Loyalty schemes are becoming increasingly popular year on year. Thanks to them, companies gain loyal customers, who in many cases contribute to the growth of the business, whilst members themselves enjoy numerous benefits, such as discounts, personalised offers or credit to use on future purchases. However, it is worth reviewing how a loyalty programme is performing from time to time. Its most important aspect is its effectiveness, which can be assessed in several ways.

Participation rate

By using what is known as the participation rate, a company can find out whether joining loyalty scheme how easy it is for customers to use, and how readily users themselves share it with their network of contacts.

The ratio is easily calculated by dividing the number of programme participants by the total number of customers. As the data shows, in most loyalty programmes the participation rate ranges between 20% and 25%. Put simply, this means that one in four customers takes part in the loyalty programme of an average company. Estimating this figure also allows us to draw conclusions about the effectiveness of the loyalty programme itself. First and foremost, we gain insights into how easy it is to obtain information about a loyalty programme and to join it.

Large-scale estimates suggest that a participation rate of 20% or higher indicates that it is easy to find and join. It also provides customers with a certain benefit – for example, a material one – which influences their decision to register. 

Rejection rate

Another very important metric in measuring the effectiveness of a loyalty programme is the drop-out rate. It is an indicator designed to show whether the loyalty programme is functioning correctly and whether users are being adequately engaged through it. In this case, the calculation process itself is just as straightforward as for the participation rate. Divide the number of points, discounts or rewards accumulated by a customer who is also a programme participant by the total number of points or rewards earned. This enables the business to verify whether users are being adequately engaged. It is important to bear in mind that if the programme is unattractive, customers may opt out or remain inactive, which could have a very negative impact on the company’s operations and its future market position.

A loyalty programme is successful when it is measured and analysed on an ongoing basis. It is also important that, should the metrics show unfavourable results, improvements and new features are introduced without delay. We cannot afford to lose customers. It is important to remember to focus first and foremost on existing customers, as it is much more difficult to find and win over new ones.