Change fees, high earnings thresholds, auto-redemptions. These “loyalty” practices are why so many reward members abandon programs. And not one of these members has to look far to find a replacement. To keep competitive, program operators should ground these six reward barriers.
By: Jenn McMillen, Incendio
Is Your Rewards Program the Theme Park, or the Line to Get In?
There are likely millions of reward programs out there — enough to break down to 17 memberships for every U.S. human. So why do so many of them include restrictions that transform them from the ocean-facing suite we want to the restricted-view room with the rooftop HVAC vista?
I get that guidelines are required to protect programs from abuse, but some commonplace rewards restrictions are simply restricting engagement, especially when you consider how competitive the industry has become. Consider this: Since 2017, the U.S. loyalty program market has grown by nearly 12.5% a year.
Members Choose Programs That Make Every Day a Holiday
It’s cliché, but loyalty does go both ways. And when the economy is sucking wind, members require more proof of that loyalty from the companies with which they’ve stuck it out in the good times. Restrictions aren’t that proof. Indeed, here are several common ones that should be sent packing.
Off the island, auto-issuers. A lot of reward programs send certificates or coupons to members, who may think they’re receiving surprise perks. Nope. In some cases, the program operator deducts the value of these certificates or coupons from the member’s point balance. But what about all of those members who are intentionally accumulating points with a particular reward in mind? What if the member isn’t around to use the certificate before it expires? If my favorite sushi place auto-issues to me a reward with a 14-day shelf life on the day I’m headed out of town for two weeks, I never get my reward. And that sushi place may never hear from me again because I’m torqued by knowing I’m missing out on something I’ve “earned.”
Take a hike, high earnings thresholds. Seven in 10 loyalty members leave programs because it takes more than six months to earn enough points for a reward. High-threshold requirements are a key source of member frustration, and when rising prices force consumers to either/or their purchases, high-threshold programs rank even lower in value. Yes, thresholds do vary depending on the company’s products and customer frequency, but earnings potential can flex with the times. A gas rewards program can double points while pump shock causes consumers to cut back on trips. That’s a nice little incentive that says, “We care.” And points can be issued for non-purchase activities, such as customer recommendations or via gamification that gives people an incentive to engage and score points.
Time to check out, extra steps. Ease is among the most practical forms of member recognition, and it encourages more frequent brand interactions. It therefore makes no sense for a program to require members to take additional steps to access reward benefits, balances or exclusive rates on a reward website or app. Some companies’ finance departments have an outdated idea that making rewards hard to redeem is smart for business. On the contrary, showing members value in their participation is what keeps them coming back. Red Roof, the economy lodging chain, in June began publishing its RediRewards’ member exclusive rates directly on the website. Previously this information was sent in monthly subscription emails, a method that can be overlooked.
Pack your bags, change fees. Airlines collected $2.8 billion in change and cancellation fees in 2019 (most recent year for numbers). Top flyers, including me, paid a good percentage of those fees. Why nickel-and-dime your bread-and-butter customers? Some major carriers, including Delta Air Lines, have eliminated change fees for non-economy flights, but what about those loyalty members who fly economy? While I’m at it, I’d like to request that program operators review their limitations on reward dates. It’s like arriving at a breakfast buffet at the hotel you regularly book and being told you can only get waffles on Wednesdays.
Seat-backs up, third-party deniers. It feels punitive that a reward program operator won’t issue me points or miles when I use a third-party program to make a purchase. Say, for example, I book exclusively through Hotels.com and learn that a major hotel chain whose reward program I belong to won't honor my status and issue points unless I book directly with it. That company has given me zilch-o reason to stay there over somewhere else, since I have a plethora of interesting options right in front of me. Plus, now I’m agitated. Perhaps the restriction is due to the hotel not being able to collect customer data through the third party, but members don’t care about that. How about a compromise? If the hotel offered even half credit or some form of token points, I would place Major Hotel Chain in the “reconsideration” set.
Sail away, surprise points expiration. In what world is it good practice to give someone something and then take it away without warning? This is how it feels to members whose points expire on pre-determined dates. Some airlines and hotels, including Air Canada and Marriott Bonvoy, have extended their expiration periods during the pandemic, but this option may not be financially feasible for all companies. Instead, why not just make members aware of what they might be missing? If members who have lapsed are alerted that their inactivity might result in points expiring, they might step up their brand engagement.
How About Grounding the Predictable?
If reward programs should restrict anything, it’s following the age-old model of earn-and-burn. That’s a challenge, but no greater a challenge than many others companies have overcome.
I suspect it’s simply a matter of priority — that program guidelines slip lower on the “must do” list as companies tackle other issues. If so, these companies should reconsider why they have rewards programs, and/or hire a third-party to turn their programs into profit centers.
It’s a very competitive reward industry out there this summer. Send the most frustrating, avoidable reward restrictions on holiday — and come back with a program that’s refreshed.
Jenn McMillen, nationally renowned as the architect of GameStop’s PowerUp Rewards, is Founder and Chief Accelerant of Incendio, a firm that builds and fixes marketing, consumer engagement, loyalty and CRM programs. Incendio provides a nimble, flexible and technology-agnostic approach without the big-agency cost structure and is a trusted partner of some of the biggest brands in the U.S.