Measuring ROI: Does Your Loyalty Program Deliver Value?

Launching a loyalty program is a strong move, but it's only the beginning. Brands that implement loyalty initiatives are far more likely to retain customers and drive profits. If you've worked in the marketing realm for a while, then you're familiar with the famous Harvard Business Review article highlighting research that shows increasing customer retention rates by 5% increases profits by 25% to 95%.

It's no secret that loyalty initiatives can be effective. But for your brand to experience the same results as top-performing programs, you need to track its performance with the same rigor as any other marketing channel.

With that in mind, we've put together a resource to help you confidently measure and interpret the ROI of your loyalty program.

This guide features insights from Lance Walker, a Marsello Loyalty Consultant. As the former CEO of Loyalty New Zealand, which operated NZ's largest loyalty program, Flybuys, Lance has seen what works—and what doesn't—when it comes to measuring loyalty ROI.

Read on as he shares proven methods for defining success, choosing metrics, and calculating the real value of your loyalty initiatives.

Why measuring loyalty ROI is harder than it looks.

You already know how vital loyalty programs are—but do you know if yours is actually delivering value? 

It's one of the most common questions in loyalty marketing today, and answering it starts with figuring out your objectives. Before you start crunching the numbers on loyalty ROI, you need to be clear about what you're trying to achieve.

According to Lance: "Whenever someone asks, "Is my program working or is it delivering value?" The first thing I do is ask the question, "What do you mean by value?" 

He continues, "Loyalty programs are fantastic, and they can do a whole range of things—including the acquisition of your customers, point of differentiation, upsell, cross-sell, and retention. But they can't do all things equally well for all brands."

That's why it's critical to align early on. Set your objectives and agree on how you'll measure success before the data starts rolling in. The clearer you are from the get-go, the easier it is to evaluate impact, avoid confusion, and keep everyone moving in the same direction.

Start here: Define what "success" looks like

You can't measure the value of a loyalty program without first defining what you're trying to achieve. And to do that, you need to have a clear vision of what success looks like.

As Lance alluded to above, if the loyalty program's stakeholders aren't on the same page with an initiative's objectives and success metrics, you risk running into challenges like:

• Subjective assessments of value - Without clear goals from the outset, everyone defines success differently. 

• Misinterpretation of results - It's hard to know what the numbers are telling you if you didn't define what you were hoping to see. "We end up debating the accuracy of results," Lance explains, "because we never agreed on what 'working' actually meant."

• Unclear accountability - If objectives weren't defined from the start, how do you know who owns the outcome? "I always remember," Lance shares, "a sales guy complained the program didn't drive new sales—but that was never the objective."

What are good loyalty program objectives?

So, how do you define "success" in a way that's useful? Lance goes back to the reliable SMART model of goal setting. When it comes to loyalty programs, your objectives must be:

• Specific - Tie each goal to a precise behavior or outcome you want to influence.

• Measurable - Ensure you can accurately track and quantify progress using available data.

• Achievable - Ground your targets in reality, not just ambition.

• Relevant - Align your loyalty goals with broader business priorities.

• Time-bound - Set a clear timeline for hitting your objectives and reviewing impact.

One thing to emphasize in all of this is the importance of setting challenging but achievable goals. "I think aspiration is great, but achievability is better. Be realistic about what can be achieved."

Lance adds, "If someone said to me, 'My objective is to increase retention by 50%,' I'd come right back to that and say, 'Well, on what basis? What basis do we think that's achievable?'"

What do good loyalty program objectives look like?

Too often, loyalty goals are set with good intentions but lack clarity. For example, a vague objective like "boost customer loyalty" doesn't provide any clear metrics or actionable steps. A stronger version would be: "Increase repeat purchase rate among loyalty members by 15% over the next six months." 

Similarly, "drive engagement" is too broad. A better goal might be: "Raise loyalty email click-through rates by 10% by the end of Q3." All this to say that SMART goals make everything easier—from setting strategy to tracking progress and knowing what to fix (and when).

Learn more about setting effective objectives in Lance Walker’s full webinar on Measuring ROI. Watch the session on demand.

What loyalty metrics should I measure?

