Rewards Programme KPIs - Understanding the Success

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Key Performance Indicators are an essential part of every influential, hard-working customer loyalty programme. Without them you won’t know how your rewards programme is progressing, whether it is actually influencing people’s behaviour as it should. 

Loyalty program KPIs help keep your programme on track, revealing whether or not it’s driving desired behaviour. At Ovation Incentives we have a wealth of expertise in KPIs for loyalty programs. Read on to find out exactly what you need to know to make sure your customer loyalty programs are as effective as you want them to be.

Why You Need KPIs to Assess Your Loyalty Programme

Loyalty programme KPIs reveal how the programme you’ve put in place boosts customer loyalty.  When your culture supports and motivates everyone, tracking KPIs reveal exactly how well your scheme is performing. Monitoring programme performance against targets creates an environment where positivity is prioritised. It reveals exactly how your loyalty scheme is doing in a snapshot, rather than having to wait for results to emerge over weeks or longer. KPIs for loyalty programs build morale and drive continual improvement.

None of this is possible without the right metrics. Once you’ve clearly defined the key performance indicators that give you the metrics you need, you’re in a position of power. As you can see, without measurement it isn’t possible to assess the ROI of your loyalty programme.

Most Important Loyalty Programme KPIs

So what are the most important customer loyalty programs KPIs? Determining the correct KPI measurement varies based on the industry you operate in, and the purchase cycle. On the other hand, the key aspects are the same for most. Next we’ll look into the crucial things most businesses need to know, the primary KPIs that most businesses will want to measure.

Member Acquisition

First, member acquisition. Efficient member acquisition matters a lot when it costs more to get a new member on board than it does to service an existing customer.

Member acquisition is also called customer acquisition. It simply means bringing new and potential customers to your business via marketing, advertising, natural SEO, whatever means you decide. If you run a loyalty programme, for example, the goal might be to bring in x number of new members over a specified time. The member acquisition metric reveals clearly and quickly whether or not your targets are being met, which in turn has an impact on the business’ bottom line.

Member Retention Rate

Next in our list of essential loyalty program KPIs is the member retention rate. Loyalty programmes are all about retention. Your retention rate is simply the percentage of programme members who stick around for a pre-set time. 

If your retention rate is 100% you’d never lose a member. If it’s 75% you’re constantly leaking 25% of your valuable programme members. It’s an important metric because, like member acquisition, it has a direct impact on the business’ bottom line. When it’s always more expensive to bring a new customer on board, and cheaper to keep an existing one, retention matters.  

Churn Rate

Churn can cost a fortune. Your churn rate is another of the most important loyalty program KPIs. It reveals  the number of people who leave the loyalty programme over a given time, expressed as a percentage. 

A churn rate of 40% suggests you’re losing 40% of your members, a figure that can be catastrophic. Imagine it costs you £20 to acquire every new member. Every time you lose someone, you lose that initial investment in them.

Constantly losing a large percentage of people reveals there’s something going wrong with the scheme itself, the structure, the way it’s being managed, or the membership benefits. If you’re losing members hand over fist it’s a clear sign your loyalty programme isn’t hitting the mark. And that means you have the opportunity to go find out why, and make it work better.

Reward Redemption Rate

The most important KPIs for loyalty programs include the reward redemption rate, which reveals how keen your members are on what they’re being given. The speed at which people take their benefits shows you which benefits matter most to them, which in turn feeds directly into how they feel about their membership.

Again this reveals a slightly different aspect of a programme’s success – or otherwise. It means you get the chance to identify the most popular and beneficial programme elements, develop future benefits you know will appeal strongly to your audience, therefore improve retention, reduce churn, acquire more new members, and keep hold of your current members. .

Average Basket Size

One of the most influential KPIs in customer loyalty programs is the average basket size, also known as average order value, is really important. It gives you the insight you need to drive your average basket size upwards, what you need to effectively optimise the revenue from your advertising and marketing spend. Perhaps you could offer free delivery on orders over £50 to encourage more people to spend more per visit. The higher you can drive it, the more you’ll earn from your loyalty programme. Think about setting up a minimum order for free shipping, giving away free gifts if they spend a certain amount, discounting multiple buys, creating packages and bundles, up-selling, cross-selling, and suggesting ‘people who liked this also bought’ complementary products.

Purchase Frequency

A successful loyalty rewards programme should mean you naturally encourage more frequent purchases from existing members. And that’s what makes the purchase frequency metric so important. 

Amazon Prime, for example, is a purchase frequency mastermind. The monthly charge encourages Prime members to buy more often than they otherwise might on Amazon, so they feel they’re getting a good deal from their membership.

Customer Lifetime Value

How much is a single customer worth over the lifetime of their relationship with your business? The customer lifetime value or CLV is important, revealing the average customer's revenue generated over their entire relationship with a company. 

It’s very useful in determining the projected potential provided by programme members. Measuring CLV helps inform your advertising and marketing efforts, carry out better audience targeting, reduce churn, and maximise the impact of personalisation.

Incremental Margin

The incremental margin metric reflects the loyalty programme’s ROI. It shows you whether the programme is increasing company profits overall, or costing the firm money. It’s a reliable way to get the financial information you need to make good business decisions. 

While your margins tell you where the business is now, incremental margins show you where the business is going. Obviously, for a loyalty programme to be both profitable and sustainable, the members need to spend a lot more than you have invested in the programme.


The last in our essential KPIs for loyalty programs list, the refunds KPI, applies to premium loyalty programmes, where the members pay to join. They’re meant to provide extra value and instant benefits to members. If you’re giving away frequent refunds it’s a clear sign people aren’t as happy with the programme’s benefits or management as they should be. 

Knowing there’s a problem means you can make changes to give members the type of benefits they want, keep them engaged, keep them buying, and make sure the membership cost isn’t too high compared to the programme’s perceived value.

The importance of KPIs in assessing the success of a loyalty programme

Every KPI we’ve mentioned gives you a different view of the situation inside your loyalty programme. Put them together and you get a rich, detailed picture, in snapshot form, of exactly what’s going on. You’ll use the knowledge to establish ways to improve the member benefits, inspire members more, and spend less on driving even more income.

Now you know the importance of KPIs in assessing the success of a loyalty programme, why not give our brilliant demo a go? Alternatively, get in touch to discuss your loyalty programme needs with the experts.