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Pros & Cons Of Expiring Loyalty Points

Having a great loyalty program can work wonders for your customer retention strategy. A recent research suggests that acquiring a new customer costs the company five times more than retaining an existing customer. Today, companies join the fray for a single penny, market is competitive beyond words, in this scenario customer retention is a top priority for companies & so is the loyalty program. Digital loyalty apps help in achieving customer loyalty. Through loyalty programs you reward your most loyal customers bringing in benefits for your business. Now, the question is, should the loyalty points offered by the company through the customer loyalty app expire or not?

Pros of expiring loyalty points

Can expiring loyalty points help? Is there merit in setting an expiry date to the loyalty points earned through customized loyalty and rewards programs? Here are the arguments in its favour.

One, it adds up sales. The expiry date of loyalty points sets up a temporary boundary of expiry date. When there is no expiry date, customers have no immediate reason to accumulate points & that means they are not actually going to make a purchase in the near future. Expiring loyalty points have the opposite effect – they create an urgency to purchase affecting sales in a positive way. Thus, it may be said in a way that expiring loyalty points boost sales.

Two, it motivates repeat purchases. You will be surprised to know that more than 40% of e-commerce stores’ revenue is made by nearly 8% of its customers & most of these 8% are repeat customers. An approaching expiration date motivates people to spend more with the intention of earning more loyalty points & this way they become repeat customers. 

Three, it fosters brand loyalty. Running a true-value rewards program is a successful way to create a feeling of brand loyalty in customers. When you have in mind that my earned points may expire soon, you will engage with the brand to redeem those points & in the process demonstrate brand loyalty. Expiring points ensure that repeat customers & frequent shoppers are rewarded, thus inducing brand loyalty among them. The equation is very simple: shop more, earn more points & stay loyal to the brand. 

Four, it creates a marketing opportunity. Let us show you how. When customers’ points are going to expire, being a customer-centric business, it will be your responsibility to remind them on time about it. That’s where the prize lies. You can use this opportunity to advertise your products & tell customers about your upcoming loyalty program. For that, you will have to simply include the promo material in the reminder email. 

Five, it helps your brand to earn a place in the customers’ mind. From a customers’ point of view, expiring points will be a bad thing which they will tend to avoid. For this, they will be setting a reminder in their mind about it – this keeps your brand at the top of their mind. When the expiry deadline indicated by the best loyalty apps will approach, it will trigger thoughts in the customers’ mind about your brand – that’s what we all as a brand want – a place in customers’ mind.  

Cons of expiring loyalty points

So, in the above section we saw how expiring loyalty points can help businesses. Now, it’s time to see how the scenarios look from the opposite camp, what are the drawbacks of expiring loyalty points. 

There is no doubt loyalty points earned through shopping mall app are a prize for the customers, but if you add a lot of conditions & restrictions on any program it will become a turn off.  Today’s customers are well informed, they can understand what’s in their favour & what’s not. Expiring loyalty points doesn’t make any sense from the customers’ perspective – They earned the points, & now the company wants to take it back, how will it be called a positive customer experience? 

Sometimes a customer simply absents from a brand without any compulsive reason. Maybe they just want to experience a change of taste, maybe your company doesn’t offer that product, or maybe it was on somebody else’s advice. Does that mean they should lose the rewards they have earned by spending their hard-earned money? Does it mean that they are no longer loyal to your business? Does that mean they deserve a punishment? And yet many retailers & shopping mall owners set up the clause of expiring loyalty points in their shopping mall loyalty program.

Let me share an example with you. Many cash back programs on credit cards have the expiry clause which says if customers don’t use the card for a certain period of time they will lose the points. Does taking back reward points make sense? Is this going to make the customer happy? Do you think that threatening customers will help your business? The fact is customers don’t like too many rules & policies. A better approach is to tell customers whatever points & rewards they have earned are going to be forever with them. 

The other thing that many retailers do is devalue the reward points. Over time, it becomes less profitable to redeem the reward points in exchange of values for customers. By devaluing the reward points companies are lowering the value of the overall loyalty rewards program which is against its philosophy. After all, if customers have earned reward points by spending their hard-earned money & now those points have become frugal then why will they continue to be loyal to your brand & shopping mall. 

The idea of expiring reward points is not made with the customers in mind but with your misplaced business perspective. How do we make the reward program less expensive? How do we save money through loyalty tools? How to reduce the liability this program gives? These are not the right questions to ask. Your task as a marketing manager is to create value for customers so it’s a slippery slope to cut back their reward points. After all, if you are going to annoy customers to the point they decide to leave you, you are not going to profit from it.  

Conclusion

One thing which we have noticed is those who are in the favour of expiring loyalty points have failed to underline its benefits to customers. We leave it to you to decide whether just thinking from your perspective & not thinking about creating value for customers will be beneficial for you in the long run.   We have seen both the opinions. We know the pros & cons of the expiring loyalty points, now it’s time to tell you one more secret. After all, reading the blog full through should provide additional benefits to you. For managing customer loyalty points, you can leverage the OKEN SaaS Platform powering the mobile app. It only takes 3-4 weeks to configure, design and launch your own mobile app, featuring un-expiring benefits!