How can we quantify ROI for a customer loyalty program?

How can we quantify ROI for a customer loyalty program?

I presented a customer loyalty program to a group of directors of a global manufacturing company with about 200 clients in the luxury goods retail sector. The program is based on the following message to retail clients: "We would like to help you become the best retailer in your region." Hence, the rewards are primarily additional marketing services and sales tools, as well as educational possibilities for the retailers, their sales environments and their sales staff.

The question I am looking to answer in measurable terms is: How can we predict (quantify) the ROI that this customer loyalty program will likely bring?

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Any customer loyalty program should have a measurable impact on the company's retention and repeat business from existing customers. Based on this program you should be able to measure:

1. Increase in the average number of purchases from existing customers.
2. Increase in the average deal size of purchases from existing customers.
3. Increase in new customer referrals from existing customers.
4. Reduction in customer attrition (for subscription type services).

This was first published in May 2007