5 Metrics for Diagnosing Your Loyalty Program Health

Introduction

In case you missed it, Stamped is on a mission to end "lazy loyalty"—it's our name for the type of programs that are never marketed in-channel and rely too heavily on generic, out-of-the-box settings.

When done right, a loyalty program helps generate more sales, boost AOV, and increase your base of brand advocates. But that requires you to treat it like any other marketing program: it needs to be highly customized, tested, and optimized.

However, you won't know what parts of your program need to be optimized unless you keep track of your loyalty metrics. As we discussed in our last article, it's important to figure out what you want from your loyalty program. Once you decide what metrics you want to target, whether it's AOV, customer retention, or something else, you need to familiarize yourself with those metrics and learn how to interpret them.

Let's dive into which loyalty metrics matter the most and how they can help you diagnose the health of your program.

5 loyalty metrics you need to monitor

Redemption Rate

Your redemption rate tells you how many points your customers are earning versus how many they are cashing in and redeeming. It’s great if your customers are racking up points, but their excitement will soon fade if there’s nothing worth redeeming them for.

You should keep a close eye on your points breakage rate, which is the number of points earned divided by the number of points spent. The higher the breakage rate, the less engaged customers are with your program. A high breakage rate may signal that customers find the rewards unattractive, the redemption process inconvenient, or the program terms unclear, leading to decreased engagement. 

While unredeemed points might seem financially beneficial in the short term, relying on high breakage rates can be detrimental in the long run, as it often indicates underlying issues within the program that could affect customer satisfaction and retention.

There are several quick fixes for redemption rate, including simplifying the redemption process, enhancing reward offerings, and extending point expiration periods. However, the most important fix is marketing your loyalty program in-channel. Keeping customers informed about their point balances, upcoming expirations, and new reward options through regular updates can prompt timely redemptions and sustained engagement.

Repurchase Rate

A repurchase rate (or repeat purchase rate) shows how many customers placed more than one order in a given time frame.

A solid loyalty program has higher repurchase rates, as customers are eager to keep earning and redeeming their rewards during these windows. So if your repurchase rate isn’t trending in a positive direction, your loyalty program could use a bit of troubleshooting.

Similar to improving your redemption rate, part of this troubleshooting might include simplifying the redemption process, enhancing reward appeal, and amplifying in-channel marketing. Another highly effective method to boost your repurchase rate, though, is establishing a strong VIP program.

By creating a structure that offers increasingly valuable benefits as customers reach higher tiers, you can incentivize customers to make additional purchases to attain higher status and rewards. Programs with VIP tiers are proven to drive 2x ROI and 2x AOV compared to programs without.

In a recent newsletter, we found that two-thirds of brands saw improvement in both purchase frequency and AOV from customers who redeemed points on purchases once in a VIP program. The key to increasing your repurchase rate could be building a VIP program with highly enticing rewards.

Revenue Per Customer

Last November, we launched a Loyalty Analytics update which includes our Revenue Per Customer By Acquisition Month graph. This chart is a diagnostic tool—it might not give you the answers to your business, but it will report on how your strategy is working and tell you where to look for answers.

In the example above, we’re showing how a brand’s newly acquired customers in November 2024 compared to customers who were acquired in previous Novembers (2023, 2022, and 2021). A year-over-year comparison of the same month like this can help you understand longer-term trends in retention behavior.

What you’ll notice is that the value of a customer is not expanding at the same rate it previously did. In fact, even as the business has gotten better at increasing first purchase AOV, the long-term value of the customer has declined. This is something you don’t see when looking at monthly AOV or even your overall repeat revenue as a percentage of your business.

To begin figuring out why, you can deconstruct LTV, which is made up of three metrics:

• Repurchase rate
• Purchase frequency
• Returning purchase AOV

Retention is a tricky thing, because if you improve one metric immediately, it can take time for domino effects to take hold. And that’s exactly what’s happening here.

