Guide 59 · Strategy
How to benchmark against competitors' loyalty programs
Benchmark what members can see: how fast they earn, what a point is worth, how long a first reward takes, tier thresholds and expiry rules. Collect these from each competitor's published terms, convert them into comparable figures such as value returned per $100 spent, and date every entry. Do not copy a competitor's earn rate into your own program; set yours from your own margins, because you cannot see how theirs is funded.
Loyalty program benchmarks come in two kinds: industry reports that average many programs, and your own comparison of the few competitors your customers actually weigh you against. This guide is mostly about the second, because it is the one you can act on. Looking at competitors’ loyalty programs is a normal part of designing your own. Members compare programs, so you need to know what they see elsewhere. The risk is that a benchmark turns into a template: the first number you see becomes the number you defend, and a design choice becomes a copy. This guide covers what to compare, how to make the numbers comparable, and which ones to leave out.
What to compare
What should a loyalty benchmark compare?
Compare what members experience and notice, not what happens inside a competitor’s finance department. A useful test for any number: would a member notice if it changed before their next purchase? If yes, it shapes expectations in your market and belongs in the benchmark. If no, it is part of the competitor’s hidden economics, and you cannot see it clearly enough to use it.
| Visible to members (benchmark these) | Hidden economics (derive your own) |
|---|---|
| Earn rate on a typical purchase | Gross margin behind the rewards |
| Value of a point at common redemptions | How much partners pay to fund points |
| Time to a first reward | Breakage assumptions |
| Reward choices and how easy redemption is | Points liability and how it is accounted for |
| Tier thresholds and benefits | Cost of delivering tier benefits |
| Expiry rules | Fraud losses and operating costs |
What you can see
Which numbers can you see from outside?
More than you might expect, because many programs publish their rules. Sephora’s Beauty Insider terms, for example, state that every member earns 1 point per dollar on Sephora merchandise, that 500 points can be redeemed for $10 off a purchase of $10 or more, and that Rouge members can redeem 2,500 points for a $100 Rouge Reward. VIB status starts at $350 of spend in a calendar year. Marriott Bonvoy publishes five elite tiers, starting with Silver at 10 nights a year. Tesco states that 150 Clubcard points become £1.50 in vouchers.
From published rules like these you can work out comparable figures. At Sephora, 500 points for $10 means a point is worth about 2 cents at that redemption, so a member who redeems that way gets about $2 back for every $100 spent. At the Rouge Reward, a point is worth 4 cents. The same program can therefore return different values depending on how members redeem, which is why a benchmark should record the most common redemption, not just the best one.
Join the programs yourself. Terms tell you the rules; membership shows you the emails, the app, the speed of a redemption and how often offers arrive. Make a few real purchases and redeem a reward, so you see the experience a new member has.
Sources for this section
Beauty Insider Frequently Asked Questions (sephora.com) F-SEP-01
Beauty Insider Frequently Asked Questions (sephora.com) F-SEP-05
Beauty Insider Frequently Asked Questions (sephora.com) F-SEP-06
Beauty Insider Frequently Asked Questions (sephora.com) F-SEP-02
Do not copy earn rates
Why shouldn’t you copy a competitor’s earn rate?
Because you see the output, not the engine. A competitor may offer a generous rate because its margins are wider, because a credit card partner pays for many of its points, or because it expects many points never to be redeemed. Copy the rate without that structure and you take on the cost without the funding.
Consider a hypothetical retailer with $50 million of tracked member revenue a year. Matching a competitor that returns 1 cent of value per dollar creates up to $500,000 a year in reward obligations before any breakage. If the retailer’s own margins support only 0.4 cents per dollar, about $200,000, the benchmark has added $300,000 of cost that nothing in the competitor’s published terms could have warned about. The benchmark tells you what members expect; your own program P&L tells you what you can afford.
Build the benchmark
How do you build the benchmark?
- Choose five to eight programs. Include direct competitors and one or two indirect ones that set expectations for your customers.
- Collect from primary sources. Use published terms, FAQ pages and the member experience. Record the URL and the date for every figure.
- Normalize. Convert each program into the same units: value returned per $100 spent at the most common redemption, months to a first reward for a typical customer, spend or visits needed for the first tier, and expiry terms in plain words.
