When it comes to the loyalty program points that consumers earn, spending them seems just as hard earning them. From the air miles to cash back points earned via credit cards, consumers earn, but don’t always spend the points.
The reason for this can be reasoned with the following:
(A) They forget: Perhaps the biggest reason why points go unused is that they are forgotten. For example, I earn points at the grocery store every time I purchase something, but rarely get any acknowledgement/updates of it. The instant benefit of getting a discount on the products I buy because of being part of the loyalty program makes me forget that the points accumulated can be used for something bigger and better.
(B) The rewards are unattainable/difficult to use: If you’ve ever tried to use your air mileage points for a trip, you know how hard it is to redeemed for the trip you actually want. Because of the difficulty and sometimes ‘impossible’ redemption milestones, consumers often see their efforts as fruitless.
Tip: When creating milestones for points, consider tiered levels of rewards: Easy, Medium, Hard. Your loyalty program should make it easy for the casual shopper to participate while making it worth while for the ‘hardcore’ shopper
(C) They expire: Unlike gift certificates which often don’t have expiration dates, loyalty points with no activity can set a user back to square 1. On Southwest for example, travel rewards expire within 1 year of earning them (You can re-activate it, but you have to pay an additional fee.)
Tip: Create a loyalty program points that can be used 365 days with no expiration. Instead of creating expiration dates, consider bonus offers such as “free upgrades” if you earn 500 points in a 12 month period.
For more on what happens to loyalty program points, check this infographic on where it all goes (click image to enlarge):
Infographic credit to rmmojado.