Loyalty Register glossary
Redemption
When a member uses points or rewards to get something of value, such as a product, a discount, a flight or a hotel night.
Redemption is when a member uses points or rewards to get something of value: a product, a discount, a flight, a hotel night or a donation. It is the moment a loyalty program delivers what it promised, and the moment a point stops being a promise and becomes a cost. Sephora Beauty Insider members, for example, can redeem 500 points for $10 off a purchase of $10 or more.
Updated · By Loyalty Register Editorial TeamRelated terms
Why does redemption matter so much?
Until members redeem, the value of their points is only a promise. A member who has redeemed once has seen that the reward is real, which gives them a reason to keep earning. Members who never redeem are more likely to lose interest, and their points often end up as breakage. The first redemption matters most, so the time it takes members to reach it is worth measuring.
How does redemption affect the program’s finances?
Points are carried as a liability until they are used. Starbucks, for example, defers revenue for the Stars members earn toward free products and records a liability for them. When a member redeems, the program delivers the reward and that part of the liability is released. The cost of each redemption depends on the reward chosen, so the mix of rewards members pick matters as much as the number of redemptions.
What gets in the way of redemption?
Thresholds set too high for typical members, a catalog that does not appeal, rewards that are hard to find or claim, and checkout steps that staff or systems handle badly. Travel programs add availability: Marriott Bonvoy’s terms, for example, say award stays are subject to availability at the time of reservation. Each point of friction lowers redemption and raises breakage, usually without anyone deciding it should.
Which metrics should you track?
The redemption rate (points redeemed compared with points issued), the share of members who redeemed in the period, the time to first redemption, and the average value per redemption. Read them by segment and by reward. A falling redemption rate is not a saving if it comes from members losing interest; it is usually an early sign of churn.