Loyalty Register glossary
Burn rate
How quickly members redeem the points they have earned. A steady burn rate is a sign that members see value in the rewards.
Burn rate is how quickly members redeem, or “burn”, the points they have earned. Programs usually express it as the share of points issued in a period that members redeem in the same period. It is the other side of earning: points are earned, then they are either burned or never used.
Updated · By Loyalty Register Editorial TeamRelated terms
How do you calculate burn rate?
Divide the points redeemed in a period by the points issued in that period. In a hypothetical program that issues 120 million points in a year while members redeem 72 million, the burn rate is 60%. If issuance grows to 150 million the next year and redemptions stay at 72 million, the burn rate falls to 48% and the unredeemed balance grows. That growth is not a saving: those points will either be redeemed later or lapse.
Programs also report the activity behind the rate. White Castle, for example, said its Craver Nation Rewards members earned 32 million points and redeemed more than 1.2 million offers in one season.
How is burn rate related to breakage?
Every point is either redeemed or never used, so burn rate and breakage move in opposite directions. A program that reports a falling burn rate as lower cost is, in effect, reporting a higher breakage assumption. Read the two numbers together, and compare the burn rate with the breakage assumption in the program’s liability estimate.
What is a good burn rate?
There is no single right number. A cash back program should burn quickly; a hotel program built around aspirational stays will burn more slowly and still be healthy. The useful question is whether the rate matches the program’s design and is stable. A sudden drop often points to friction, such as higher reward prices or a weaker catalog. A sudden spike, for example when a bonus campaign ends, can strain the reward budget.
Why is burn rate a signal and not a target?
Pushing burn rate down to protect margins means hoping members forget what they earned. Pushing it up without checking reward costs can give away margin to look generous. Track it monthly, explain every change, and fix the cause rather than the number.