Rewards That Work: The Power of Easy and Quick Redemption

Rewards are psychologically powerful tools for influencing behavior. People offer rewards to encourage strangers to help search for their lost items or pets. Grade schoolers will study extra hard on their spelling tests to earn a bonus recess. And my picky eater 8-year-old would still refuse to touch vegetables if it weren’t for the promise of dessert as a dinner incentive.

For years, businesses have been harnessing the power of rewards to earn the attention of their customers and members. And with good reason. They work.

More businesses than ever before are now offering rewards programs. Collectively, the results show that rewards are a highly effective way to influence customer behavior. Depending on how the rewards are structured, they convince members to spend more, spend more often, pay an annual membership fee, refer their friends and/or keep coming back.

However, members have limited attention to give, with more businesses than ever competing to capture it. In fact, on average, consumers are signed up for 17.9 loyalty programs, but are active in only half of them.

The question becomes: How do you keep members engaging in your rewards program for years to come?

A closer look reveals that while high-value rewards are important, members prioritize the ability to redeem them quickly and effortlessly.

The Impace of Rewards: Stats That Prove Engagement & Retention

Rewards programs hold incredible potential to boost membership engagement and customer retention, as shown by the impressive statistics below. While consumers love the promise of rewards, they quickly lose interest if those rewards are difficult to redeem or take too long to earn. Let’s explore what works—and what doesn’t—when it comes to keeping members engaged.

• 81% of consumers who participate in a brand’s rewards program purchase from them more frequently. (Merkle)
  
• 73% of consumers modify the amount they spend to maximize reward collection. (Bond)
  
  
• 67% of consumers report having a more positive opinion of a brand due to their loyalty program. (EY)
  
  
• 79% of consumers are more likely to recommend brands with solid loyalty programs and 85% of consumers saying they are more likely to continue buying from the brand. (Bond)
  
  
• The lifetime value of members who have redeemed points at least once is 6.3 times higher than those who never redeemed. (Antavo)

Clearly, the mere promise of a reward is enough to get consumers to give your business a try. However, attention is fickle. It’s just as easy to lose as it is to gain—perhaps even easier—as evidenced by statics like these:

• 42% of consumers feel it takes too long to earn a reward. (Merkle)
  
  
• 71% of consumers are turned off by rewards they perceive as low-value. (Snappy)
  
  
• 71% of consumers dislike complicated procedures for rewards redemption. (Snappy)

The answer is clear. Members should be able to enjoy their promised rewards quickly (preferably instantly) and with little (preferably no) effort required of them. Right?

If that’s true, why do so many businesses require members to jump through hoops to earn their reward? Why are businesses constantly devaluing their points? Why is the average time commitment to redeem 12, 18, even 24 months?

To understand, let’s back up and look at the history of rewards programs.

The Falling Value of Rewards Currency

Many rewards programs follow an “Earn and Burn” model. In this model, program members first EARN loyalty currency (points, miles, cash back, etc.) by performing designated behaviors (like spending money on purchases). Then, once they have accumulated enough, they can BURN them by redeeming for their chosen reward (most commonly a selection of merchandise, gift cards and/or travel service).

Kelly Passey, President of Access Development, works closely with businesses of all types that are facing the hard decision to devalue their costly rewards programs. “If a member redeems for a $25 gift card, the business pays pretty close to $25 to provide that reward,” Passey said. “If a member redeems for a $200 night stay at a hotel, the business basically pays $200 for it. Traditional rewards come with a heavy price burden and at the end of the day, businesses need their rewards programs to stay profitable.”

Many businesses have been devaluing their reward points in recent years, and more are expected to follow suit.

When a program devalues its rewards, it lowers the purchasing power of each point. The end result is that members have to save up even more points before they’ll have enough to redeem. From the member’s perspective, all they see is that they now have to wait longer, work harder and/or spend more money, before they can finally enjoy the promised reward.

“When you devalue your points and miles, you’ve extended the runway it takes to get that liftoff you’re looking for, the one where the member is able to redeem for a reward and become even more loyal to your program,” Passey said.

