Capillary’s 2024 Loyalty Expo Session: Understanding the Mechanics of Customer Loyalty Programs and Leveraging the Right Set of Metrics

Capillary Technologies is a managed SaaS solution powering 500+ loyalty programs with its best-in-class loyalty technology platform and expert services. Founded in 2012, Capillary has a strong global presence across the United States, Asia, Europe, and the Middle East, working with 400+ brands like Tata, PUMA, Shell, Petron, Domino’s, Kanmo Group, and Marks & Spencer. The platform’s suite of products—Loyalty+, Engage+, Rewards+, Insights+—are all AI-powered and sit on top of a powerful consumer data platform that has touched more than a billion end customers.
As part of the Loyalty Expo Speaker Preview Series, Loyalty360 interviews presenters who will lead dynamic sessions at this year’s Loyalty Expo in Orlando, Florida, from June 4–6. 
Mark Johnson, CEO of Loyalty360, spoke with Don Smith, Chief Consulting Officer at Capillary, about the upcoming session he will lead in June. The session will address the mechanics of customer loyalty programs and what metrics to tap into when measuring customer loyalty efforts.

Brand marketers must leverage the right metrics when measuring customer loyalty efforts, but many fail to understand they must accurately track both behavioral and emotional metrics. Why are both necessary for a holistic understanding of customer loyalty and program health? 
Smith: There are two sides to the coin. There are performance metrics demonstrated by decisive loyalty behaviors and financial performance, but there’s also an emotional and softer side of the coin—building true brand affinity and deeper relationships between customers and the brand. Both of those sides must be present.
I’m an evangelist for having the right set of metrics, and we religiously maintain benchmarks because we’ve worked with lots of programs. We believe there are key metrics you must review from a diagnostic perspective for every loyalty program. You have to look at them because they are the early indicators of whether or not a program is doing the things that it ought to be doing on behalf of customers. Those are the top-line metrics, and they’re important.
We work with brands that tell us they have a loyalty program, but they feel like it’s lost its luster. We “pop open the hood” and look at those metrics. However, you can’t stop at those line metrics. They are the entry into a deeper dive into the “why” of customer behaviors.
If you see a decline in customer retention, we agree that it’s an important metric to look at period-over-period sales and keeping customers active with a brand in a program. But if you’re looking at a decline, you also have to look at the rate of deceleration or acceleration and try to understand why. Are you attriting customers from a certain product category, a service segment, or a particular segment or demographic because you’re not meeting their needs? How do you proactively take those insights around retention and retain member velocity and start actioning them in campaigns and in outreach tactics so that you can change the behavior as it’s happening?
That’s the magic of why you must have a good discipline built around the right metrics as well as a commitment to go deeper.
When you look at the opportunity around metrics, are there mistakes brands are making, such as looking at the wrong metrics or not having the right data? What’s the biggest opportunity where brands can get a quick win?
Smith: Don’t just track a top-line metric. Let’s take that retention example again.
Every brand we work with shows us its year-over-year retention, and that may be great. We might see that the rate is at 65%, and that’s something to appreciate. But of those members who shopped period-over-period, what happened during that same timeframe? Go deeper. Look at their spending velocity. What was their visit frequency? Did they start buying in multiple categories? Or did they act like one-trick ponies who were slowing down over time? You can’t just look at retention. You must dig into the data, segment it, and identify who’s moving up and who’s at risk of deceleration.
When you start to dig into some of those metrics, that’s how you send proactive campaigns into the market.
Retention is a common metric; sales penetration is another one. You should be getting high sales. Any program at a 12-month steady state should have at least 68% tracked sales penetration into the program.
However, tracked sales penetration alone isn’t an indicator that the program is healthy. You have to confirm that the program’s mechanics are working. How many of those members, if there’s a reward, earned it? And how many of them redeemed the reward? What happened on that redemption transaction? Is the promise of redemption driving accrual stretch?
You must dig into those mechanics and keep your finger on the pulse of what’s happening in your program. Also, acknowledge that what’s happening for segment A may be different for segment B. You must craft customer-centric approaches to go deeper with those insights. You can’t just have a scorecard and believe that you’re managing your program. The scorecard is the cover sheet to going deeper in a diagnostic that is actionable.
When you look at the time to the first or second transaction, what are some opportunities brands might find?
Smith: This will vary as a function of the business vertical and the natural cadence that exists within that business vertical. But if you just take retail loyalty—let’s say that we have a reasonable cadence, there’s a lot of splitting within the competitive set, and the right to win is very high—the program’s purpose is to enable that right to win.
During the design process, brand marketers are obsessed with figuring out how to get customers to a first win. That first win could be a reward or something else. We call it priming the pump because one of the things that we know is a remarkable uniformity, and this is true across the world. It’s true in Southeast Asia, just like it’s true in North America and Europe.
Customer patience is low—especially among younger customers.
They do not like to play the long game to get a reward or go through a long accrual cycle. Anything you can do to prime the pump and get that customer to their first reward or something tangible quickly—e.g., a recognition, perk, surprise and delight, something that reinforces the value proposition of the program—that’s the solidifying event that you must commit to. If you’re presenting a cycle where a customer has to shop with you four times before they ever get to a first reward, chances are very good that they’re going to be promiscuous with their share of wallet. The program won’t reinforce the behavior you’re seeking fast enough.
Across the board, we’re seeing programs that are front-loading redemption, benefits, and perks while providing other ways to make them more exciting in the onboarding experience. For me, that is table stakes and modern customer loyalty.


