One-Third of Loyalty Reward Points Are Never Cashed In

4/19/2011

Americans accumulate approximately $48 billion in rewards points and miles annually, yet at least one-third, representing $16 billion in value, goes unredeemed by consumers, according to a new study conducted by Colloquy and Swift Exchange.

According to the study, titled “2011 Forecast of U.S. Consumer Loyalty Program Points Value,” the average household that is active in loyalty programs earns $622 worth of rewards per year, but does not redeem $205 of them.

“American consumers are leaving significant dollars on the table every year,” said Kelly Hlavinka, managing partner at Colloquy. “This report should [encourage retailers to alert] savvy consumers to a great opportunity to stretch household budgets, and to do so by simply consolidating their loyalty rewards participation with their favorite brands, making it easy to accumulate and redeem them faster than ever imagined.”

The study examines consumer-oriented reward programs from a host of merchants, including those from travel and hospitality, retail, and financial services. “Three decades after the inception of the modern frequent flyer program, the rewards industry is ripe for a transition from a culture of accumulation to one of realization in the fullest sense,” said Nancy Gordon, COO of Swift Exchange. “That means helping consumers make rewards-based purchases as easily as they buy anything else in their daily lives. To accomplish this, marketers will need a transformational tool that can translate rewards and points into real mind share.”

Some of the reports findings:

The financial services sector is the biggest provider of rewards at $18 billion a year
The travel and hospitality sector is the second-largest industry in terms of rewards at $17 billion a year
The retail industry, although it makes up 40% of all loyalty program memberships, issues the smallest value in rewards at $12 billion a year.

Hlavinka said the research results indicate loyalty marketers have work to do, because while unredeemed points may translate to short-term corporate savings, they do not equate to long-term customer relationships.
“If redemption equals engagement and engagement delivers customer satisfaction and profits, then loyalty marketers should encourage their members to make the most of their rewards,” she said. “In short, redemption is good.”

Forming the backbone of the forecast was the bottom-up sizing of the number of U.S. loyalty program memberships – data that is featured uniquely in the “2011 Colloquy Loyalty Census.” Its key findings include:

The number of loyalty memberships in the U.S. is 2.1 billion, exceeding 2 billion for first time, up from 1.8 billion in the 2009 report
The average household has signed up for 18.4 programs, compared with 14.1 programs in 2009
Despite the increase in overall membership, the average number of programs in which households actively participate is just 8.4
Overall membership of 2.1 billion represents a 16 percent increase compared to the 2009 report, but a slowdown from 2007 to 2009 when memberships rose 34 percent.

The “2011 Forecast of U.S. Consumer Loyalty Program Points Value” was completed through a nine-step process examining the perceived value of loyalty rewards across all industries. A mix of publicly reported data points, including reviews of corporate records, web sites and press releases, third party information, proprietary estimates and forecast assumptions were used. The report refers to the value of all points and miles as “perceived” because the worth of a reward to a consumer may vary from the actual cost of delivering the rewards to the granting company.

The 2011 Colloquy Loyalty Census is the result of a comprehensive review of loyalty program memberships that includes an archive of programs across major market sectors, web sites, press releases, annual reports and third-party publications. Complete details of the research on growth and trends in loyalty program memberships and activity are available at www.colloquy.com.

Complete details of both the 2011 Colloquy Loyalty Census and the 2011 Forecast of U.S. Consumer Loyalty Program Points Valueare available as a free download at www.colloquy.com/whitepapers.

Cincinnati-based Colloquy is a global provider of loyalty marketing publications, education and research; and Miami-based Swift Exchange is a marketing technology company specializing in the rewards industry.