How to Improve Loyalty Program Redemption Rates


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.
Redemption Rate Formula
Calculate your redemption rate with these three easy steps:
- 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.)
- Determine the total number of points issued ever, including expired points.
- Divide the total number of points that have been spent by the total number of points issued.
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.
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:
- Offer different ways to earn points
- Offer a variety of rewards
- Provide on-site and instore cues
- Reward customers for social engagement
- Update customers

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.

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.

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.


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.

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

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.

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

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.

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
Filed under: Loyalty Marketing