Loyalty Blogs

Many customers are unaware that they have earned loyalty points redeemable for a wide range of rewards. To spend or not to spend your loyalty points is a big question. Is it bad if your customers are just hoarding points and not spending any of them? You may think they will either spend them or the company will save on its reward costs. However, the reality is something else. Program members keeping their reward points unused is not a good sign and may hurt your brand financially, leading to a loss of opportunities.

In this blog, we will learn about the reasons why it is good for your brand when customers spend their points earned from your Customer Points System and the best tips to help them keep redeeming.

Reasons Why Customers Don’t Spend Their Reward Points

Undoubtedly, it is true that customers usually don’t spend half of the loyalty points they earn due to many reasons, which may even lead to points liability and fraud. It can be a difficult task to keep track of how many unspent points are currently left unattended at customers’ accounts.

A report by Gartner shows that more than $140 billion worth of unspent customer reward points in the U.S. whereas the total amount of unspent points across the globe is worth $48 trillion. Antavo’s loyalty report 2023 says that 48.6% of points are redeemed by the loyalty program members, which also means every second point customers earned will go wasted.

Here are some of the reasons why customers are not spending their reward points-

· Higher costs of rewards that customers need.

· The rate of earning reward points is too low.

· No desired rewards available in the catalog

· Less engagement or failure of updates in the existing loyalty program

Know Why Unredeemed Customer Reward Points are a Bad Sign for Your Brand

Though getting a 100% redemption rate in the reward system is impossible, your brand is making a big mistake if you just let your customers sit on their points.

Listed below are the reasons why too many unredeemed points can be a headache for your business-

– Higher Points, Higher Liability

Though customer reward points cannot be spent anywhere, they can be considered a specialized currency, which customers can use to claim rewards or coupons with a real-world cost on your end. Whether your customers claim 2 coupons in a month, each worth 10 dollars or redeem 10 coupons at once after years of storing points, it can impact your business bottom line differently.

– Taking points back leaves customers disappointed

Another reason is the problem associated with giving customers their loyalty points and taking them back without backlash. Once customers earn the points, they believe they are theirs, and losing points due to expiry can be a big no, leading to a bad customer experience. Customers may even abandon the loyalty program and break a connection with the brand as well.

– Unredeemed Points lead to security threats or fraud

Fraud in loyalty programs happens mainly when hackers attack accounts full of unspent reward points. No matter what kind of fraudulent activity i.e., a crack in your security, program members’ negligence, or anything, program members will expect you to return their lost accounts & loyalty points.

If your brand is unable to return customers’ accounts, they might turn their back on your brand forever.

– Difficulty in Points redemption for Coalition Programs

Managing points liability is important for coalition & umbrella loyalty programs. If we talk about the mall loyalty programs, tenants buy the loyalty points that must be handed out to customers for purchases. The mall will finance the rewards through which customers can buy using points, compensating the tenants for their investment.

The cycle of clearing and settlement will break down if program members don’t use points, as the tenant’s money will sit in the circle indefinitely hampering the relationship between the mall & tenants.

– No Point in Having a Program If Customers Not Using

The main purpose of having a loyalty program is to refine customers’ relationships and views of the brand, which is only possible with regular interactions. Low loyalty program usage by your customers will not help move KPIs and increase ROI.

Without a healthy point economy, the loyalty program will only add costs as customers not spending their loyalty points will either churn or never become loyal buyers.

Quick Tips to Reduce Points Liability

Offering a tangible value exchange for customer reward points is the key to winning customers’ hearts and making them stay engaged for a long time. Before hiring experts to make use of reliable points or Gift Card Loyalty Management Software, let’s check out some of the best ideas you can implement to reduce points liability and keep both customers and the brand happy.

– Regular Reminders About Point Expiration

– Offer a Wide Range of Rewards Option

– Deliver Branded Merchandise & Experiences

– Let Customers spend points on special events

– Incentivize Repeatability with Gamification

– Work with Partner Brands for Discounts, Gifts & Deals

– Allow Point Redemptions to Charity

– Offer VIP Privileges to Most-Loyal Ones

– Use Points Swapping to combine different loyalty currencies

– Let Customers Bid on Unique Experiences

By following simple practices like sending reminders, offering a broader rewards option, using gamification, exclusive experiences and more, your brand can encourage customers to redeem their loyalty points. This will not only unlock better savings but also help in strengthening customer bonds with brands.

Final Takeaways

As we can see, unredeemed loyalty points are a part of any loyalty program, brands must take the initiative and act to encourage customers for higher redemption. No matter how good the program is, there will always be some customers that won’t redeem their points. Ensure that you go through the points stated above to help encourage more and more customers to redeem their points.

By paying more attention to details and implementing the right loyalty solution, there will be a lesser chance of points liability or fraud. However, customer expectations are evolving every year, which is why your program must stay on top of the loyalty market to make it a success.

Novus is a great Loyalty Program Offers Management Platform that helped several brands across the globe to win the game of customer loyalty with solutions aligned with the latest technologies. Connect with our experts to transform your dream loyalty concept into life and witness a higher redemption rate.