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They’ve Earned Points. Do They Use ‘Em?

December 13, 2016

Is there room to improve your loyalty program’s redemption rate? What’s a healthy benchmark in this area? Here are three ways to move the needle.


By Alex McEachern

For loyalty program operators, redemption rate is a metric that tends to be shrouded in mystery. Do you know how to measure it or tell if it’s good or bad?

Loyalty members become hooked on a program when they feel the positive emotions of obtaining a reward, so redemption rate – the number of points redeemed for a reward divided by the total points issued – is an excellent way to check on the health of a program. Program enrollment and engagement are two very different metrics, and the redemption rate can illustrate whether members are actually using your program.

A “good” redemption rate depends on a ton of factors – industry, location, age of the program and much more. Sweet Tooth clients in the upper tier enjoy a redemption rate of 21%, which is a good benchmark to chase. For programs with redemption rates under 20%, there is definitely room for improvement; here are three tips to help boost it.

1. Offer more ways to earn points. The average Sweet Tooth program offers three ways to earn rewards — usually points for registrations, purchases and referrals. However, programs with the best redemption rates offer an average of 5.5 ways to earn points.

These additional ways to earn are even more effective if they focus on increasing brand touchpoints and exposure. The best way to do this is with rewards that focus on social media.

2. Reward for social engagement. Awarding points for social follows has two key benefits. First, it creates more opportunities for customers to be exposed to your brand if they follow all your channels. Second, if they like what they see, they can share it with their network of friends.

This increase in exposure and potential audience has an impact on a loyalty program’s redemption rate. Sweet Tooth programs that reward points for social follows see an increase in their average redemption rate.

Programs that reward for Instagram follows have an average redemption rate that is 7.76% higher than the average across all stores. The redemption rate for programs that reward for a Facebook like are 12.26% higher, and programs that reward for a Twitter follow are 16.39% higher.

3. Offer more ways to redeem. A standard loyalty program allows members to turn points into a discount, but that there are other types of rewards that make sense, too.

Not everyone is motivated by the same thing. Some people are strongly motivated by financial incentives (discounts, coupons, etc.), but others prefer experiences or praise. Offering more than one type of reward increases the likelihood of having something that appeals to every member. This helps boost redemption rates and overall engagement.

Besides straight discounts, programs can reward customers with free shipping, store credit and experiential rewards such as a one-on-one with the company CEO or a celebrity that endorses its product.

More redemption, more engagement

Just because a program has strong enrollment doesn’t mean it is effective. By measuring redemption rates, program operators can determine whether members are actually using their points on rewards (and engaging with the program).

To learn more about how other factors like country and program age impact redemption rates, download Sweet Tooth’s free report.

Alex-McEachern

Alex McEachern is a customer-loyalty specialist
at Sweet Tooth Rewards and a blogger on the
e-commerce industry, customer retention
and consumer loyalty.  Ask him questions
on LinkedIn or Twitter.

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