Key Formulas Every Loyalty Marketer Should Know
Loyalty may be emotional, but measuring its success is all about the numbers. If you've ever struggled to answer a CFO’s question about program performance or want to know how to calculate things like Customer Lifetime Value (CLV) or true ROI, this one's for you. These three articles break down the formulas and frameworks that can help you justify spend, optimise performance, and make smarter strategic decisions.
1. How to Calculate Customer Lifetime Value Using Loyalty Economics
Improving NPS can significantly boost CLV, and even basic estimations can guide loyalty strategies effectively. This article presents a straightforward method to estimate the potential value created by enhancing your company's Net Promoter Score (NPS) and fostering greater customer loyalty. It emphasises that even simplified calculations can offer meaningful insights into customer lifetime value (CLV), aiding in strategic decision-making.
2. How to Measure and Demonstrate Loyalty Program ROI
A holistic evaluation of loyalty programs, accounting for all associated costs and benefits, is essential to demonstrate their true value and impact on customer behaviour. This article addresses the complexities of quantifying the ROI of loyalty programs. It suggests a comprehensive approach that considers both direct and indirect costs and benefits, emphasising the need to understand whether loyalty programs genuinely create higher-value customers or merely attract them.
3. How to Calculate the ROI of a B2B Loyalty Program
A systematic evaluation of costs and customer value enhancements is crucial for assessing the effectiveness of B2B loyalty initiatives. This guide outlines a step-by-step approach to determine the return on investment (ROI) for B2B loyalty programs. It covers identifying program costs, valuing customer rewards, assessing customer participation, and measuring changes in purchasing behaviour to calculate ROI accurately.
4. Loyalty Math: The Economics Behind Customer Loyalty and How a Coalition Program Can Turbo-Charge Results
This whitepaper from Underwood Partners introduces the “Retention, Lift, and Shift” framework — a quantitative model that helps executives evaluate whether loyalty programs can deliver attractive ROI.
Retention analyses how long customers stay engaged.
Lift measures increases in spend or engagement per customer.
Shift assesses changes in purchasing behaviour or product mix.
Using this framework, leaders can define what customer behaviour changes are required — and at what scale — for a loyalty initiative to pay off. This “loyalty math” approach turns vague assumptions into measurable scenarios, enabling data-driven investment decisions.
