A recent study by KPMG found that the biggest issue members have with their loyalty programs stems from trying to exchange points for rewards.
And yet getting rewarded is the reason members join loyalty programs in the first place. It is what determines a customer’s level of engagement and satisfaction with your program, and is key to generating real emotion. Your job is to ensure that emotion remains positive.
How to calculate your redemption rate
A loyalty program’s “redemption rate” represents the exchange of rewards. It is the percentage of points issued (including deactivated points) that have been exchanged for a reward.
Calculating the redemption rate is simple:
Number of points exchanged ÷ Number of points issued
It’s important to consistently measure and follow your redemption rate. This will provide you with an indication of how engaged your customers are, as well as how well your program attracts new members.
When you run a loyalty program, you need to view the exchange of points as an opportunity to create more engagement, and not as a cost centre. In fact, members who exchange points for rewards tend to spend more on average than those who don’t.
Boost your redemption rate
1. Facilitate the redemption experience
The first rule for ensuring a good redemption rate is simplicity. That means avoiding complex procedures, restrictive rules, and technical difficulties.
Make things easy for members by allowing them to exchange rewards as part of the purchase process. Avoid having to issue coupons or use other intermediary exchange mechanisms. Don’t hesitate to set a minimum amount for exchanges, since this will give the exchanged reward added value. Just be sure that the minimum amount still allows members to access a reward.
You must also be clear in your program presentation. Clearly indicate the number of points needed to earn a reward, and put this information upfront. Members are motivated by a clear goal they can work towards.
2. Offer exciting rewards
Once you’ve ensured a simple exchange process, you need to come up with rewards that are worth earning. Remember that being rewarded is why members join loyalty programs. The less worthwhile the rewards, the less involved your program members will be.
Be sure to offer a variety of rewards, instant rewards, and rewards at different value levels. Members are looking for flexibility and the ability to select something that’s of interest to them—whether that’s through payment with points, exchanging for goods or services, a selection of experience-based rewards, or partner offers. To see what works, you can always survey members and measure the success rate of the various rewards you offer.
3. Encourage members to exchange their points
Bond Brand Loyalty published a study stating that 57% of members do not know how many points they have in any given loyalty program, and 38% do not know the value of those points.
Let members know their point balance as well as what rewards are available to them on a regular basis in all your communications. You can also set up campaigns designed to communicate point balances and encourage an exchange for rewards. If your program is available online, make sure a member’s point balance is clearly displayed on every page and include reminders in the purchase process.
Offering points has little value on its own. To optimize your program’s performance, you need to invest in marketing initiatives. Measure and follow your redemption rate, and be ready to act when it comes to keeping your program exciting and your members engaged. Your ROI will thank you for it.