POS SOFTWARE

What is commonly done is to measure a customer's spending in a loyalty program in a retail shop. Then compare these figures to the average customer.

I am sceptical.

The spend is not profit.

Yet many so-called retail experts quote this as a critical measure of how successful the loyalty program is as they rarely get profit figures. So this is the best they can do.

The other issue is that one supposes that members of your loyalty programs are already spending more in your shop. So, in most cases, they are spending more with you already. The extra problem here is that they do it to gain more rewards in their purchases, so you are often discounting your products to people who are buying them anyway.

If you are running a loyalty/VIP program in your shop, here are some KPIs; I recommend looking into them.

In my experience, even vague figures are better than none.

Budget

A professional marketer will budget a loyalty program's cost at 1% of sales. Sometimes they will take it to 2%, but it is too much to do anything higher without the suppliers' help. If you are doing a million turnover in your shop, you are looking at about $10,000 cost maximum. 

You need to know whether you are getting $10,000 back in profit.

Membership

Examine your membership. How big is it? Is it growing or declining? Where are the members coming from? Existing customers or new customers? If it's existing customers, then your program is dubious.

To determine this, you need names.

Are you just giving a discount to existing customers?

Email list

The email addresses are said to be worth 2%. If you are not collecting these email addresses, your loyalty program is down 2%. In today's market, you must communicate with your customers. You have to find a way to get your customers to come back. This is the key to profitability.

Usage

How many are using it, and at what frequency?

Member spending vs. non-member spending

The primary purpose of a loyalty program is to get you more customers and get them to spend more. Is it? So do not just check the sales totals but also the basket size, profitability, etc.

Pre-membership vs post-membership spending

What do you need to know that it is working?

The figures can be gotten here.

​Use your data, not the seat of your pants.

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