Loyalty Program metrics of success – triple bottom-line of a different kind

In the land of customer loyalty and retention programs, there is a reality that no program owner should escape, nor want to.

These are in my view the 3 V’s that can make a massive impact to the positive profit-line of a loyalty program.

V1 = Volume
V2 = Value
V3 = Velocity

Each in their own way can be leveraged to grow the revenue of a program.

Add them together and then the fun really begins.

In simple terms:

V1= volume of members who participate in the program and by participate, I mean actively (however you define an active member). V1 can also be a metric of the depth of membership vs customers transacting = % of members who are participating in your program vs customers in total transacting.

V2 = value of their spend. This V is the revenue driver and therefore the profit provider to the programs success. It’s the value of the purchase by the member be it average or variable based on segmentation. Whichever way you cut it, the $ spent by your members should be incrementally greater than your non-members.

V3 = velocity of spend. This is the speed of spend or frequency metric = how often they purchase.

Here’s an example showing the power of leveraging any or all of the 3 V’s

Volume of members 20000 x Value $35 (ave) x Velocity (4 x per year) = $2.8 million (base)

Change Volume of members 25000 x Value $35 (ave) x Velocity (4 x per year) = $3.5 million (Inc=$700,000 on base)

Change Volume of members 25000 x change Value $40 (ave) x Velocity (4 x per year) = $4.0 million (Inc $1.2 million on base)

Change Volume of members 25000 x change Value $40 (ave) x change Velocity (5 x per year) = $5.0 million (Inc $2.2 million on base)

Once you have worked through your triple V strategy, concentrate on the other metrics of success such as retention, tenure and those that belong to the BELIEF dimension of loyalty = advocacy made up of (amongst other metrics) referral and recommendation. These deserve as much attention as the 3 V’s

Here’s to loyalty success…

(Note: Metrics of Success image has been designed by Directivity)

Facebooktwittergoogle_plusredditpinterestlinkedinmail

Leave a Reply

Your email address will not be published. Required fields are marked *