Has your customer loyalty program been giving out points to customers who don’t redeem their rewards. This all-too-common scenario represents a breakdown of the way rewards and engagement strategies should work.

Traditional loyalty programs built on earn-and-burn models of point accumulation are particularly susceptible to loyalty debt. Due to a weakness in the system — a weak rewards slate, or an unoptimized redemption process — people are earning points and never burning them.

Something has to give. The real appeal of a rewards program comes when customers get to actually earn their rewards. If your audience isn’t reaching that step, your loyalty strategy isn’t living up to its potential, and this could be a sign to upgrade, providing hyper-personalized and relevant rewards, alongside nudges to action that will remind users to spend what they’ve earned.

Loyalty debt: Among the biggest issues with rewards programs

Where does loyalty debt come from? Typically, it begins when a company starts issuing reward points without performing in-depth research into what customers want. This leads to a disconnected experience where people are piling up points and building loyalty currency but not finding any way to convert them into rewards.

Simply giving points an expiration date might seem like the simplest way to get out of this situation. This will wipe out the debt, but it’s not a satisfying resolution. After all, the value of a rewards program really comes from people using it. The simple promise that customers can earn points will lose its appeal over time if they always hold onto the points until they expire.

A customer rewards and loyalty program that people actively use and enjoy is an ongoing benefit for your company. An earn-and-burn system where nobody ever burns can’t deliver that level of advantage. After all, PricewaterhouseCoopers’ audience preference research revealed that 65% of U.S. consumers find positive experiences more influential than advertising, and 54% think most company experiences could be improved.

By using a management platform that delivers improved analytics on what customers want from your brand, you can craft a loyalty and engagement program that people are excited to use. Better aligning reward options with customers’ wishes through hyper-personalized offerings is a far better way of reducing loyalty debt than simply causing points to expire. This way, your audience gets what it really wants: a great experience.

Turn liabilities into strengths

Keeping a close eye on the way customers interact with your brand is at the crux of designing an improved loyalty program. While still using the basic model of earning and redeeming points, you can transform the way people interact with your brand — making sure that every part of the program is optimized.

Creating more opportunities to redeem points is a great starting point for increasing a program’s appeal. If your audience is focused on dealing with your brand in physical stores, integrating redemption into point-of-sale terminals should be a priority. In cases where a mobile app is a major touchpoint, that app should interact with the loyalty point system.

In addition to introducing new redemption options, your brand can create other triggers associated with loyalty debt. For instance, you can mitigate point expiration, using this as a reward in itself. Customers may be happy to have retained their points and more likely to use them to engage with the brand. If the points had been left to expire, those positive experiences and interactions wouldn’t have happened. Gamification features make this process fun for customers to engage with, encouraging them to keep participating in earn-and-burn loops and opening opportunities for easy upsell and cross-sell transactions.

A sufficiently evolved rewards program can work hand-in-hand with overall business objectives. PYMNTS recently reported on post-2020 success stories from the quick-service industry where loyalty programs at restaurants such as McDonald’s, Taco Bell, Chipotle and Starbucks have made their rewards programs into key digital sales drivers. This kind of tangible progress can only come from customers actively using rewards and cashing in loyalty currency, not simply building a brand’s loyalty debt.

Open programs to partners

When you look beyond the walls of your own business, you gain more ways to expand the usefulness of your loyalty program. Point earning and redemption can extend to partner businesses, creating a more valuable custom rewards system for your customers, while potentially promoting all the companies involved.

There’s more chance that customers will redeem their points and less risk of them building up or expiring when they’re usable across a spectrum of partnered companies. The integration between your business and partners should extend behind the scenes, with the businesses connecting their tech platforms and sharing data.

A joint loyalty rewards program delivers not just a bigger experience but also a smarter, better tuned one — the extra data can help you perform advanced analytics and offer more relevant rewards. Customers who may not be interested in a limited loyalty offering may engage more deeply in a partnership program.

As customer loyalty specialist Adam Psner explained in a LinkedIn blog post, building partnerships has become a common approach for businesses hoping to build optimized loyalty strategies. There are a few ways to make the partnerships happen — either a full integration between the companies or hiring a partner to provide rewards as a value-add. No matter which you opt for, the expanded scope could trigger a major reduction in loyalty debt.

Perx can power ideal, optimized point systems

If you’re eager to build an optimized custom rewards system that will cut down on loyalty debt while increasing positive customer experiences, you need the right technology at the heart of the program: Perx Lifestyle Marketing Platform.

The platform’s Impact Dashboard gives you real data-driven insights into what your customers care about. That in turn allows you to create point-earning triggers, redemption opportunities and corporate partnerships that match what your customers really want.

A more accurately targeted loyalty program is the perfect tool for creating value, by delighting customers instead of simply giving them points. The basic framework of a point-earning system remains the same, it’s simply been revamped to match your customers’ interests and lifestyles.

The platform’s ability to enable smooth integration with any and all rewards merchants is another feature that will help you build a truly appealing custom rewards program. When a solution is easier for both you and your customers to use, there’s nothing standing in the way of a great loyalty experience.

Request a demo to see the platform for yourself.