6 Ways to Measure Your Customer Loyalty Rates
Feb 7, 2025
You've launched a loyalty program. Customers are signing up. Stamps are being earned. But is it actually working?
Many businesses invest in loyalty programs without ever measuring whether they're achieving anything. They assume that signups equal success, that participation means loyalty, that having a program is enough.
It's not.
A loyalty program is an investment—of time, money, and effort. Like any investment, it should deliver measurable returns. And the only way to know whether you're getting those returns is to track the right metrics.
But here's the challenge: "loyalty" isn't one thing. Different businesses want different outcomes. Some want customers to visit more frequently. Others want larger transaction values. Some want deeper engagement. Others want longer customer lifespans. Each goal requires different metrics to measure success.
This article covers six ways to measure customer loyalty—each revealing something different about how your program is performing and where improvements might be needed.
Before You Measure: Define Your Goals
Metrics only matter in context. Before diving into calculations, clarify what you're actually trying to achieve:
Frequency: Do you want customers to visit more often?
Transaction value: Do you want customers to spend more per visit?
Retention: Do you want customers to stay with you longer?
Engagement: Do you want customers actively participating in your program?
Advocacy: Do you want customers recommending you to others?
Different goals require different measurements. A program that succeeds at increasing frequency might fail at increasing transaction value—and that's fine, if frequency was your goal. Problems arise when you're measuring the wrong things, or not measuring at all.
With goals clarified, let's explore six metrics that reveal how your loyalty program is actually performing.
1. Customer Retention Rate (CRR)
Customer Retention Rate measures how well you're keeping customers over time—not just acquiring new ones.
The Formula
(Current customers − New customers acquired) ÷ Customers at start of period = CRR
Example:
You currently have 500 customers
You acquired 150 new customers in the last 6 months
You had 400 customers 6 months ago
(500 − 150) ÷ 400 = 350 ÷ 400 = 87.5% retention rate
What This Reveals
A high retention rate means you're keeping most of the customers you acquire. A low retention rate means customers are churning—coming in and leaving quickly.
If your retention rate is low despite having a loyalty program, something's broken. Either:
The program isn't compelling enough to create loyalty
The core experience (product, service) is disappointing
Competitors are pulling customers away
You're not communicating with members enough to maintain connection
Benchmarks
Retention rates vary by industry, but generally:
Below 70%: Significant churn problem
70-85%: Room for improvement
Above 85%: Strong retention
Improving This Metric
Focus on what happens after the first purchase. Are you following up? Are you giving reasons to return? Are you communicating value?
A loyalty program addresses this directly—but only if customers know about it, join it, and find value in participating. Push notifications keeping your business top-of-mind, birthday rewards creating emotional connection, progress updates motivating return visits—these features improve retention.
2. Redemption Rate (RR)
Redemption Rate measures how often customers actually claim the rewards they've earned.
The Formula
Rewards redeemed ÷ Rewards earned = Redemption Rate
For stamp-based programs: Completed cards ÷ Total stamps issued (divided by stamps required per card)
Example:
200 free coffees redeemed this year
2,500 total stamps issued
10 stamps required per free coffee (250 potential rewards)
200 ÷ 250 = 80% redemption rate
What This Reveals
Low redemption rates signal problems:
Rewards aren't appealing: Customers don't care enough about the reward to bother claiming it.
Thresholds are too high: Customers give up before reaching the reward.
Communication is failing: Customers don't know they've earned something or forget about the program.
Program is confusing: Customers don't understand how to redeem.
Surprisingly, industry-wide redemption rates for traditional loyalty programs often hover below 20%. Digital programs with proper communication typically perform much better.
Benchmarks
Below 30%: Serious engagement problem
30-60%: Average performance
Above 60%: Strong engagement
Improving This Metric
Make rewards desirable: Are you offering what customers actually want?
Set achievable thresholds: Can typical customers realistically earn rewards?
