If you want to know if your loyalty program is a success or not, you need to take a look at the redemption rate. 

If points are not being redeemed, it means customers are not participating in your loyalty program. This metric helps you realize how many points are actually being redeemed. 

Redemption Rate = (The total number of points redeemed/total number of points issued)* 100

What does a low redemption rate mean?

It is important to know if your redemption rate is low or high. A low redemption rate means your program is not performing. The customers are not motivated to spend the points they have accumulated. You might need to work on your rewards system or plan a better strategy to increase participation. 

Note: As a rule of thumb, make sure to wait till six months after launching the loyalty program to evaluate its success. 

The two main reasons for a low redemption rate could be:

  • Earning Related Issues: The frequency of the transactions, the points earning rate and the reward tiers impact the points earning. Once 
  • Redeeming Issues:

Steps to Improve Low Redemption Rate

#1 Make the Program Exciting

The customers should feel motivated to join the program. Ensure there are numerous ways for them to earn points at the store. For instance, adding the profile details should allow them to earn extra points. You can award them points for adding their email addresses. 

#2 Variety of Rewards

The rewards should encourage the customers to start redeeming the loyalty points. Keep the first stage of the rewards low. If you are a cafe, you can have a free coffee at 100 points. This is an excellent motivator for redemption. As the points increase, the rewards should be more attractive. Have multiple reward stages so that the customer feels like participating in the program and redeeming their points. 

#3 Educate The About the Program

Low participation could also be attributed to the fact that customers are unaware of the loyalty program. You should let them know and educate them about the way the program works. Tell them the benefits.

For this purpose, you might want to educate the people in the store and train them on how the program works.

#4 Use Emails and Messages

Remind your customers of the loyalty points in their account. With the redemption emails and messages, you send them a reminder and motivate them to come back to the store. This will eventually help improve the participation and encourage more people to redeem the rewards.

The industry standard redemption rate is 13.67.