All loyalty programs are meant to deepen customer relationships and drive repeat business. That being said, some of your program's priorities may vary depending on your business model, customer behavior, and growth stage.

The key is to identify the most important metrics and anchor them to your original objectives. Be wary of trying to measure all the things, as this can muddy your analysis and make it harder to spot what's working.

"One of the problems I see time and time again is too many metrics and all that does is confuse the picture," says Lance. "So, be clear about which are most important and are going to give you the best indicator of whether something is working."

Generally speaking, core loyalty measures fall into the following categories: transactional, attitudinal, and engagement metrics.

Transactional loyalty metrics

These are the "hard" or behavioral metrics—tied directly to customer actions and closely aligned with revenue. According to Lance, "A customer who's retained, who is shopping more frequently, and who is spending more—they're going to be generating high revenue and be more valuable."

• Retention/churn rate - Retention is the bedrock of loyalty program success. "If your loyalty program is not impacting retention, then all things being equal, it's not delivering value," says Lance. Retained customers are more profitable over time, so tracking churn reduction should be a core metric.

• Repeat purchase rate - How often are customers coming back to shop, and how does that compare to before they joined the program? According to Lance, "Technically speaking, a customer could get retained, but are they returning to purchase?"  

• Average Order Value (AOV) - Higher spending per transaction can indicate stronger loyalty or more effective promotions. "Is the average order value higher than it was before the program or higher than those who aren't part of the program?" Lance asks. Comparing member vs. non-member AOV gives you a clearer picture of the impact.

Additional loyalty metrics

While transactional metrics tell you what customers are doing, attitudinal metrics help explain why. As Lance points out, "The ideal loyalty program is one that creates behavioral loyalty, but also attitudinal loyalty." These are the softer measures that reflect how customers feel about your brand—and whether your program is building real relationships, not just habits.

"Habits may generate the right returns, but it's much better if a customer's doing it because they've developed a relationship with your brand they actually love."

With that in mind, here are a few key attitudinal metrics worth tracking:

• Customer Satisfaction (CSAT) - CSAT gives you a simple way to gauge how happy your members are with the program and your brand. A quick post-purchase or post-redemption survey can go a long way.

• Net Promoter Score (NPS) - A classic measure of how likely your customers are to recommend your brand to others. Lance notes that NPS is one of the best ways to quantify brand advocacy, and it gives you a clear read on long-term relationship strength.

• Sentiment - Sentiment analysis, from surveys or social listening, gives you a broader sense of customer emotion.

• Preference - Are members more likely to choose your brand over competitors? If you can understand preference, you get closer to understanding why loyalty happens.

Engagement loyalty metrics

While transactional and attitudinal metrics show what's happening after loyalty kicks in, engagement is your early warning system—it tells you whether your program is on track before results show up in revenue.

"Engagement's a lead indicator," Lance explains. "All things being equal, low engagement means your loyalty program has less chance of being successful."

Unlike a single metric, engagement is made up of multiple behaviors. Think of it as a signal that your program is resonating—if members are earning, redeeming, referring, and interacting, chances are your program is working. According to Lance, effective engagement measurement includes:

• • Points earned (both how much and how quickly)

• Rewards redeemed

• Time to first redemption

• Points expired

• Referral activity

• Response rates to communications and offers

One of the best ways to make sense of all these factors is to use an engagement score.

"At Flybuys, we had an engagement model which effectively gave every customer in the program an engagement score that was based on weighting these factors. So, when we were targeting customers, we could choose those who had higher engagement scores, which meant they were more likely to respond to a loyalty offer. Or, we might choose those who have lower engagement scores with offers designed to increase their engagement."

To drive long-term value, don't wait for lagging indicators like revenue. Start measuring engagement because it's one of the clearest signs of whether your loyalty program is set up to succeed.

How to calculate loyalty program return on investment (ROI)

So far, we've talked about the fundamentals behind tracking the success of your loyalty program. Now, let's look at how to actually do it.

If you're looking for a straightforward way to calculate the return on your loyalty program, this is where to start.

