I recently read a rather lengthy article, “Rewards breakage-boon or bane? The role of technology in optimizing breakage“ by Sanjai Velayudhan, Senior Manager, Loyalty Programs, ITC Infotech. This article was eye opening on the amount of breakage left on the table each year – and the detrimental effects this breakage has to companies across industries.
Loyalty programs have a clear impact on customer retention. They allow companies to identify purchase patterns and help tremendously in rewarding customers. When customers are rewarded, they are able to realize the answer the age old question, “What’s in it for me?” Redemption of points is meant to recreate the desire to accrue more points and triggers the loyalty cycle all over again. A win-win for both the company and the consumer…
So we know how critical reward redemption is – but amazingly there are many people who fail to redeem their rewards – for a variety of different reasons. The unredeemed points, those left on the table, end of having zero value for members and despite the fact that non-redemption can be classified as “profit” for a company – they can present quite a dilemma for companies with substantial loyalty programs.
This article is jam-packed with information. Sanjai clearly outlines why breakage is bad for companies and discusses the many reasons why members do not use the points accrued (which, once identified should help you avoid these very issues).
