Prior to launching a loyalty program, smart marketers build ROI models…
…that forecast incremental profits based on anticipated lifts across three key customer revenue variables: average order size, yearly purchase frequency, and yearly retention rates. These models make assumptions on funding, breakage, and participation rates to estimate results.
- How can you tell what loyalty members would have spent if no program existed?
- New customers are a particularly good segment to break out for high-level comparison.
- The purest way to measure incremental lift is to randomly assign every existing and new customer to a control group.
For example, “Compare Members versus Nonmembers” section, we performed the following analysis:
• Identified every shopper, loyalty program member and nonmember that made at least one purchase over first three months of loyalty program. For the member group, the purchase had to be made within 24 hours of registering for the loyalty program.