Glossary
What is redemption rate?
Redemption rate is the share of earned rewards that customers claim, and a low rate is a warning rather than a saving: it usually means the threshold is too high or the reward is not wanted.
Redemption rate is the metric most often misread. An unclaimed reward looks like money saved, and some loyalty vendors present it that way, but a customer who earns a reward and never collects it has not been motivated by the programme. They have simply been recorded by it. The number to watch alongside it is the share of enrolled customers who reach the threshold at all: if most never arrive, the threshold is set for the business's comfort rather than the customer's behaviour.
What is a good redemption rate?
High enough that most customers who earn a reward claim it: if a large share of earned rewards expire unclaimed, the reward is either not wanted or too inconvenient to collect.
Look at the two numbers together rather than one alone. A programme where few customers reach the threshold but nearly all of them redeem is working correctly for a small group; one where many reach it and few redeem has a reward problem.
Why is a low redemption rate a problem?
Because the reward is the mechanism. A loyalty programme changes behaviour by making a reward feel reachable and worth reaching, so rewards going unclaimed is direct evidence that the mechanism is not operating, whatever the enrolment numbers say.
It is also a trust cost that compounds. Customers who earned something and never received it remember the programme as one that did not pay out, which is worse for the business than never having offered it.
How do you improve redemption?
Tell the customer the reward is ready, at the moment it becomes ready. A wallet notification saying a free drink is waiting is the highest-converting message in any loyalty programme, and it costs nothing to send.
After that, check the reward is something the customer wants (the usual order rather than the cheapest item) and that claiming it takes no more than showing the card.
See also
- Reward threshold: The reward threshold is the number of stamps or points a customer must reach before earning a reward, and setting it correctly determines whether the programme motivates or discourages.
- Breakage: Breakage is the value of loyalty rewards that are earned but never claimed, and it is the gap between what a programme appears to cost and what it costs.
- Push notification: A push notification is a short message delivered directly to a phone's lock screen; in wallet loyalty it is sent to the card itself rather than through a separate app.
- Enrolment rate: Enrolment rate is the percentage of customers who join a loyalty programme when offered it, and it is the number that determines whether the programme is worth running.
Further reading
How to measure repeat customer rate (and what to do with it)
The formula for repeat customer rate, the window to measure it over, what a good figure looks like by industry, and the two numbers that are more useful.
Running one loyalty programme across multiple locations
How to run a single loyalty programme across two or more sites: one card or several, who pays for a reward redeemed elsewhere, and what changes with franchisees.