Introducing a small business loyalty system is a sound decision for any company. Customer loyalty is essential to keep your business growing and profitable. Loyalty programs help ensure passive (and active) outreach and rewards for simply being a customer. However, how can a business owner ensure their programs are delivering the success they should be?

Here are the most impactful loyalty program metrics, and how to measure their success. 

Enrollment Rate

For a loyalty program to work, your customers have to be a part of it. Track its enrollment rate for a snapshot of the program’s success. The higher the enrollment rate, the higher the impact of the program. Likewise, a low enrollment rate could signal a less-than-stellar loyalty program. 

Today’s customers are looking for ease of use. Enrollment in a loyalty program should be straightforward and unobtrusive. Consider customer surveys for more in-depth loyalty questions. It could be a simple issue of switching from points to store cash, or you might need to realign your program.

Customer Acquisition Cost

Loyalty programs have two goals: keep your current base happy, and attract new customers. The strongest loyalty programs will have low customer acquisition costs. 

To determine the customer acquisition cost, add the cost of sales to your marketing budget. Divide that by your new customers in a given time, say a month. The result is your monthly cost of acquiring new customers. Note that in this formula, there is one variable that you have the most control over. Keep your marketing costs down by ensuring your loyalty program is working for you. 

Keep in mind, though, that new customers are five times more expensive to secure than retaining your existing customers. While expanding your base is important, let organic marketing grow your customers for you.

Customer Retention Rate

Customer retention rates are some of the most insightful data that a small business owner could ask for. Compare the active customers from one period to another. This will allow a business owner to evaluate the impact of recent marketing campaigns and ad services. Plus, the data can help showcase the effectiveness of a loyalty program.

Repeat Customer Rate

Repeat rate is another metric to gauge customer interest. After implementing a loyalty program, you should see a higher repeat customer rate. Compare the periods before and after the program. Then, add up all customers who bought items at least twice, and divide that by customers who only shopped once. 

With this data, business owners can track how often customers make repeat purchases, and how much repeat sales are driving profits. In other words, the rate you get will highlight whether your business is being driven by repeat or new customers. A higher repeat rate likely indicates a higher customer loyalty. And, repeat customers spend 67% more than new customers. Thus, loyalty leads to repeat customers. 

Average Order Value

A simple metric, average order value highlights what is driving your business’ revenue. Divide revenue by the number of orders for a given time. An efficient loyalty program should show clear growth in order value. Loyalty programs promote repeat sales and consistent purchases. A low order value can indicate poor sales or selling lower-valued items.

Redemption Rate

Your loyalty program’s redemption rate is a direct reflection of its effectiveness. Whether your program is points, cash, or based on another resource, always track its redemption rate. 

Compare those who have redeemed points, cash, or referral bonuses to those who haven’t. Redemption rates should be at least 20%. For guidance, the best loyalty programs feature redemption rates above 30%. However, the higher the number, the more effective and popular your loyalty program.

Revenue Per Customer

Finally, divide your business’ revenue by its total customers for a period of time. This will showcase the average revenue per customer. Look at these numbers from before and after you implement your loyalty programs. Like order value, revenue growth should be evident. If there isn’t a clear boost to revenue, then you should take another look at your loyalty program.

A loyalty program is an important tool and asset. Use social media outreach to highlight your program like a new product. As well, be sure to stay in contact with your customers. Use outreach and surveys to make sure the program is firing on all cylinders. Follow your customers’ lead, and target the rewards to them. After all, they will determine if a loyalty program is worth it.