Communicate progress: Remind customers when they're close to redeeming.
Simplify redemption: Make claiming rewards effortless.
Perkstar's push notifications are particularly valuable here. Sending "You're just 2 stamps away from a free coffee!" drives completions. Progress visibility in wallet cards keeps rewards top-of-mind.
3. Participation Rate (PR)
Participation Rate measures what proportion of your customers have actually joined your loyalty program.
The Formula
Loyalty program members ÷ Total customers = Participation Rate
Example:
800 loyalty program members
2,000 total customers
800 ÷ 2,000 = 40% participation rate
What This Reveals
A low participation rate means most customers aren't in your program at all. They're visiting, purchasing, but not enrolled—meaning you have no mechanism to track them, communicate with them, or systematically encourage their return.
Research suggests average consumers belong to numerous loyalty programs but only actively use a fraction. Getting them to join yours is the first hurdle.
Benchmarks
Below 30%: Enrollment problem
30-50%: Moderate enrollment
Above 50%: Strong enrollment
Improving This Metric
Reduce friction: How easy is signup? Perkstar's wallet integration (scan QR, save to phone) removes the barriers of app downloads and account creation.
Promote consistently: Is every customer asked? Are staff trained to mention it?
Offer immediate value: Sign-up rewards give reasons to join now rather than "maybe later."
Create visibility: Signage, counter displays, receipts—make the program impossible to miss.
If participation is low, you're leaving money on the table. Customers who would engage if enrolled are instead anonymous visitors you can't track or communicate with.
4. Repeat Purchase Rate (RPR)
Repeat Purchase Rate measures how many customers come back after their first purchase.
The Formula
Customers who made more than one purchase ÷ Total customers = Repeat Purchase Rate
(Usually measured over a 12-month period)
Example:
1,200 customers made more than one purchase this year
3,000 total customers this year
1,200 ÷ 3,000 = 40% repeat purchase rate
What This Reveals
This metric cuts to the core question: are people coming back?
A low repeat purchase rate might indicate:
Poor first experience
Weak value proposition
No reason to return specifically to you
Forgetting about you between potential visits
Competitors capturing subsequent purchases
Benchmarks
Varies significantly by industry:
Retail: 25-40% is typical
Cafés/restaurants: 35-50% is typical
Service businesses: 40-60% is typical
If your rate is below 20%, your loyalty program isn't doing its fundamental job.
Improving This Metric
The loyalty program itself should directly address repeat purchases—that's its primary purpose. But the program only works if people join and engage.
Focus on:
Getting first-time customers enrolled immediately
Following up after first purchase (welcome message, next-visit incentive)
Creating reasons to return (progress toward rewards, exclusive offers)
Staying top-of-mind between visits (push notifications, birthday rewards)
5. Loyal Customer Rate (LCR)
While Repeat Purchase Rate measures whether customers come back at all, Loyal Customer Rate measures how many become genuinely loyal—typically defined as purchasing four or more times per year.
The Formula
Customers with 4+ purchases ÷ Total unique customers = Loyal Customer Rate
(Usually measured over a 12-month period)
Example:
400 customers made 4+ purchases this year
3,000 total unique customers
400 ÷ 3,000 = 13.3% loyal customer rate
What This Reveals
This identifies your core base—the customers who are truly committed rather than occasional visitors. These are the customers who:
Generate disproportionate revenue
Cost least to serve (no acquisition cost)
Are most likely to recommend you
Are most forgiving when things go wrong
A low loyal customer rate means you're surviving on a stream of one-time or occasional visitors rather than building a foundation of regulars.
Benchmarks
Below 10%: Limited true loyalty
10-20%: Moderate loyalty base
Above 20%: Strong loyal customer foundation
Improving This Metric
Move customers from occasional to loyal through:
Recognition: Acknowledge frequent customers. Know their names, their orders, their preferences.
Escalating value: Make being loyal increasingly rewarding. Tiered benefits, milestone rewards, VIP treatment.
