Redemption makes or breaks a loyalty programme

28 January 2016
When it comes to the efficiency of any loyalty programme, redemption is absolutely critical.

Too many loyalty programmes have experienced low redemption rates where points were cumulated but never used, leading to the waste of unredeemed loyalty currency and the disengagement of costumers.

When customers have difficulties to redeem, do not understand the redemption process, or get tired of it, great redemption promises not being fulfilled lead to negative feeling regarding the programme.  Over time, customers disengage and even forget about the programme.

In summary, bad redemption processes lead to the failure of the programme.

As redemption of rewards remains the reason why customers sign up in the first place in a programme, financial organizations have no other choice than to facilitate redemption processes in order to ensure a good redemption rate and sustainability of their loyalty programmes.

To avoid going down the path from poor redemption to disengagement, a few guidelines can help in making redemption a success.

Enabling redemption as soon as possible

The loyalty programme has to be designed in such way that it doesn’t take too long for the customer to be rewarded and to enjoy redemption. The longer it takes for redemption to kick in, the higher the risk of losing customers.

Providing various options for redemption

Several seamless and user-friendly redemption options have to be proposed to members of the loyalty programme: exchanging points for goods, flights, hotels nights, converting points for cash,  getting a discount etc…. Redemption should be easily available on various channels (Web catalogue and payment channels such as POS, mPOS, e-commerce) and easily accessible when customers want to redeem.

Making sure the perceived value of the reward is higher than its actual cost

The more redemption offers look attractive, the more customers redeem and stay engaged in the programme. Maximizing the perceived value of a redemption offer compared to its actual cost provides a double benefit to financial institutions: they engage more effectively their customers in the programme while ensuring a positive ROI is attached to each proposed offer.

Diversifying the rewards to increase the attractiveness of the programme

Customers have a special interest for programmes that propose varied types of rewards. Financial institutions can collaborate with external partners to design a range of diversified offers that go beyond what the bank could propose on its own. For example, a bank can partner with an airline to enable the exchange of points against flight tickets. Proposing attractive and diversified rewards increase the chances of long-lasting engagement from customers.

Financial organizations who propose diversified and well perceived rewards, quickly and easily redeemable through various redemption channels increase their influence on their customers’ behavior, resulting in better customer satisfaction, higher engagement, more positive programme ROI and further decrease of liability of unredeemed rewards.