direct feedback on the impact of referral and loyalty programs. Ask customers about their motivation to participate, satisfaction with program benefits, and perceived value. Cohort Analysis: Conduct cohort analysis to compare the behavior of customers who joined the referral and loyalty programs in different time frames. Assess the impact on retention and lifetime value over specific periods. Attribution Modeling: Utilize attribution modeling to understand how referral and loyalty program interactions contribute to customer actions. Attribute customer actions and conversions to specific program touchpoints.

A/B Testing: Implement A/B testing to evaluate variations in program structures, rewards, or communication strategies. Measure the impact on customer retention and lifetime value to identify optimal program configurations. Customer Feedback and Reviews: Monitor online reviews, social media mentions, and customer feedback related to the referral and loyalty programs. Identify positive sentiments and areas for improvement. Financial Impact Assessment: Assess the financial impact of the referral and loyalty programs by comparing the cost of program implementation to the incremental revenue generated. Calculate the return on investment (ROI) for each program.

Loyalty programs don't deliver value. They cost more than they bring. Why? They dilute value in customers that are loyal anyway.

Best way to maintain long term loyalty is by making sure that your product / service delivers outstanding customer value to every customer every day ...if this becomes the core mantra of a business it will really does not need a separate loyalty program.

Longitudinal Analysis: Conduct a longitudinal analysis to track changes in customer behavior over an extended period. Identify trends and patterns in customer retention and lifetime value.