As we showed in the statistics above, not every member will tolerate the added effort and time. Some will give up and refuse to play the game. But many more will simply forget about you because they never had any solid value to anchor their loyalty to. In total, consumers were sitting on over $140 billion in unspent loyalty points in the US alone, and $48 trillion across the globe. That’s a huge amount of untapped loyalty potential.

According to a study by Bond Brand Loyalty, “satisfaction peaks as participants become eligible for rewards and drops off following redemption, making it important for operators to minimize time between redemption periods and progress towards the next redemption quickly.”

To make matters even trickier, the rewards program market is growing increasingly noisy. Looking back, it was only a decade or two ago that there were few rewards programs being offered. Now, it might seem like every coffee shop and local pizzeria is offering rewards for loyal customers—and for good reason. Studies show that more than 90% of businesses now have some form of consumer rewards program, making it a cornerstone of customer retention strategies.

“Why do members keep signing up for the next rewards program, and then the next, but don’t stick around long enough to actually redeem?” said Passey. “Unmet expectations. Unfulfilled marketing promises. If consumers could find a rewards program that met their needs and expectations for joining in the first place, that rewarded them with appropriate value for their time and investment, then they'd have no need to keep looking or be swayed to abandon and join other rewards programs.”

Collectively, U.S. shoppers hold 3.8 billion memberships in loyalty programs. However, 75% of consumers actively earn and redeem rewards in just three or fewer programs on average.

So what can rewards programs do to stay both rewarding AND profitable (besides devaluing their points)?

Faster Earn + Faster Burn = Reward Success

The faster a business can reward members the better. This begs the question: how fast is fast enough? How easy is easy enough?

While there is no industry standard, most agree that anything longer than a year is too long for members to wait before they have enough points to cash them in.

This long wait isn’t only bad for the member. 62% of retailers who deliver loyalty program benefits in the first week of membership see a return on their investment within the first 6 months, compared to only 21% of retailers who deliver benefits within the first month.

“Why do businesses offer rewards in the first place?” said Passey. “If the purpose were to monetize their members, then it wouldn’t matter if a member never redeemed for a reward. However, most businesses want to establish a lifelong relationship where the member returns again and again. And there’s no way members are coming back unless they see the benefits soon.”

Successful rewards programs reward members fast AND often. So, if you’re a business looking to streamline your rewards program, it might be helpful to break it into two parts.

The equation has two key components: Earn and Burn. By focusing on each, you can craft powerful strategies to build lasting loyalty.

Increase Members' EARNing Power

On the first half of the equation, people earn points for doing the behaviors you’ve chosen to reward them for. Some of the pain points they run into during this part of their journey could be frustration that the points aren’t adding up fast enough, or that the tasks are not fun or fulfilling.

Businesses must find ways to make earning points faster and more effortless for consumers.

On the bright side, human psychology is working for you. Rewards programs already take advantage of some elements of gamification. Every point earned is a little hit of dopamine, leading up to that big hit when a reward is finally earned. Just be aware that consumers are getting savvy to these tactics, and positive reinforcement only works when members believe the reward is within their reach.

If the program feels like too much work, or if it’s not fun anymore, they’re quick to abandon the effort.

In essence, to keep members engaged, you need to find a way to increase their sense of progress toward the reward. If they feel like the points are racking up fast, or that points are simple to earn, they’ll keep returning.

Here are a three ideas to increase members’ earning power:

1. Team Up With Partner-Funded Rewards (Our Personal Fav)

Today, the partner-funded rewards program model shifts the funding responsibility from the program or company provider to the partner. What does this mean for loyalty programs? 

Instead of accruing liability or holding unused points on their books, companies can let rewards providers, like Access Development, fund bonus points and miles. This reduces their costs while providing an engaging, cost-effective rewards system for their members. 

White label travel portals, like this one from Access, do more than just reduce costs; they create aspirational, memorable rewards that engage customers on a deeper level. Most traditional rewards programs offer a simple one-to-one ratio: earn one point for every dollar spent. Access blows that model out of the water with exponential earning potential. Customers can save significantly—sometimes earning 20 to 30 times the value of traditional rewards—on experiences like hotel stays, car rentals, and theme park tickets. It's a way to instantly juice the earn side of the equation and shorten the line of sight to redemption.