Who would most benefit from attending Capillary’s session at the 2024 Loyalty Expo? 
Smith: For this particular session, anyone who wants to understand the metrics of loyalty—anyone who’s sat down and thought, “I think I know the right metrics that I’m looking at, but I’m not sure if I’m looking at this the right way—if I’ve considered everything.” This session is for those who want to know and understand what others are doing.
Think of it as a boot camp. We’re going to go over the most common metrics that are used to understand loyalty programs. We’re also going to talk about the six things that you need to be doing to go deeper.
It’s not just about metrics; it’s about the actionable tactics that we can take with basic data to do a better job of changing behaviors and mapping tactics and strategies to change the game.
We’re also going to talk about what’s in your analytics toolkit for your program and how you prime yourself. Everyone talks about AI and the AI revolution—we’re big fans of it, too—but it’s understanding the basic blocking and tackling of what goes into program analytics and loyalty analytics and how we prepare for AI. AI can be helpful, but we need to have our ducks in a row first.
We’re going to be offering those perspectives. Think of it as a crash course in understanding the right metrics.

What are a few key takeaways attendees can expect to learn by attending this session?  
Smith: We’ll talk about retention and how to take your existing measures of retention and apply segmentation. We’re going to give examples of how brands can do this with their own data and their own customer segmentation and develop deeper views quickly. We’ll talk about things that loyalty marketers can do in Excel with the right data.
We’re also going to talk about understanding your flow through to margin and how transactions double and triple dip in the loyalty ecosystem. We’ll spend a lot of time talking about the ways that brands discount. Most brands that we work with will have some hard marks and promotions they put into the market for everyone— typical sale pricing—and then they’ll do some targeted CRM, with offers going out to particular customers designed to drive desired behaviors. Then, there are rewards and the incentive structure of their loyalty program that are presented to customers, too.
One of the things we want to show is an optic for looking at double- and triple-dipping and how all those factors come together to impact the flow through to margin that ultimately happens at the customer level within a program. Most marketers don’t have a great handle on this as much as they should. We’re going to propose a very specific optic for measuring it, looking at it, and then, more importantly, actioning it so that we can look at triple-dippers differently and start to come up with some actionable strategies that take advantage of the price calculus of members and consumers.
For more information on this year’s Loyalty Expo, including the event agenda and registration options, please visit

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