Overview
What's the most important thing you can do to maximize your loyalty program? Create engaging promotions? Offer really tempting rewards to guests?
These are great, but the single most impactful thing you can do to increase your program's ROI is ... enroll and register new guests into your loyalty program. Your impact will always be limited by the number of guests enrolled in your loyalty program.
Before You Start
It's important to quickly review the distinction between enrollment and registration. Enrollment means a guest has activated a physical card to begin accruing rewards.
Registration means the guest has provided information (name, phone number, email address, etc.), usually via a paper or online registration form, to associate their information with the activated (enrolled) card/account number. Most loyalty programs have goals specific to enrollment, and to registration. This article focuses on enrollment. If you're looking for strategies to get more guests to register, please make sure to check out: 7 Tips to Boost Loyalty Registration Rate
Note: When guests join your loyalty program via mobile app, or online, they are both enrolled and registered at the same time. We call this "reverse enrollment" because the guest is providing registration info *before* activating a card/account number - it's the "reverse" of activating a card and then providing info via registration.
Loyalty Impact Model
The Loyalty Impact Model is one measurement we use to determine the overall effect of a loyalty program on an organization's bottom line. Loyalty Impact is calculated using two preliminary calculations: Loyalty Penetration, and Lift. Let's start with those.
Loyalty Penetration
How many of your customers are registered in your loyalty program? Loyalty Penetration measures the percentage of your checks that are from guests engaging in your loyalty program.
Why is this important? Loyalty penetration forms the foundation of loyalty success – the impact of your campaigns and communications is directly related to how many guests you can reach. You can only reach guests who are enrolled in your loyalty program.
Calculating Loyalty Penetration:
Formula: #loyalty checks / #total checks = Loyalty Penetration
Example: 21,587 loyalty checks / 59,196 total checks = 36.4% Loyalty Penetration
With this Loyalty Penetration example, any campaign or communication you create will reach approximately 36.4% of all guests, maximum.
Is that good? It's OK. Our clients' Loyalty Penetration rates vary from 20-78%. We usually say 40-50% is a good goal. Ideally, you should measure your own Loyalty Penetration rate and set incremental goals for improving it.
Lift
Do guests in your loyalty program spend more than other guests? Lift measures differences in spend per check between loyalty and non-loyalty guests.
Note: Depending on your concept, you may find that loyalty guests spend less per check, but visit more often. More frequent visits means more spending. If you are not seeing significant Lift per check, you may want to talk with your Paytronix contact about how to measure Lift over time, rather than per check to get a more accurate calculation.
Why is this important? Guests registered in loyalty programs typically spend more than non-loyalty guests. It is a tangible measure of a loyalty program’s success.
Note: If your organization has multiple concepts, you will want to analyze this on a per-concept basis to get an accurate measure of how each concept is performing.Calculating Lift:
Formula: average spend per loyalty check - average spend per all checks = Lift
Example: $24.41 avg spend per loyalty check - $19.78 avg spend per all checks = $4.63
In this example, loyalty guests, on average, spend $4.63 more per check than non-loyalty guests.
Is this good? This will really depend on your concept (especially where loyalty guests may visit more frequently but spend less per individual visit), and a number of other factors. Measure it, and make sure loyalty guests are spending more overall than non-loyalty guests. If they aren't, research to find out why?
Loyalty Impact
Now we put Loyalty Penetration and Lift together to calculate Loyalty Impact.
Calculating Loyalty Impact:
Formula: #loyalty checks x Lift = Loyalty Impact
Example: 21,587 loyalty checks x $4.63 Lift = $99,947
In this example, loyalty guests spent $99,947 more than other guests - that's a $99,947 increase to your bottom line. That's pretty good. What if you could do more
A few dollars per check might seem small, but it really adds up even if you only actively work on Loyalty Penetration.
Imagine if the increase in spending by loyalty guests (Lift) stays the same, but you could increase Loyalty Penetration by 5%, how would that affect Loyalty Impact?
Current Loyalty Penetration + 5% = New Loyalty Penetration
Example: 36.4% + 5% = 41.4%
New Loyalty Penetration x Total Checks = New #loyalty checks
Example: 41.4% x 59,196 = 24,507 loyalty checks
Lift – Lift stays the same
Lift = $4.63
New #loyalty checks x Lift = New Impact
Example: 24,507 x $4.63 = $113,467.41
New Impact – Old Impact = Change in Impact
Example: $113,467 - $99,947 = $13,520
Answer = $13,520! In this specific example, if you can improve Loyalty Penetration by just 5%, you could see a $13,520 increase in spending. And that's without doing anything at all to encourage loyalty guests to spend any more money per check, or running any promos/offers/discounts.
