The ROI of Loyalty
- The Treue Team
- Jan 9
- 3 min read
Updated: Jan 22
The ROI of Loyalty - How to Calculate the Value of One "Regular"
Ask any cafe or retail owner in Auckland or Wellington what their biggest stress is, and the answer is usually "Cash Flow."
When money is tight, the natural instinct is to hunt for new customers. You run Facebook ads, put out a chalkboard sign, or print flyers. You focus on acquisition.
But while you are busy trying to get new people through the door, you are ignoring the "leaky bucket" of people walking out the back.
This article isn't about "brand love" or "community." It’s about the hard math of your business. We are going to calculate the customer lifetime value for a small business in NZ to prove that you don't need more customers, you need better ones.
Is a loyalty program actually profitable, or just a discount?
Many owners view loyalty software as just another monthly expense, like their EFTPOS rental or internet bill. They think, "Why should I pay for software just to give away free product?"
This is a fundamental misunderstanding of the economics of retention.
According to research by Bain & Company, increasing customer retention by just 5% increases profits by 25% to 95%.
Why? Two reasons:
Zero Acquisition Cost: A new customer costs money to get (ads, signage, discounts). A regular customer costs $0 to get back through the door.
Higher Spend: Regulars don't just visit more; they spend more. They are comfortable with you, so they are more likely to buy the pastry, the upgrade, or the retail product.
The Pivot: Stop viewing loyalty as a "discount expense." View it as a profit multiplier.
How much is one 'Regular' actually worth compared to a Walk-In?
Let’s look at the numbers side-by-side using a typical NZ cafe scenario.
Customer A: The Walk-In
They buy one flat white ($5.50).
They never return.
Total Value to Business: $5.50
Customer B: The Regular (Powered by Loyalty)
They buy one flat white ($5.50).
Because they are earning points, they visit 3 times a week.
They do this for 48 weeks a year.
$5.50 x 3 visits x 48 weeks = $792.00 / year
That is not a small difference. One "Regular" is worth 144x more than a Walk-In.
The Kicker: This doesn't even account for the "Upsell Effect." Data shows that loyalty members spend 12-18% more per transaction because they are chasing their next reward.
How do I calculate Customer Lifetime Value (CLV) for my business?
You don't need a degree in accounting. You just need this simple formula:
(Average Order Value) x (Purchase Frequency per Year) x (Average Customer Lifespan)
Let’s apply this to a Barber charging $40 per cut.
Scenario A: Without Loyalty (The Drifter)
Visits 4 times a year (whenever they remember).
Churns after 1 year.
CLV: $40 x 4 = $160 Total Value.
Scenario B: With Loyalty (The Member)
Visits 6 times a year (to maintain their look/points).
Stays for 3 years because they are "locked in" to your program.
CLV: $40 x 6 visits x 3 years = $720 Total Value.
By simply moving a customer from "Scenario A" to "Scenario B" using a loyalty tool, you have increased their value by 450%.
Why shouldn't I just use paper punch cards?
If the math is so good, why not just use paper cards? They are cheap, right?
Paper cards have a massive Blind Spot. They track redemptions (your losses), but they don't track spending (your gains).
You don't know who your customers are.
You don't know if they have stopped visiting.
You can't email a paper card to say "We miss you."
A digital loyalty system gives you the data to wake up a "sleeping" regular before they churn to a competitor. It turns a passive "hope they come back" strategy into an active "bring them back" engine.
Conclusion: Do the Math
If you have 100 "Walk-In" customers, you make $550. If you turn just 10 of them into "Regulars," you make $7,920.
The ROI of a loyalty program isn't about giving away free stuff. It's about using math to build a stable, profitable asset base for your business.
Ready to stop leaving money on the table? Treue helps you identify, retain, and grow your most valuable customers. You can read more about Treue here, or, Start your free trial today.
