To be most effective, loyalty programs need to continually evolve.  Loyalty programs need to be regularly re-evaluated as customers, products and the competitive environment change.  Stagnation can cause a once valued loyalty program to be seen as old and tired.

To determine the health of your loyalty program, monitor its performance and perception.  The key performance indicators (KPIs) will be tailored to your program, your goals and your business.  However, there are four general metrics which are important for most programs:

1.  The time it takes to earn a loyalty reward

2.  The percentage of loyalty customers who earn a reward

3.  The percentage of loyalty customers that redeem the reward certificate

4.  The percentage of loyalty customers that take advantage of the program

A loyalty reward must be attainable.  If it takes too long to earn a reward, the customers may get bored and give up.  The appropriate time to earn a reward varies by your business and customer behavior.  That said, do not consider this a static number.  It may be that an average of 6 months was appropriate two years ago but 3 months is more appropriate now.

Similarly, if you have a program that requires a particular spending or mileage threshold, the minimum at which a customer receives a reward must be chosen carefully.  If you are a retailer whose median customer spends $250 per year and customers only receive a reward after spending $1,000 annually, very few customers will likely attain the reward.  If you want to encourage increased spending, you can always create tiers.  The basic loyalty membership level could be annual spend of $250 to $499 per year, the silver level could be $500 to $749 per year, the gold level could be $750 to $999 per year and the platinum level could be $1,00 or more per year.  Tiers encourage customers to strive to reach the next level.  Plus, it does not have to be expensive to add additional services for the higher tiers.  For example, you could e-mail platinum level customers in advance of sales or invite them to special in-store promotions.  However, customers must see the value of achieving a higher tier.  It is very easy to see the benefits of tiers when you see fliers with higher tier levels board the plane first or see the shorter check-in line for premier members.

The value that customers see in your loyalty program is evidenced by how many of the customers redeem the certificate.  In addition, if customers do not redeem the certificate then you have lost the revenue that would have been generated by the incremental trip.  Certificate redemption should generate revenue and continued loyalty to your brand.  If not, the loyalty program needs to be re-evaluated.

Finally, customers should be taking advantage of the program.  If not, you should be asking yourself why not.  Do customers not see the program as valuable?  Does my competitor have a better program?

The question I am increasingly asked is how do you measure social media and what is its ROI?  Given the economy there has been an increased demand for accountability and measurement.  The question is how do you apply this to a channel that is about brand awareness? 

There is the question of source material.  In many cases this translates into what web sites do you follow?

1. Your company web site(s)
2. Social media web sites (e.g., Facebook, Twitter)
3. Individuals’ personal blogs

What metrics do you measure?  Below are just some ideas.

1. Number of tweets
2. Number and ratio of positive comments
3. Number Facebook fans and Twitter followers
4. Links to personal sites that fans and customers have added to their web sites and blogs
5. Level of engagement with your company web site

Lastly, how do you establish causality?  It is difficult to determine if events in the social space are affecting purchasing behavior in the bricks and mortar space.  As my Statistics Professor said so often, “correlation does not mean causation”.

Accountable marketing is a lofty goal.  It is the idea that marketing can and should be measured.  It sounds simple but is difficult to implement and execute.  It starts with planning and identifying metrics for success up front and ends with calculating ROI and other relevant metrics as well as incorporating lessons learned into future marketing efforts.

I have written about metrics before.  In fact, my New Year’s Resolutions post included a suggestion to test, measure and learn.  Even in social media there are now agreed upon metrics.  The Interactive Agency Bureau (IAB) has released social media ad metric definitions. 

Given the current tough economic climate, there is no reason not to measure and evaluate your marketing efforts.   How else can you know what worked, what did not work and whether your efforts have met your threshold or definition for success?