How is your loyalty programme going? A framework for a loyalty programme performance indication system

Abstract

One of the root causes of the failure of membership programmes introduced by many companies is the lack of a systematic performance evaluation framework that can design, monitor and evaluate membership programmes tailored to the company’s own circumstances. This paper proposes a loyalty programme performance evaluation framework called MemPIS to help use the loyalty programme as a strategic platform for digital customer management and to provide a standard for optimising a company's loyalty programme. Using the MemPIS framework, this paper emphasises profitability, stability, growth potential and activeness of membership when evaluating programmes from a financial perspective, and suitability of tier design, reward design, point design and membership operation for the evaluation of programmes from a non-financial perspective. After developing candidate evaluation indicators and measurable matrixes for each evaluated subject, these are applied to a Korean cosmetics company to test the practical validity of the research and to suggest improvements to the membership programme to the company. Weights for all evaluative perspectives, subjects and indicators evaluated were calculated through AHP analysis. This research found that MemPIS can not only reveal the problems of a company's membership programme, but also suggest directions for improvement in the future.