THE BASIC FORMULA

ROI = (Incremental Revenue – Program Cost) / Program Cost

This tells you how much return you're getting for every dollar invested in your loyalty program. But the keyword here is incremental. Because remember: not all revenue from loyalty members can be attributed to the program itself.

Here are some key considerations when measuring loyalty program ROI using the simple formula.

Measuring incremental revenue, not total revenue

"We're always interested in incremental revenue... not just straight revenue because some of that you would've got anyway," says Lance. Compare member spend before vs. after joining, or vs. a control group of non-members.

Factor in frequency and retention

If loyalty members are shopping more often or staying longer, that delta matters. "So if someone's spending $10 more on average each visit and visiting three times as often—that's your increment."

Account for the full cost of your program

Running a loyalty program incurs cost, so don't forget to factor these in:

• Rewards and discounts - The value of discounts, free products, or perks redeemed by customers. These costs can add up quickly, especially if your redemption rate is high, so be sure your rewards are compelling but sustainable.

• Technology/platform costs - These include the cost of your loyalty platform, POS, or e-commerce integrations, as well as any custom development work. It's worth investing in tools that automate tracking and attribution to save time and improve accuracy.

• Operational and marketing expenses - Don't forget the team behind the program. This includes time spent managing customer support inquiries, updating rewards, or analyzing performance, whether done in-house or through an agency.

Be sure only to include costs directly tied to the loyalty initiative.

Avoid over-attribution

Be honest about what the loyalty program is responsible for. Recognize that some customers would have stuck around anyway. Here's an example of what this calculation would look like in action.

In this example, for every $1 invested, you're generating $1.67 in return, or $0.67 net.

All in all, the simple ROI model gives you a clean, directional view of value. That said, this model assumes all uplift is loyalty-driven — if you're looking for a more well-rounded approach to loyalty ROI measurement, consider a more nuanced model.

This brings us to...

The weighted impact model (advanced)

Even when loyalty ROI looks good on paper, there's still one big question: Would those customers have behaved the same without the program?

To dig deeper, you can model loyalty impact using customer feedback, asking members directly how much the program influenced their decision to buy. Here's how it works:

Survey your customers

Gather direct input from members to understand the true influence of your program. Ask a representative sample of loyal customers how much the program impacts their decision to shop with you. Keep the survey short and specific to get quality responses.

Ask: "To what extent did the loyalty program influence your decision to shop with us?"

Group their responses into tiers

Once you've collected the responses, you need to assign a weight to each impact level based on how strongly customers felt influenced by the program. That could look like:

Apply those weights to your total loyalty revenue

You then need to multiply each group's percentage by its corresponding weight to calculate a blended "impact factor." Here's an example distribution:

• 10% said it was the main reason
• 20% said major reason
• 40% said minor
• 30% said no impact

Weighted impact: 10% (×100%) + 20% (×50%) + 40% (×25%) = 30% impact

Calculate ROI using the discounted revenue

The next step is to apply that 30% impact rate to your total loyalty revenue, then subtract program costs to calculate ROI.

• Total loyalty revenue: $10M
• Loyalty impact: 30% × $10M = $3M
• Program cost: $2M

ROI = ($3M – $2M) / $2M = 50%

This model discounts revenue that likely would've happened anyway, giving you a more conservative but realistic view of program impact.

While no ROI model is perfect, defining your assumptions upfront and applying them consistently gives you a credible foundation for decision-making.

The importance of context when making sense of your data

Metrics on their own only tell part of the story. To get real insights—and make smarter decisions—you need to interpret your results in context.

Lance explains, "The real trick is about interpretation. And for me, the key thing about interpretation is context."

Compare pre- vs. post-program results

Don't just look at your current numbers in isolation. Instead, compare performance before and after launching your loyalty program. For example, the data point "80% retention rate" in and of itself doesn't mean much unless you layer in the proper context.

Let's say you've noted that your pre-program retention rate was at 60%. In this instance, 80% shows the actual movement and helps justify your investment.

Analyze member vs. non-member behavior

One of the most effective ways to evaluate program impact is by comparing the behavior of loyalty members with that of non-members. Are they spending more? Purchasing more frequently? Staying longer? "It gives you a yardstick to make comparisons," says Lance—and provides much-needed clarity.