VIP Tier Membership

Measuring the success of VIP tiers in a loyalty program can be difficult. Certain factors, such as types of discounts offered, can produce wildly different results when looking at two similar brands. That doesn’t mean that the data is unreliable, though—it just means that you might need some help understanding it.

Also included in our recent Loyalty Analytics update was a VIP Tier Membership chart. This graph shows the number of customers within each VIP tier at the start of the respective day or at the end of the respective month. You want to see growth over time here, as it would mean that you have a larger number of high-quality customers. Customers moving up through VIP tiers means they’re spending more with your brand, and likely increasing their AOV with higher discounts.

Again, benchmarks can be a bit misleading, but you should typically expect to see 10% of VIP members in your highest tier, 30% in your middle tier, and 60% in your lowest tier. Overconcentration in lower tiers may indicate that customers find it challenging to progress, possibly due to high thresholds or insufficient incentives. On the other hand, too many customers in your upper tiers could suggest that tier advancement is too easy, causing unnecessary loss of margin.

VIP Tier Metrics

Beyond VIP Tier Membership, there are a few other VIP metrics you should keep an eye on. With our Revenue Per Customer by VIP Tier chart, you should expect to see a correlation between tiers and revenue: the higher the tier, the higher the revenue driven. There are two factors behind this trend. One, customers in the highest tier are already your best customers, so you should expect them to be spending more. Two, your rewards should be driving higher spend. 

The same idea applies to our AOV by VIP Tier chart, as revenue and AOV tend to correlate. Since you’re offering better rewards to customers in your highest tier, they should also have a higher AOV. A lot of it comes down to simple psychology. Let’s say you’re offering 10% off to customers in your middle tier, and 15% off to customers in your highest tier. Customers receiving the 15% discount are likely to spend more because the more they spend, the more they’re saving.

A possible alternative would be offering free gifts instead of a percentage-based discount. This method will naturally have a negative impact on AOV, as customers redeeming a free gift might have an order value of $0, but the positives show elsewhere. For example, you would expect to see a boost in purchase frequency and LTV.

Using customer feedback to diagnose your program

Metrics can tell you a lot about what is working (or what isn’t) in your loyalty program, but so can your customers. You should be leveraging surveys, reviews, and engagement trends to gain valuable insights into customer sentiment about your program.

A perfectly timed survey can reveal a lot about what customers think about your program. For example, you might consider a post-redemption survey, prompting customers to talk about their satisfaction after redeeming rewards. We also recommend trying an exit survey to gather insights from customers who stop engaging with the program to understand pain points. These surveys should be a mix of multiple-choice and open-ended questions—mixing quantitative (e.g. rating rewards from 1-10) with qualitative (e.g. "What's your favorite feature?") leads to deeper responses.

You should also monitor any trends in your reviews, whether they're positive or negative. You can look for recurring themes to determine what your program is doing right and what improvements it needs to make. The post-redemption period is a perfect opportunity to prompt customers to leave a review, as the reviews are more likely to be about your program. 

There are also certain engagement trends which may suggest that it's time for your program to make some changes. By identifying if customers disengage after specific milestones, such as reaching a new tier or after earning a reward, you can likely determine that there is an issue with your incentives. Another place to look is referral participation: high referral activity suggests enthusiasm for your brand, while low engagement could mean customers don't see enough value.

How Stamped can help you master your metrics

Your loyalty program is only as strong as the insights you gather from it. By tracking key metrics like redemption rates, repurchase rates, revenue per customer, and VIP tier engagement, you can diagnose the health of your program and identify areas for improvement. But numbers alone don’t tell the whole story—listening to your customers through surveys, reviews, and engagement trends will provide the context needed to refine your strategy.

The key takeaway? A thriving loyalty program isn’t a "set-it-and-forget-it" tactic. It requires continuous optimization, in-channel marketing, and a deep understanding of customer behavior. With the right data and a proactive approach, you can transform your loyalty program into a powerful engine for retention and growth.

Looking for deeper insights into your program’s performance? Book a demo with our team today to unlock our powerful Loyalty Analytics dashboard.