2. Reward Non-Purchase Behaviors

This is a powerful tool for businesses, driving growth while deepening member engagement. For instance, you can reward members for actions like joining your mailing list, engaging on social media, or referring friends and family to your rewards program. These and other engagements are so important to a program’s success that one study showed that 77% of loyalty programs that reward solely on “transactional behaviors” fail within two years of launch. This is amplified by the fact that 75% of consumers want to be rewarded for engagement beyond purchases.

3. Create Tiered Membership Levels

Do you have both free and a premium (paid) membership options? In a recent survey, 95% of businesses with traditional rewards programs have discussed adding a premium tier. And with good reason. Consumers want them to: 81% said they would likely pay to join a retailer’s premium program if they are already part of its free traditional program. Frequent users are willing to pay for better rewards including a better points earning rate, discounts, free shipping, etc. Just be aware that paying members expect more: 72% of them expect to see benefits immediately or at least within the first week.

Increase Members' BURNing Power

The second half of the equation is when members redeem their accumulated points for real-world rewards. Common obstacles that prevent members from completing this step include low-threshold reward options, expiring balances, and undervalued points that aren’t worth enough to redeem. To overcome these barriers, businesses need to empower their members with the options and knowledge they need to succeed. 

Unfortunately, many businesses hold to the traditional “catalogue” of limited gift cards and merchandise to choose from, along with their one-size-fits-all redemption processes.

Even worse, some businesses operate on the hope that members will sign up and earn points but never redeem them. This is called breakage and those who rely on it to make their profits are missing the point.

It’s important for members to make it to the crucial step of redemption as quickly as possible. That moment when they finally receive their reward helps cement their loyalty to you.

Here are a four ideas to increase your members’ redemption power:

1. Give More Redemption Process Options

Rewards programs have evolved over the years, from paper punch cards, to plastic membership cards to all-digital programs. While not every member is the same, one thing is clear. Most consumers use mobile phones as a digital hub for all financial and shopping services: everything from mobile pay to storage of digital coupons, discounts, and—you guessed it—rewards program management. In fact, 71% of shoppers say they would be more likely to use loyalty payment cards if they could access their cards and rewards from mobile phones. If members have everything they need at their fingertips, ready to go when they are, they’re less likely to forget.

2. Diversify Rewards Choices

For some, this may mean adding reward tiers with different price points. This way members can get a quick win by redeeming for smaller rewards at an easily-attainable price point. Others who are so inclined will have bigger rewards they can aspire to and save up for.

3. Ensure Easier Tracking, Clear Communication, Reminders, etc.

Members respond positively when you remind them about their rewards. Consistent communication is an important component of member engagement, and rewards reminders give you another reason to communicate your value with members. Emails that alert members to earned reward points have at least 50% and as much as 300% higher redemption and click-through rates. And consumers themselves admit they would visit or purchase from a store more often if they did a better job of communicating how many points they have (40%). 

4. Sprinkle in Surprise Rewards & Other Alternate Perks

There are lots of options for “just because” perks you can add to help round out a rewards program. A well-placed membership perk reward can help you re-engage members who haven’t earned in a while, or intensify the excitement of your top earners. Some member favorites include “happy birthday” freebies and “we miss you, come back” promotions.

Engage Your Members with Faster, Easier Rewards

At the end of the day, rewards programs tap into some of our most primal urges. Science has shown that our human brains are hardwired to prioritize instant gratification over long-term goals. We develop cravings to repeat experiences that feel good. We’re more likely to continue in behaviors after receiving positive reinforcement, and stop behaviors where we’ve received negative punishment.

How does this apply to rewards programs? In short, it tells us members want rewards, but they don’t want to work or wait for them.

That’s why successful rewards programs take the necessary steps to make the process fun, fast and painless.

“People want to save money, be smart, feel savvy, stretch their discretionary dollars and take home pay,” said Passey. “We all like to be rewarded.”

If you’d like to discuss how to give your rewards program the boost it needs to resonate with your members, contact the experts at Access Development.

Related articles:

• White Label Travel Platforms: The Ultimate Buyers Guide
• How to Create Customer Loyalty from Points and Loyalty Programs
• Travelers Demand Exceptional Customer Service: What It Means For Your Travel Benefits