Don't forget external factors

Context also means recognizing what's happening outside the program. Seasonality, promotions, market conditions, and even the weather can skew your numbers. 

Lance recalls working on a bonus points promotion for ice cream that flopped, not because of the offer, but because it rained all weekend. "It went really badly... and the reason had nothing to do with the offer."

Ultimately, when you layer in context like trends, timing, and comparisons, you'll go beyond surface-level reporting and start uncovering what's truly driving your results.

Beyond ROI: Consider the non-financial value of loyalty programs.

ROI is critical, but it doesn't tell the whole story. Loyalty programs can unlock massive value in ways that are difficult—if not impossible—to quantify on a spreadsheet.

Case in point: A well-run loyalty program gives you first-party data—insights into purchase behavior, product preferences, and customer segments that can improve everything from marketing targeting to product development. You may not be able to assign a hard number to that data, but its strategic value is undeniable.

Loyalty programs also strengthen your brand. They differentiate you in a competitive market, enhance customer experience, and deepen emotional connections.

Also, the best programs go beyond transactional loyalty. They create relationships. They make customers feel like they're part of something. These factors build long-term brand equity and drive word-of-mouth.

Even though traditional ROI models can't fully capture these benefits, they still matter—especially to leadership. So, how do you bring these intangibles into the boardroom?

Here are a few ways to present non-financial value in your reporting:

• Tie data access to efficiency gains - Show how customer insights reduce acquisition costs or improve marketing performance.

• Highlight customer sentiment trends - Use survey data, NPS, or CSAT scores to show how the program impacts perception and brand preference.

• Tell the story of member engagement - Share anecdotes, testimonials, or growth in referral rates to illustrate how the program is resonating.

A simple checklist for building your own loyalty program ROI model

Measuring loyalty ROI doesn't have to be overwhelming. With the right structure, you can build a model that enables your team to make smarter decisions and secure stakeholder buy-in. Here's a practical checklist to guide your approach

• Define objectives clearly - Start by getting everyone aligned on what "success" looks like. Are you trying to increase retention? Drive upsells? Acquire new customers? Set SMART goals upfront so your ROI model has something concrete to measure against. Without clear objectives, your results will be open to interpretation and debate.

• Choose core metrics (fewer is better) - Focus on 2–3 metrics that best reflect your program's goals, like retention rate, average order value, or engagement. Too many KPIs can muddy the waters.

• Pick a model (simple vs. weighted—or structure your own) - The simple model calculates ROI using total incremental revenue and program cost. The weighted model goes further by discounting revenue that would've happened anyway. Choose the approach that aligns with your business needs or adapt your own. Just make sure your methodology is documented.

• Determine your assumptions - Every ROI model is built on assumptions. Decide what counts as incremental revenue, what costs to include, and over what period. Be transparent and consistent.

• Build a comparison group - Compare your metrics to a relevant benchmark, like customer behavior before the program or non-members today. That way, you can isolate the program's true impact on loyalty and behavior.

• Review lag vs. lead indicators - Don't just look at results after the fact. Track engagement metrics (like points earned or rewards redeemed) as leading indicators of future success. Then, pair them with lagging indicators like repeat purchase rate or NPS for a fuller picture.

• Present the what and the why - Your ROI number tells a story—but it's only part of the story. Show the "why" behind the results with insights, customer sentiment, and strategic value. That's what turns data into decisions—and ROI into action.

Measure to improve, not just to prove.

At the end of the day, measuring ROI isn't about proving your loyalty program was a perfect decision—it's about learning how to make it better. No ROI model is flawless, and that's okay. What matters most is clarity: defining your assumptions, applying them consistently, and using the results to guide smarter strategies. Loyalty is a long game, and continuous improvement is the name of it. Keep measuring, keep learning, and keep optimizing.

This article is based on Lance Walker's webinar on Measuring ROI. Lance is the Former CEO of Loyalty NZ and Flybuys.

Watch the full session on demand.

Want to improve your loyalty program initiatives?

Marsello can help. Chat with a loyalty and marketing expert about your unique business needs and learn how Marsello can help you achieve your retention goals. Book a demo with our team today.