Analysis Of Unredeemed Loyalty Points Offers Customer, Marketing Insight

There is information in inaction, if marketers know how to analyze it: Segmenting and examining customers based on their activity and unused loyalty program currency can offer insight into communicating with them and building their value. It can also help stimulate redemption.

This is a double bonus: Not only do customers interact with the marketer, building affinity, but it helps with the books: Loyalty program points are often kept on corporate accounting sheets as liabilities.

What are the keys to looking at unused program currency? “The first question marketers should be asking is why their members are keeping the points,” says Jill Goldworn, president of The First Club, which offers low-point redemption alternatives for companies running loyalty schemes.

“Are they waiting for the big redemption, [for] a big trip or a big-screen TV?” she continues. “Or are they mindlessly collecting without a true connection to the brand?”

A few database queries regarding purchase patterns can offer the first clues regarding approaching these participants. If they are one-time enrollees, or if they make purchases only on an annual basis, they can be urged to make immediate, low-cost (to the marketer) redemptions which reinforce brand devotion.

“They are not likely candidates for upgrades to the next level or ancillary revenue,” says Goldworn. “But if they are actives users, such as someone who has a co-branded credit card or who flies the same airline regularly, go back to the first question: Are they a collector, or is there nothing of value [in the program] to redeem for?”

Points collectors represent an opportunity for increased activity, especially if they are close to an award threshold and can be incented to increase their interaction to achieve that threshold. But this assumes marketers have captured the amount of loyalty currency accumulated through direct interaction with the brand, as opposed to through ancillary activity. Marketers that don’t record, on a participant-by-participant basis, the activities through which loyalty currency is earned are missing a key analytic component, she adds.

There are benefits to social media as well. Segmenting customers into those who frequently engage with the brand and its core activities allows marketers to identify brand advocates – individuals who are more likely to talk about program features and benefits, and therefore may be more receptive to messaging suggesting they serve as advocates in social media and other forums.

Surveys of enrollee preferences, when linked with a specific individual, can also help shape rewards and increase redemption and engagement, says Goldworn. Airline or hospitality program participants can be sent sweepstakes opportunities for tailored vacation prizes, for instance, with points redeemable for chances to win. Those who use their program currency to purchase books can have their preferences captured, and can later be offered chances to meet a favorite author.

One of the more attractive elements of sweepstakes is that loyalty currency for chances to win can be redeemed for relatively few points, which means such a premium is attractive to all levels of participants. “Most companies focus on the top 20% or 30% of their members – to the detriment of the bottom line,” says Goldworn. “They don’t market to the rest of them.

“The reason only 20% are engaged is because the rest have orphan points,” she continues, referring to the members of a loyalty program’s file who haven’t accumulated enough currency for a reward. “The reason there are 700 billion orphan points is that participants don’t have enough to redeem for something useful. Airlines offer magazine subscriptions when points are about to expire. That is not brand engagement, that’s throwing away a relationship. That is a goodbye gift.”

This is exactly the wrong time for a marketer to start querying its database and trying to determine what will engage participants. Ideally, Goldworn says, marketers should be asking questions upon enrollment (or shortly thereafter) which indicate how serious a participant an individual is likely to be. These questions could include the number of related loyalty programs the enrollee is in, which can offer clues regarding the share of their wallet.

Goldworn’s final suggestion regarding populating information in a loyalty participant database is one for the beginning of the program. “Marketers don’t ask forward-thinking questions, like what is next? They should be asking and designing [data fields] based on where they want their customers to end up, not where they will be when they start.”