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Loyalty Rewards, ROI, Customer Experience

Invest in growing your audience size or optimize your conversation rate?

Posted on April 4, 2023

You're underinvesting in adding existing customers to your marketing database

Let's face it, you've been optimizing your campaigns for years and squeezing more juice out of those same campaign and channels is getting harder. Even the best marketers are looking at ways to get just a couple of percentage points increases in their campaign conversion rates, but what if they instead invested in a little bit more attention into increasing member signups and retaining them to grow their overall audience.

Let's take a closer look at how increasing the audience database by 3x can have a more significant impact on revenue than improving the conversion rate by 50%. We'll use the following metrics as our base:

  • Value per conversion: $12
  • Base audience size: 5,000 people
  • Base conversion rate: 5%

Scenario 1: Increasing Audience Size by 3x

In this scenario, the brand triples its audience size from 5,000 to 15,000 people. The conversion rate remains constant at 5%, and the value per conversion is still $12.

Revenue generated:

  • Audience size: 15,000
  • Conversion rate: 5% (0.05)
  • Value per conversion: $12

Revenue = 15,000 * 0.05 * $12 = $9,000

Scenario 2: Improving Conversion Rate by 50%

In this scenario, the audience size remains the same at 5,000 people, but the conversion rate improves by 50%, increasing from 5% to 7.5%. The value per conversion is still $12.

Revenue generated:

  • Audience size: 5,000
  • Conversion rate: 7.5% (0.075)
  • Value per conversion: $12

Revenue = 5,000 * 0.075 * $12 = $4,500

Comparing the Results

Comparing the revenue generated from both scenarios, we see that increasing the audience size has a more significant impact on revenue:

  • Scenario 1 (Increased Audience Size): $9,000
  • Scenario 2 (Improved Conversion Rate): $4,500

By tripling the audience size, the brand generated twice as much revenue as by improving the conversion rate by 50%. This example illustrates the potential benefits of focusing on expanding the audience for a marketing campaign rather than solely on improving conversion rates. Some brands may feel they have already maximized their reachable audience, but with the average loyalty adoption rate at 10% for a restaurant's loyalty program,  and many Spendgo-powered loyalty programs with a 65%+ adoption rate, there is definitely room for most brands to grow their audience size.   

Learn more about loyalty program adoption rates