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How to Improve Loyalty Program Redemption Rates

Crickets Loyalty Program Sign up
Source: Cricket Rewards

How to Improve Your Average Loyalty Redemption Rate

Points are often earned but not redeemed. There are plenty of loyalty programs out there, and some have higher redemption rates than others. When you offer points, it’s essential to look at your redemption rate to see if the program is compelling and your members are actively earning and “burning” points. If your customers are earning points but aren’t redeeming them, there could be a problem.

Redemption Rate Definition

The redemption rate for a loyalty program is the percent of points that have been issued and that were redeemed for rewards. Average redemption rates for loyalty programs are impacted by several factors, including industry, location, ease of redemption, overall program awareness, the perceived value of rewards, the age of your loyalty program, and more.

loyalty program redemption rate definition

Redemption Rate Formula

Calculate your redemption rate with these three easy steps:

  1. Determine the total number of points that have been spent. (This is the total number of points that have been redeemed for the entirety of your program.)
  2. Determine the total number of points issued ever, including expired points.
  3. Divide the total number of points that have been spent by the total number of points issued.redemption rate formula

When Customer Insight Group audits loyalty programs, we find that there are two main drivers of low redemption rates: earning and redeeming issues that need to be addressed. For earning issues, the earning rate, frequency of transactions, and the point tiers required per rewards impact how easily a customer earns a reward. As a benchmark, your high-value, loyal customers should be able to redeem for a reward within 3-6 months, while your next most valuable should be able to redeem within 6-9 months.

For redemption problems, we see three issues: lack of program awareness among participants, difficulties with the redemption process, and overall perceived value of the rewards.

how to improve loyalty program results

5 Tips to Help You Improve Your Redemption Rate

A low redemption rate is often the result of a low participation rate, the solution is to build a program that gets people more excited to engage. Here are five tips to increase member participation and you improve redemption rates:

  1. Offer different ways to earn points
  2. Offer a variety of rewards
  3. Provide on-site and instore cues
  4. Reward customers for social engagement
  5. Update customers

Zappos Loyalty Program Earn Points
1. Offer Different Ways to Earn Points

Don’t just reward for transactions. Reward your customers for engagement, interactions, social sharing, health goals, and more. You may be surprised by how your redemption rate increases when your customers feel valued for all that they do.

Healthy Lifestyle Rewards for AARP Members
Source: AARP

metrics to measure customer loyalty

2. Offer A Variety of Rewards

Brands need to provide consumers with choices and control so that they have an excellent experience that is frictionless so that they can extract relevant and meaningful value out of the brand relationship.

Redemption Offers for Rewards Program
Source: Wells Fargo

77% of consumers want personalized rewards, and 70% of consumers want programs to partner with other brands that are complementary to their consumers’ lifestyles to increase ways to earn. From cashback or rebates to experiential rewards to free products, consumers want the flexibility to pick the rewards that meet there needs.

Members Want Personalized Rewards
Source: HelloWorld Loyalty Barometer Report, December 2017

loyalty program points and shopping cart
3. Provide On-Site and Instore Cues

Some of your shoppers may be guilty of forgetting that you have a loyalty program. They may have forgotten that they signed up for it and that they earn points every time they shop in the store. Provide various on-site cues to remind them.

Zappos Rewards Program on Website
Source: Zappos.com

By keeping your program in front of shoppers, you can make sure that people are not only earning but also redeeming the points.

Ulta Rewards Sign-up Instore
Source: Ulta Rewards

4. Reward Customers for Social Engagement

Social engagement has two benefits. The first is that your customers will be exposed to more things regarding your brand when they follow you on Facebook, Instagram, and the other social channels you are involved in.

Yankee Candles Loyalty Program Rewards Social Enagement
Source: Yankee Candle

The second is that when people share various aspects of your social posts, it will be shared with their network of friends.

Yankee Candle Customer Social Share
Source: Yankee Candle’s Facebook Timeline

Talk about your loyalty program and invite people to share what they have redeemed for. As people see others discuss redemption, it will trigger a reminder for people to redeem their own points.

5. Update Customers

Consider using an email program that coincides with your customer database. This will allow you to provide updates to those within your loyalty program so that they know how many points they have. Each time you send out a newsletter, their current balance of reward points may be found in the side panel.

Customer Loyalty Email Sample for Points Program
Source: American Airlines

When it comes to average redemption rates, loyalty programs hover around 13.67%. If your rate is lower, you will want to start implementing some of the different ideas into your loyalty program.

Updated: April 27, 2020

Sallie Burnett
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