A new methodology for predicting the ROI of a loyalty program
Introducing the PK Loyalty ROI Simulator
When making decisions around re-designing a loyalty program, marketers always want to know the return on investment (ROI) of the new loyalty program. Predicting the ROI is extremely difficult, as each program decision may have only a small influence on an individual customer’s behavior. But in aggregate, even small changes in customer behavior can have a large effect. Many companies do simple back-of-the-envelope calculations in Excel to understand loyalty ROI, but that is a cumbersome process that can yield inaccurate results. By using customer simulation, Marketers can feel more confident about the business decisions that will drive the desired customer behavior and improve customer loyalty.
Our simulator helps:
- Analyze actual customer behavior: By simulating how each customer behaves based on past behavior, the data is more accurate in projecting how each loyalty program will perform.
- Compare loyalty program scenarios efficiently: Different program scenarios are analyzed quickly and efficiently until optimal ROI is met under specific program conditions.
- Target specific customer segments: Findings drill-down into specific customer segments or periods of time for detailed information.
- Make confident loyalty program business decisions: By using data-driven simulation, the data is more accurate in projecting how each loyalty program will perform in the future.
PK’s Loyalty ROI Simulator is a powerful tool for understanding the potential ROI of a loyalty program. Once the simulation is complete and the results are analyzed, program decisions can be made. If certain scenarios are not ROI positive, new scenarios can be quickly plugged back into the simulator. When the optimal ROI is met, the program can be launched with lower risk.
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About the AuthorMartin Mehalchin is EVP for Retail and Consumer at PK, the experience engineering firm. He has dedicated his career to working with executives and managers to help them define their strategies and then translate those strategies into results. Among the clients Martin has worked with are Nike, Atlantic Records, Microsoft, Qualcomm, Expedia, Victoria’s Secret, Adidas and DuPont. Martin is a Board member and Chair of the Marketing Committee for the North Cascades Institute. His thought leadership has been featured in MarTech Advisor and Retail Customer Experience.
Tags: Brand Loyalty, Customer Loyalty, Loyalty, Loyalty Marketing, Loyalty Program Design, Loyalty ROI