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Calculate Customer Loyalty and Retention Metrics

Are you wondering how to measure customer loyalty and customer retention?
Use Voucherify free loyalty metrics calculator to measure customer loyalty and customer retention rate.

Participation
Redemptions
Engagement
Repeat Purchase
Churn
CLV
Acquisition
Retention

Participation level

How many of your customers enrolled in your loyalty program. If the number is lower than expected, perhaps you haven’t marketed your program enough?

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If the number is lower than expected, you should rethink your loyalty program marketing strategy. There are various ways to improve loyalty program participation. Start with asking these questions:
  1. Are my incentives right for my target audience? Would they prefer different incentives? 
  2. Is the rewards value high enough to motivate my customers to participate in the loyalty program? 
  3. Have I marketed my loyalty program enough? Is the landing page easy to find? Is it advertised throughout all my owned distribution channels? Have I included any other channels to advertise it? 
  4. Is there any incentive to join the loyalty program? Any reward that can be gained easily to start with? Consider offering some loyalty points just for joining to motivate customers to join. 
  5. Am I using the power of referrals? Consider launching a referral program that incentivizes customers already in the loyalty program to bring more loyalty program participants. 
  6. Are the program rules easy to understand? Maybe your loyalty program is too complicated causing people not understanding the value of participating in it?

Redemption rate

How many points in your loyalty program are actually redeemed for rewards. High redemption rate indicates growing customer loyalty

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If your redemption rate is low, it means that customers earn points but don’t use them. There can be various reasons behind this:
  1. Maybe your customers do not know how to redeem points or coupons? Maybe the program rules are not understandable for them?
  2. Is the points balance at hand for your customers? Can they find it easily? Do they know they have rewards waiting for them? Do you notify them about earned rewards? 
  3. Are the incentives right for your target audience? Maybe customers are not interested in the rewards you offer. You can find some ideas for loyalty rewards in our blog post.
  4. Is there any bigger reward they can get if they accumulate more points? Maybe they are saving towards that reward? 
  5. Double-check if your redemption mechanism is working, maybe you have a bug. 
  6. Can the rewards be redeemed where your customers usually do their shopping? If you offer only in-store rewards redemption to customers who primarily shop online, they may not redeem the rewards because they simply do not go to the places where they can do it. 
If your redemption rate is high, congratulations! Your loyalty program seems to be working well. Customers engage with it by earning and spending points, which means the rewards are of value to them and you do not have an issue with growing liability of unused points. 

Engagement rate

How many points were collected and spent by how many customers in a given timeframe to measure the overall customer engagement in your loyalty program.

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If your engagement rate is high, congratulations! If it is low, however, you should try to investigate the possible reasons:
  1. Are your rewards motivating enough for your target audience? Try changing the rewards to raise the participation levels. 
  2. Is there a valuable reward for joining the loyalty program? Maybe some customers join it just to earn the joining reward and later do not participate in the program. Try reducing the joining incentive and raising the value of other rewards to motivate customers to stay active in the program. 
  3. Do you send notifications and reminders to the participants about earned rewards? Maybe they have forgotten about your rewards program? 
  4. Are the dormant customers still purchasing from you? Maybe they churned a while back and their inactivity has nothing to do with your loyalty program. You should check it and introduce a re-engagement campaign, if that is the case. You can find some campaign ideas in our Inspirations Library. 
  5. Have you changed the program rules recently? If you have changed them, maybe your customers did not like the changes and stopped participating in the loyalty program. 
  6. Do you advertise the benefits of your loyalty program enough?
  7. Is it easy to redeem the rewards? Maybe if you make it easier to add the points or coupons at the checkout, more customers will use their rewards. 
If you would like to improve your loyalty program and its engagement rate, we recommend reading our ebook on loyalty program best practices.

Repeat purchase rate

Repeat Purchase Rate shows you how often your buyers come back to repeat a purchase. Its value ranges from 0% to 100% (the higher the better).

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Here are some ideas to increase your repeat purchase rate:
  1. Providing first-rate customer service.
  2. Launching loyalty or referral schemas.
  3. Creating personalised experiences and a brand narrative that goes beyond sending product newsletters.
  4. Staying in touch via numerous customer touchpoints and remembering about special occasions like birthdays or anniversaries.
  5. Running online contests and free giveaways to boost customer engagement.
  6. Launching coupon campaigns with limited time offers that will urge customers to purchase from you again. 
  7. Launching a coupon campaign targeting customers who have ordered a certain number of times from you already, for example sending them a 10% off coupon for their third purchase. You should define when usually customers churn and incentivize the purchases after the predicted churn to bring them back. 
You can find more ideas in our blog post on how to boost brand advocacy. 

Churn (customer attrition) rate

Churn measures how many customers resigned from using your services. 5-7% annual churn is considered normal.

