Point redemption is the most important metric showing how well your loyalty program is performing. It tells you whether customers are engaging with your rewards offer and whether it’s of any value to them. 

If customers sit on their points and rarely spend them, it can mean that there’s something wrong with the rewards and they simply don’t find the value to be worth the effort. 

Also, unredeemed points represent a liability for your business which you want to avoid.

A good place to start analyzing point redemption is to calculate your point redemption rate.

How do you calculate the point redemption rate of your program?

Simply apply the following formula:

PR = total points redeemed / total points earned

This number should be higher than 20%.

If it’s lower than 20%, it means you need to rethink the point redemption strategy and tweak your offer to motivate people to spend their points. 

This guide shares 7 tactics you can try to increase your point redemption rate.

1. Point expiration

The most effective way to motivate customers to spend their points is to set a point expiration period. It may sound a bit cruel to take away points from customers, but when there’s an expiration date, customers are prompted to use them because of the fear of losing something they’ve earned. After all, nobody wants to throw away a discount. 

Bonus tip: Make sure point expiration is clearly communicated to customers. Wherever you’re displaying their point balance, make sure there’s a reference to the expiration date. This can be in their My account page, in the program widget or even in email marketing communications. 

2. Rewards expiration

Another common scenario merchants experience with point redemption is when customers spend points to obtain a reward but don’t actually use it. So now, instead of points, customers have discounts sitting in their account. This is not good for your repurchase rate, nor the point redemption rate. 

To motivate customers to use their rewards, try setting up a reward expiration date. The fear of missing out on a good discount will prompt customers to take action and place that next order. 

If you’re worried that this may not be the best customer experience, you don’t have to apply an expiration date to all rewards you offer in your program. Think of this as a push tactic for specific actions, such as prompting VIP users to use their welcome reward in a given time period. 

Or another example would be to set an expiration date on a super attractive reward aimed at increasing average order value, like “$25 off of orders over $100 - expiring in 10 days"

Bonus tip: Don’t forget to promote reward expiration as well. Make sure people are able to see this clearly everywhere they communicate with their rewards - in the program widget, in email marketing communications. 

3. Reward available notification

Don’t assume customers know what rewards they hold in their accounts and when they expire. Instead, make it a point to remind them of their assets. A reward available notification will motivate customers to come back to your e-store and check their account. 

Moreover, if you’ve enabled reward expiration too, your notification should indicate that as well to inspire prompt action.

4. Offer experiential rewards

Another tactic to experiment with to increase point redemption rate is to offer experiential rewards. This type of reward is attractive to both customers and merchants for a few reasons. 

Experiences tap into the emotional side of shopping and give people the sense that they’re getting something more from a brand than a discount. Essentially they’re inspired to spend their points because of how the reward they get makes them feel. Popular examples of this type of rewards are donations to a charity, invitation to a class, call from a specialist in the industry.

For merchants, experiential rewards don’t represent a huge liability, so it’s much easier to manage these from an accounting perspective. Plus, if the experience goes well, it adds to their brand reputation and social recognition.

5. Bonus point events

A bonus point event is a great way to motivate people to spend their points to buy from you.  Who doesn’t want to earn more points for their money than what they already do? 

Another benefit of bonus point campaigns is that customers can get to rewards faster and be more likely to obtain discounts and use them on an order. 

Also, a bonus point event is a great way to boost sales of a specific product or category of products. Check out Ulta Beauty’s example:

6. Multi-store point redemption

If you’re operating several businesses and you know your customers love the products from the different brands, you can utilize this to increase your point redemption rate. 

In such a scenario, customers’ point balance is like a “digital wallet” which allows them to choose where to spend their points. They also earn points from buying from the different brands which is a major earning possibility, and are also enjoying the luxury of a richer rewards offer.

As a result, point redemption is much faster and higher, as this type of engagement is fun and exciting for customers and brings much more value to them. 

Bonus tip: promotion is crucial for the effectiveness of this type of offer. Customers should be clear on the point balance number they see in their accounts as well as know where they can spend their points. Make sure you remind them of this consistently. 

7. Promotion of your rewards program

Don’t forget that the average buyer is enrolled in at least 18 rewards programs. So assuming that they’ll know about their assets in your store and think about what’s about to expire or not is a major mistake to make. 

Promotion of your rewards program is key for its success. Utilize all communication channels where your customers are and always make a reference to the program with every marketing asset you put out. 

A great way to do this is to add a reference to the customer point balance in every email marketing campaign you sent, reminding the customer of the points they have to spend. 

Also, occasionally it’s good to run specific email marketing campaigns about your rewards program; unleash your creativity to really give momentum to certain program offers, such as a limited time reward, or a bonus point event that runs for 2 days only.

Bonus tactic: Learning the why behind poor point redemption

If you're experiencing poor redemption rate and can't really figure out why, a good tactic to try is to simply ask your customers why aren't they spending their points.

You can run a survey via your email marketing tool to gather data and analyze what customers really want versus what they’re offered. 

Here’s how United Colors of Benetton does this:

Bonus tip: you can even incentivize survey completion with points!

Wrap up

Point redemption is critical for the success of a loyalty program. You should make it a top priority to devise a solid strategy to motivate point redemption. You can utilize different tactics to achieve this, but most important is to make sure customers understand the value of the offer, the offer is something that caters to their preferences and this is clearly and consistently communicated to them. Also, your program should change with time and market changes to always adapt to what customers want.