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Good Points Blog

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Is your loyalty program hurting your brand? 4 indicators that it might

When it comes to evaluating the performance of your loyalty program, there’s a goldmine of data at your fingertips. A variety of metrics can tell you what’s working and what’s not and even send up red flags when your rewards program may be on the verge of trouble. Here are four warning signs you should be on the lookout for when evaluating your program’s data.

  • Low activation

How many new members are you adding to your program? Even an active reward program with a relatively engaged member base should be seeing new members added regularly. A low activation rate could signal that customers don’t see a high enough value add to warrant joining the program. 
 

  • Low Utilization

This one’s obvious but bears mentioning. Low redemption rates can be a symptom of a larger issue -- the bar for earning points could be too high or redeeming those points could be too difficult. It also could be a sign that your content mix is not be right for your member base. To get members to re-engage, consider some of these tips to revitalize a stagnant program

  • Usage rate 

You’ve got metrics on the front and back ends that can easily signal a troubled program (on the front, people aren’t signing up and on the back, members aren’t using the program, or worse, leaving altogether). But what about the middle where there are active users? How do you gauge whether the level of activity is good or bad? This is where you’ll want to establish benchmarks. Start by determining your average and then track the data to see if it’s trending positively or negatively. Anything below a 50% usage rate is a red flag; an 80%-90% usage rate is ideal. (We define usage rate as redemption, because while earning points is great, redemption shows that your customers have received value from the program and are more likely to continue using it.)

  • Overuse

While high redemption/usage rates are signs of a strong program, you can have too much of a good thing. If you’re seeing abnormally high redemption rates, that could be an indication that the requirements to earn points are too low and may need to be adjusted. Finding the sweet spot between not too hard and not too easy is the key to keeping members engaged and active. High redemption rates also could point to users gaming the system, which is a type of loyalty fraud. Members could be double dipping their points, or employees could be taking unfair advantage of discounts. For more on loyalty fraud and ways to combat it, check out our blog post

A bad loyalty program isn’t just bad for business, it’s also harmful to your brand reputation. Put some protocols in place to monitor how you are doing and keep a lookout for the warning signs. By keeping a regular eye on these indicators, you can address problems at the onset before your brand starts getting bruised. 

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Tags: reward redemption, brand loyalty, customer engagement, blog, loyalty, rewards programs, loyalty rewards, loyalty programs

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