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One-third of all rewards earnings go unredeemed, according to a new study by the marketing firms Colloquy and Swift Exchange.
According to the study, consumers earn a cool $48 billion in rewards points each year. But a not-so-cool $16 billion go unused.
To put those numbers into perspective, researchers broke the numbers down even further and found that the average American household earns about $622 a year in rewards earnings; however they only use about $417 of their points. The remaining $205 in rewards points typically go to waste, say researchers.
$205 is enough for a cheap airline ticket, an evening out, or even better, a week’s worth of groceries for the family. So why do consumers end up leaving so much of their rewards earnings on the table?
“One of the problems is that consumers are scattering their efforts across so many loyalty programs that they lose track,” says Jim Sullivan, a partner at Colloquy. “According to the numbers from our loyalty marketing census, the average family has 18 loyalty programs. However, they are actively engaged in only 8 of those. The others go unused and often are ultimately forgotten.”
Sullivan recommends that consumers make the most out of rewards card earnings by sticking to one primary rewards credit card. Consumers may also want to consolidate their spending around the programs that deliver the biggest return. For example, consumers could use their primary rewards card at merchants that have their own rewards program and reap additional benefits. This strategy is often referred to as “double dipping.”
In addition, says Sullivan, consumers should educate themselves beforehand about a particular rewards program so that they know whether it is worth the time and effort. “Understand the programs you enroll in, and make sure that those are merchants you want to do business with, so you don’t end up leaving points on the table,” recommends Sullivan. “Some rewards programs, such as airline programs, have a lot to offer. But it’s an investment of time to learn how to take full advantage of them. If you don’t have the time or interest, that’s probably not the best rewards program for you.”
According to Sullivan, companies that issue rewards points are also partially responsible for rewards points going unused. For example, many companies don’t regularly communicate with consumers about their rewards earnings, and they often neglect to notify consumers if their points are about to expire. In addition, many consumers complain that rewards earnings are too difficult to redeem or may be subject to black-out dates (as in the case of frequent flier miles).
Sullivan notes that the results of the study should alert card issuers and other industries with loyalty rewards programs that they still have a lot of work to do. While unredeemed points may translate into short-term savings, companies could lose out on the value of the long-term customer relationships and brand loyalty that effective rewards programs build.
“Less redemption means less consumer engagement,” says Sullivan. “You can’t save your way to a great loyalty program. Consumer redemption is the key. Otherwise, what’s the point? If people don’t redeem and the consumer feels let down, it could even hurt the relationship.”
According to the study, the majority of rewards are awarded by the financial services industry (primarily credit card issuers). Banks and other card issuers give out a total of $18 billion in rewards earnings each year, while airlines and hotels give out the second highest amount ($17 billion in annual rewards).
The retail industry, in turn, hands out just $12 billion in rewards each year, despite accounting for about four out of ten loyalty program memberships. This discrepancy may have occurred because retailers’ rewards programs often include cash rebates, which were not tracked in the study.
