Finding Money Under The Table and Everywhere Else: What to do About Unredeemed Rewards

September 4, 2012 in Loyalty Marketing by Bram Hechtkopf 0

Numbers. Big or small their context is always relative. Here is big number that’s captured my attention lately for a variety of reasons:

Sixteen billion.

If you live in California, it’s unlikely that $16 billion is your lucky number as it’s the size of the state’s current deficit. But if you live in Afghanistan, $16 billion is the amount of money pledged to the nation by multiple donors over the next four years covering a wealth of new construction and infrastructure repair, according to the New York Times. 

For loyalty program providers, $16 billion has a less black and white implication. That’s the estimated amount of money consumers fail to spend in unredeemed loyalty rewards according to a report from Colloquy, 2011 Forecast of U.S. Consumer Loyalty Program Points Value across multiple industries.

It’s also one-third of the total loyalty rewards industry valued at $48 billion in points given out each year. Now that’s a lot of money being left off the table, under the table, and pretty much everywhere else.

But $16 billion has other implications too. If loyalty customers are ignoring, forgetting about or failing to convert that large sum of money, it begs the question, what can marketers and loyalty providers do about it? How can they re-engage the one-third who has checked out of their loyalty program, and how do they manage the mounting costs of loyalty liability – the unspent billions that proper banking standards dictate must be accounted for as un-recouped expenses and for many in the loyalty industry, represents their number one challenge and drag on continued success?

A recent Swift Exchange report found that 49% of the loyalty executives surveyed said that managing costs had become “very challenging,” while 38% said the issue has become “more challenging.” As is often the case, though, any test presents a unique opportunity for improvement and this certainly is one.

For starters, loyalty programs must get creative in driving engagement. One suggestion is a multi-tiered program that offers rewards for using rewards, delimited by, say, date of use and type of purchase. That’s the type of solution that engenders excitement, timeliness, and that journalistic favorite of narrative storytelling, the ticking clock – an easy way to build momentum and start thinking about omnichannel implications.

Of course, loyalty is more than encouraging the need to shop, shop, and shop. Motivating genuine loyalty is about being creative too and combining experience as much as programs rely on traditional rewards. In fact, one company, Loyalty Shares LLC, was launched on this very notion. Founded in October 2011 with the slogan “Moving liabilities to loyalty assets,” the company lets loyalty members redeem rewards for stock in the participating organization.

Of course this is but one concrete example and would only work for publically traded organizations. And while we think about this every day, this blog post should serve as a wake up a call and a conversation starter on how to brainstorm the 15,999,999,999 more.

Besides, $16 billion is a serious amount of dough. And for loyalty providers, recapturing that windfall in repeat purchases at heightened value should be priority one. Let us know what you think and chime in on how loyalty marketers can work together to put this money back into play as we want to address this topic in more detail in a future post.

Author: Bram Hechtkopf

Bram leads the "marketing of Kobie Marketing". He consults with current and prospective clients on new business opportunities, helping to develop customer retention and loyalty marketing solutions that drive increased retention and spend. Following in the footsteps of his father, Kobie's founder, Bram is eager to continue Kobie's vision of technology and data analytics as enablers of leading-edge marketing executions for world-class customer loyalty initiatives.

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