Determine your program fundamentals
Before you dive into marketing or message creation, you must first establish what success looks like for your program. It’s essential that you define your success metrics, so you can understand what your goals are and how to achieve them.
Success metrics may look different for each brand, and that’s okay; in fact, it’s expected. However, here are some recommended metrics to focus on when analyzing your loyalty program's performance:
Customer lifetime value (CLV)
Customer lifetime value (CLV) is the total revenue you can expect from a customer over their lifespan with your brand. When you build a VIP program, you’re aiming to increase this number. The more loyal your customers, the longer they’ll stick around, and the more they’ll spend on your products.
Klaviyo’s Advanced KDP and Marketing Analytics products allow you to easily see CLV in the customer lifetime value (CLV) dashboard.
Repeat purchase rate
Repeat purchase rate tells you what percentage of your customers have bought from you more than once. When you implement a loyalty program, you’re looking to increase the number of repeat purchases across your customer base; this shows continued interest in your brand.
Find your repeat purchase rate by calculating:
Number repeat purchase customers / Number of total customers
Average order value (AOV)
Average order value is how much revenue you earn for a typical order. An increase in your average order value is a great indicator of customer satisfaction and loyalty, as customers are either buying more items at once or purchasing items at higher price thresholds. As a result, your loyalty tactics will aim to increase AOV.
Find your average order value by calculating:
Total store revenue / Total number of orders
Churn rate
Churn rate refers to the rate at which your customers stop shopping from your brand. Customers may churn for a variety of reasons, but a loyalty play can prevent some of this turnover. The more your customers stick around, engage, and buy from you, the lower your churn rate becomes.
Find your churn rate for a given period of time by calculating:
Total number of lost customers / Total number of customers at start of period
Net promoter score (NPS)
Many companies have a system for collecting a net promoter store (NPS) from customers, which asks them to rate your brand based on the question: how likely are you to recommend us to a friend? Customers are often given a scale from 0-10 when selecting an answer, 0 being the most negative, and 10 being the most positive. You can then look at your scores in the following buckets:
- Detractors: scores 0 - 6
- Passives: scores 7 and 8
- Promoters: scores 9 and 10
The higher your net promoter score, the moresatisfied your customer base is overall, and the more likely they’ll shop again or refer a friend.
Find your overall NPS score by calculating:
Total score rating / (Total number of customers who submitted scores x 10
Return on investment (ROI)
Return on investment (ROI) refers to the profitability of a given business initiative; in this case, your loyalty program. Return on investment takes into account how much money you put into an initiative and how much revenue you generate as a result. When measuring the success of your loyalty program, it’s important to take ROI into account to ensure that your strategy is beneficial for your business.
Find your ROI by calculating:
(Gain from Investment - Cost of Investment) / Cost of Investment
Loyalty programs revolve heavily around rewarding your VIPs and providing them with benefits that the typical customer won’t receive. This reward system keeps your VIPs engaged and feeling like valued members of your community.
It’s up to you to determine what types of rewards and benefits you’d like to offer; there is no one-size-fits-all approach. Consider your business, your products, and your budget when you start brainstorming your rewards.
Here are some examples of types of rewards, broken down low and high budget options, and some ideas of how you might want to structure your rewards:
Invest in a loyalty tool
Klaviyo integrates with a number of loyalty providers to help manage and execute your program. Once you’ve answered the questions above, start exploring available tools that support the rewards and structures that interest you.
Click through the gallery tabs to explore a few examples. These aren’t the only options at your disposal; explore many more options on Klaviyo’s app marketplace.
Smile.io
Smile.io is a great solution for scalable and customizable rewards, including point redemption, tier status, and referrals.
When you integrate with Smile.io, you can use Smile.io data in Klaviyo to automate and personalize your reward communications.
Even better; if you’re a Klaviyo Customer Hub customer, you can connect your Smile.io data directly to the Customer Hub interface, so you can display loyalty information and rewards details.
Learn more about the Smile.io integration.
LoyaltyLion
LoyaltyLion is another provider that helps you customize and deliver rewards and perks as customers complete actions and engage with your brand.
With the LoyaltyLion integration, you can create an interactive loyalty page on your site that encourages customers to unlock new perks. You can also power your communications with personalized loyalty data.
Learn more about the LoyaltyLion integration.
FriendBuy
Friendbuy is a solution that specializes in referral rewards and programming. Referrals are a great way to not only improve the loyalty of your existing VIPs, but to additionally grow your customer base.
Through the integration, you can easily bring the emails and phone numbers of consented loyalty members and their referrals over to Klaviyo.
Learn more about the Friendbuy integration.
Once you’ve selected a tool that best suits your needs, activate the integration in Klaviyo.
If you decide that the available loyalty providers aren’t right for you, don’t worry. You can still build a basic loyalty program using only Klaviyo functionality by creating VIP segments as your foundation.
If you’re in the process of migrating over to Klaviyo from a different ESP provider where you were previously running a loyalty program, it’s very important to export all of your data so you can merge your custom metrics. Some metrics you’ll need to create custom in Klaviyo, but some may already exist (for example, through Shopify metrics). Identifying this early and integrating that historical data will set you up for success.
In the next lesson, we’ll go over a crucial step for building your program: determining your VIP segment criteria.