Measuring the ROI of Loyalty Software for Business Merchants

While purchasing and installing a loyalty software solution is a critical step to foster customer loyalty, measuring its Return on Investment (ROI) is a tough process. Since there are so many variables, it becomes difficult to measure and account for all of them. While calculating the return of a loyalty management software solution to its last cent is exceptionally challenging, businesses can still estimate if they are in the green by pitching the total costs against the growth they have achieved since initiating the loyalty program. Here’s how to go about the calculation:

Calculating the Costs

While the biggest component of your expenditure is most likely to be the loyalty management software solution, don’t forget to include other expenses like marketing budgets, and the cost of rewards offered to the customer. The sum total of what you have invested in the software solution, customizing it, promoting it to your customers, and the rewards and discounts you are putting up for offer is the aggregate cost of your loyalty program. Furthermore, if you have specially hired human resources to manage the loyalty program, their remuneration will also be added to the costs.

Gauging the Benefits

In order to understand the value generated by the Loyalty Software For Business owners, it is imperative to measure the customer lifetime value, which is determined by the following three parameters: the frequency of customer visit, the average bill size of returning customers, and the duration of lifetime of a customer. All you need to verify is that all these three numbers are going up, and rest assured, your loyalty program is working the way it is supposed to. Furthermore, these customer lifetime values must register a respectable pace of growth for the initial few months, and then settle for an average growth rate every month.

As mentioned earlier, accounting for every last penny spent and earned through any Loyalty Software For Business merchants is very tough, by the virtue of the design of the program. For instance, if a new customer comes in through a referral, it should ideally have a multiplier effect, but there is no definitive way to ensure the same. Hence, it’s best to go with the nearest estimations.

How do you measure the ROI of your loyalty management software? Let us know!