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If your churn rate is higher than you want it to be, there are a couple of things you can do to improve your customer retention: 
  1. Launch a loyalty program. 
  2. Launch a discount scheme that incentivizes customers to stay with you for longer. For example, reduce their subscription fee by 5% every year they stay with you without churning. You can find more retention-focused campaign ideas in our Inspirations Library.
  3. Improve your products and services quality. 
  4. Improve your customer service and experience.
  5. Review your pricing. Maybe your customers found a cheaper alternative? 
  6. Educate customers better on your product. Offer free training, webinars, video tutorials, and product demos – whatever it takes to make your customers feel comfortable and informed.
  7. Ask churning customers for the reason for their churn and act on their direct feedback. 
  8. Define who is at risk of churning and solve their potential issues before they churn. 
  9. Define when the risk occurs most often and launch a discount campaign to motivate customers to stay with you. For example, if customers tend to churn after the first year, launch a second year discount for those who are at the biggest risk of churning (for example, have not logged in recently or have low usage overall). 
  10. Connect with your customers by building community, sending them useful content post-purchase, or providing free consultations or services.
  11. Incentivize longer-term subscriptions, for example by giving a -10% off the annual subscription plan vs. monthly subscription plan. 
Read our guide to brand advocacy for more ideas. 

Customer Lifetime Value

CLV estimates customer profitability. The aim is to predict how beneficial the relationship with a customer will be. The higher the score, the better.

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To increase your Customer Lifetime Value, you have a couple of options: 
  1. Increase the average basket value. This can be done by launching upselling and cross-selling campaigns. For example, tiered discounts that benefit those who purchase more items, free shipping from a certain basket value, BOGO promotions, or related products promotions. You can find more up-selling campaign ideas in our Inspirations Library. 
  2. Invest in customer loyalty, for example by launching a loyalty program. 
  3. Increase customer satisfaction. There are multiple ways to do this, from improving customer experience, offering better onboarding and support, investing in better customer service, offering better warranty conditions to building a community of your product users. 
  4. Provide valuable content to your customers, free of charge.
  5. Listen to your customers and act on their direct feedback.
  6. Offer customers personalized experiences. 

Customer acquisition cost

CAC is one of the most popular metrics used to measure customer loyalty and engagement. In short, it says how much resources you need to invest to acquire a new customer.

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How to reduce customer acquisition costs? 
  1. Lower your spend on paid advertising. You can, instead, invest in SEO, referral marketing, influencer marketing and incentives, like coupon or cart promotions for the first purchase to attract new customers. 
  2. Create buzz-worthy content or launch giveaways to bring more traffic. 
  3. Invest in retargeting to bring back the traffic that left your channels. 
  4. Focus on boosting conversion rates, for example by offering promotions and incentives. You can find some acquisition-focused promotion ideas in our Inspirations Library.
  5. Optimize your campaigns and promotions performance by A/B testing the settings, copy, and creatives. 
  6. Optimize your funnel to prevent churn. Invest in good UX and UI that will guide your customers to finalizing their purchase without any struggles. 
  7. Create personalized content and promotions to convert your target audiences to the best of your abilities. 

Customer retention rate

Retention Rate is used to monitor business’ performance in attracting and retaining customers. The higher your score the better. *Note: optimal retention rate varies between industries.

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If your retention rate is lower than expected, there are several things you can do to improve it:
  1. Launch a loyalty program.
  2. Launch re-engagement campaigns and promotions.
  3. Offer sales promotions after a certain period of inactivity. 
  4. Improve your products, services, and customer service. 
  5. Collect customer feedback and act on it. 
  6. Offer unique services or content. 
  7. Invest in customer education. 
You can find more ideas in our guide to brand advocacy.

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Frequently asked questions

Do I need to sign up to use Voucherify loyalty program calculator?

No, the calculator is free and you can use it without signing up.

How am I supposed to know all this data needed to calculate customer loyalty?

We highly recommend investing in or creating your own CRM platform to keep track of your customers’ activities to easily calculate the loyalty metrics above.

Why is customer loyalty important?

Data suggests that 40% of revenue comes from returning or repeat purchasers and that the top 10% of your customer base spend 3x more than your average customer. Besides increase in revenue,  loyalty marketing builds engagement opportunities throughout the customer lifecycle adding to trustworthiness and influence of your services.

What should I do if my loyalty score fell short of my expectations?

If that's the case, there is a number of ways how you can improve your score. You can boost your social media presence and start a conversation between your brand and customers to create a faithful community or improve customer satisfaction rates. However, what we think is best is the loyalty program that rewards your customers and offers them great real value. Go here to learn more about launching a loyalty program with Voucherify.

Aren’t participation and engagement rate the same thing?

They measure similar metrics, however participation rate tells you only how many customers signed up to your loyalty program, whereas the engagement rate excludes dormant loyalty program members and takes into account only those customers who actively take part in it.

What are some common ways to improve the performance of a loyalty program?

There  are many ways on how to boost your loyalty program performance. These include: offering new, personalised rewards that offer true value to your customers, conduct a survey to learn more about your customers’ impressions, or make point collection easier by rewarding not only purchases, but also activities of your customers. Check our ultimate guide on loyalty program best practices to learn more.