Emotional connection: Birthday rewards, surprise treats, community building.
Habit formation: Consistent experience, convenient locations/hours, rebooking encouragement.
Your loyalty program provides the structure for this progression—tracking visits, triggering rewards at milestones, enabling personalised communication.
6. Active Engagement Rate (AER)
Active Engagement Rate measures how many of your loyalty program members are actually using the program—not just signed up and dormant.
The Formula
Members who earned stamps/points in last 90 days ÷ Total members = Active Engagement Rate
(Timeframe varies by business type—90 days works for most)
Example:
500 members earned at least one stamp in the last 90 days
800 total members
500 ÷ 800 = 62.5% active engagement rate
What This Reveals
This is the reality check metric. You might have 1,000 members, but if only 200 are active, you effectively have a 200-person program with 800 dormant accounts.
Low active engagement indicates:
Rewards feel unattainable
Rewards aren't desirable
Communication has dropped off
Customers forgot about the program
The experience didn't meet expectations
Benchmarks
Below 40%: Significant dormancy problem
40-60%: Moderate engagement
Above 60%: Strong active participation
Improving This Metric
Re-engagement campaigns: Reach out to dormant members with incentives to return. "We've missed you—here's a bonus stamp to welcome you back."
Progress reminders: "You're close to a reward!" messages motivate re-engagement.
Birthday and anniversary outreach: Annual touchpoints that reach even dormant members.
Surprise rewards: Unexpected rewards for previously active members who've gone quiet.
Perkstar's lapsed customer campaigns automate this—set up once, and dormant members receive re-engagement messages automatically based on inactivity periods you define.
Putting Metrics Together: The Dashboard View
No single metric tells the whole story. Together, they reveal a complete picture:
Metric | What It Measures | Low Score Indicates |
|---|---|---|
Customer Retention Rate | Keeping customers over time | Churn problem |
Redemption Rate | Claiming earned rewards | Unappealing or unreachable rewards |
Participation Rate | Program enrollment | Signup friction or promotion failure |
Repeat Purchase Rate | Coming back at all | Weak value proposition or forgetting |
Loyal Customer Rate | Becoming truly loyal | Failure to deepen relationships |
Active Engagement Rate | Using the program | Dormancy and disengagement |
A healthy loyalty program shows:
High participation (most customers enrolled)
High active engagement (enrolled members using it)
High redemption (rewards being claimed)
High repeat purchase (customers returning)
Growing loyal customer base (deepening relationships)
Strong overall retention (keeping customers long-term)
Common problem patterns:
High participation, low engagement: People join but don't participate. Improve rewards, communication, and attainability.
High engagement, low redemption: People earn but don't claim. Improve reward appeal or simplify redemption process.
Good metrics, low retention: Program works but customers still leave. Look at core product/service issues beyond the loyalty program.
Tracking These Metrics
Digital loyalty platforms make tracking easier than paper ever could:
Automatic data capture: Every stamp earned, every reward redeemed, every member action is recorded.
Dashboard visibility: See key metrics at a glance without manual calculation.
Trend tracking: Monitor changes over time to see if improvements are working.
Segment analysis: Compare metrics for different customer groups.
Perkstar's analytics dashboard provides visibility into program performance—member counts, activity levels, redemption patterns—without requiring manual tracking or complex spreadsheets.
Getting Started
Ready to measure (and improve) your customer loyalty?
Establish baselines: Calculate each metric for your current situation.
Set goals: What improvements would you consider success?
Identify weak spots: Which metrics need the most attention?
Take action: Implement changes targeting your weakest areas.
Track progress: Monitor metrics over time to see impact.
Perkstar's 14-day free trial gives you access to analytics alongside all program features—so you can start measuring from day one.
Start your free trial at Perkstar →
What gets measured gets managed. Start measuring your loyalty rates, and you'll finally know whether your program is working—and how to make it better.