- Note the conditions. Record exclusions, minimum redemption amounts and channels where points do not count. They often matter more to members than the headline rate.
- Add what members say. Reviews, social posts and your own customer surveys show which features members actually notice.
Keep the benchmark in one shared table so the team argues from the same numbers. A row per program and a column per measure is enough:
| Program | Value per $100 (common redemption) | Months to first reward | First tier threshold | Expiry rule | Main exclusions | Source and date checked |
|---|---|---|---|---|---|---|
| Competitor A | ||||||
| Competitor B | ||||||
| Your program |
Add a short note on anything that does not fit the columns, such as a paid tier or a partner that funds most of the rewards, because those details explain why a number looks the way it does.
Turn it into choices
How do you turn a benchmark into design choices?
For each visible feature, decide on a position: match, beat or differ. You do not need to match on everything. If you cannot afford a competitor’s reward value, you might offer a faster first reward, a lower redemption threshold, no expiry while a member stays active, or service benefits that cost you little but members value.
Keep observation and adoption separate. Each benchmark figure should enter your design only after it has been costed against your own margins. If the team finds it hard to look at a competitor’s earn rate without proposing to match it, record the benchmark in a separate document and bring it into design reviews only as context. Then use your own data to set how much a point is worth and how fast members earn.
Industry reports
Should you use industry benchmark reports?
Published benchmark reports answer a different question: how programs in general perform on measures such as active member rate, redemption rate or revenue per member. They can be useful context, but check three things before you compare.
- Who was measured. Many reports are produced by vendors or agencies from their own client base, or from a consumer survey. Neither is a random sample of programs like yours.
- How the measure is defined. “Active member” or “redemption rate” can be calculated in several ways. A difference in definition can look like a difference in performance.
- When it was measured. A figure from a few years ago may describe a market that has since changed.
If a report passes those checks, use it as a sense check, not a target. Your own trend on the metrics you track first is usually the better baseline.
Keep it current
How often should you update it?
Review the benchmark at least once a year and whenever a major competitor launches, relaunches or changes its program. Programs change their rules, sometimes quietly, so recheck each source rather than updating only the figures you remember. Keep old versions: a record showing competitors steadily lowering reward values or raising tier thresholds tells you more about where the market is heading than a single snapshot does.
More answers
Frequently asked questions
Which competitors should a loyalty benchmark include?
The programs your customers actually compare you with: direct competitors, plus a few indirect ones that compete for the same spending or set expectations, such as a large retailer in an adjacent category. Five to eight programs is usually enough to show the range without becoming a research project.
How do you compare programs with different point values?
Convert everything into a common unit, such as the value returned per $100 spent at the most common redemption, and the time a typical customer needs to reach a first reward. Comparing points per dollar alone is misleading, because a point can be worth very different amounts in different programs.
Should we match a competitor's earn rate?
Not automatically. A competitor may fund its rewards from wider margins or from partners who pay for points. Check what the rate would cost you at full redemption. If you cannot afford to match it, compete on something members value that costs you less, such as faster rewards or better service benefits.
Can you benchmark a competitor's breakage or liability?
Only where they publish it, for example a listed company that reports deferred revenue for its program. Even then, the figure reflects their program rules and accounting choices. Derive your own breakage and liability assumptions from your own data.
Are industry loyalty benchmark reports useful?
For context, yes; as targets, rarely. Most are published by vendors or agencies from their own clients or a consumer survey, so the sample decides the result. Read how each figure was measured before comparing it with your own, and prefer your own history as the baseline.
How often should you update a loyalty benchmark?
Review it at least once a year and whenever a major competitor relaunches or changes its program. Keep the dated history, because the direction of change, such as competitors cutting reward values, is often more useful than a single snapshot.
Sources
- F-SEP-01Beauty Insider Frequently Asked Questions (sephora.com)
- F-SEP-05Beauty Insider Frequently Asked Questions (sephora.com)
- F-SEP-06Beauty Insider Frequently Asked Questions (sephora.com)
- F-SEP-02Beauty Insider Frequently Asked Questions (sephora.com)
- F-MAR-01Membership Levels & Benefits (marriott.com)
- F-TES-02How Clubcard vouchers work (tesco.com)