Thursday, December 11, 2008

How do you measure the value of a loyalty program?

Today I attended a roundtable presented by the Toronto Chapter of the American Marketing Association entitled "Cracking the Code: The Future of Loyalty Marketing". The panel included Steven Allmen, GM, Business Development; David Soberman, Professor of Marketing, Rotman School of Business; Pat McGoey, Vice President, Marketing Solutions, Loyalty Program Consultant; Rubina Havlin, Managing Director, Credit Cards, Scotiabank and Chris Whitaker, Senior Vice President, Partner, OSL Marketing. The panel was moderated by Jim Warrington from Fantail Communications (who is also a Past President of the AMA).

Loyalty programs have always been of interest to me, but I have only really dabbled in them in my professional life. So today's session was particularly interesting to me. I came to the session wanting to know how they work, and of course, how the success of loyalty programs may be measured.

So how do you measure a loyalty program? Is it by the sheer number of customers that sign up for a particular program? This hardly seems sufficient since as many of the panelists pointed out, many of us carry around wallets full of plastic cards from programs we've abandoned long ago. If not that, then what other variables may be measured? Purchase value? Frequency? All of these are surely worth measuring, but at the end of the day, do they mean anything? Even in combination I am not convinced that this even scratches the surface.

One of the panelists (if this is you, please feel free to let me know and I will amend my post), suggested that it comes back to "lift, shift and retention" (among other factors). I see how this is the case, but I am still baffled as to how this information could be coupled with other data as well as qualitative feedback in order to distill any clear sense of "value". What do you say to a CFO who asks what the dollar value is at the end of the day?

Sorry, folks, but I don't have any answers. If you do, I invite you to share them with me.

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