How do I calculate my Loyalty Conversion?
Loyalty Conversion measures the percentage of all guests who join your loyalty program during a transaction. It will tell you which locations are doing the best (and worst) at enrolling guests into the loyalty program. This is an important measure because, as we saw in the previous section, Loyalty Penetration is one of the most significant factors in a successful loyalty program.
Calculating Loyalty Conversion:
Formula: #enrollment activations / non-loyalty checks = Loyalty Conversion
Example: 2256 new enrollments / 37,609 non-loyalty checks = 6% Loyalty Conversion
In this example, 6% of all guests not already in the loyalty program, joined during their visit.
Is this good? It's OK. We generally recommend setting a goal of 6-10%.
How do I improve my Loyalty Impact?
Measure.
Which locations have the best Loyalty Conversion rates? Which locations have the best Loyalty Penetration? Which locations have the most Lift per loyalty check? Staff at these locations are doing a great job engaging guests.Find out what they're doing.In some cases, it can be as simple as good signage at registers and tables. Or staff being consistent in asking guests if they are enrolled in the loyalty program in a genuinely enthusiastic way, being able to quickly and effectively explain the program's benefits to guests. We recommend running the Cards Issued by Cashier Detail Report every month, per store. Find out which stores are doing something worth replicating, and which ones need guidance. Learn from the best!
Enroll, Enroll, Enroll.
Remember, the primary way to get even more results from your loyalty program is to enroll as many guests as you can. The goal is to enroll as many guests as possible, and keep them engaged. If you are worried that low-engagement guests (guests who enroll but never register, register but almost never visit) will dilute your program, your Paytronix contact can show you how to use Account Filters to exclude them from your campaigns. Learn more about Account Filters: What are Account Filters? Alternatively, you can also use Account Filters to target low-engagement guests; they represent a major area of opportunity.
Here's another way to think about the variables in improving Loyalty Impact:
#loyalty guests active / #loyalty guests enrolled = % loyalty guests who are "regulars"
#loyalty guests enrolled x Lift = increased spending per loyalty guest
This means you have a few options when trying to move the needle:
Enroll more guests in the program.
Target inactive guests to encourage more frequent visits, or to spend more money.
Try to get "regulars" to visit more often, or to spend more money.
Which of these seems the most straightforward? Enrolling more guests! It can be hard to get "regulars" to come in more often, or to get anyone to spend more money. Remember, increasing enrollment can be as simple as more engaging signage, and encouraging staff to engage with guests.
Make It Easy.
The more ways a guest can join or interact with your program, the easier it'll be for any specific guest. Make it easy. Of course "easy" is relative, so we recommend offering lots of options. Some guests will want a physical card, some will want to join using their phone (via an app, or text message), some will want to join via web site. And it's not just joining, make it easy for guests to use their card when visiting. Some guests will have their card, some will want to use an app on their phone, some will want to be able to give their phone number at the time of the transaction. Paytronix offers lots of options for your guests to interact with your program; you can talk to your Paytronix contact about which ones will be the most effective for your organization, and most convenient for your guests.
Make It Matter.
When it comes to getting more guests to join your loyalty program, get Operations involved and invested; develop a mutual, positive relationship with Operations. Don't just ask them to get more guests enrolled, find out what you can do to support their efforts. This means making sure cashiers and servers, and their managers understand why the loyalty program is important; it means making sure they feel (and stay) invested. At a minimum:
You want every cashier or server to ask guests, "are you part of our loyalty program?"
You want every cashier or server to be able to succinctly explain the benefits with sincere excitement.
You want every cashier or server to be able to get a guest in the program quickly, with minimal hassle to the guest.
How? Many of our clients have success with giving cashiers and servers tangible motivations for improving their location's Loyalty Impact and/or Loyalty Conversion. Whether it's contests/competitions, or part of their performance reviews/goals,you need to give cashiers and servers, and managers both the tools to succeed, and the motivation to engage guests in your program. Just as you want them to be able to explain the benefits of the loyalty program to guests, you should be able to explain why the loyalty program matters to the overall health and success of the business.
For further assistance, please contact your solutions consultant or customer success manager, or email [email protected]