Loyalty Program Breakage Rate

Related KPIs

Loyalty Program Breakage Rate Interpretation

A high Loyalty Program Breakage Rate suggests that customers are not redeeming their rewards, which may reflect poor program design or lack of awareness. Conversely, a low breakage rate indicates effective engagement and satisfaction among customers. Ideal targets typically range from 10% to 20%, depending on industry standards and program specifics.

• <10% – Strong engagement; customers are actively redeeming rewards
• 10%–20% – Healthy range; monitor for potential improvements
• >20% – Concern; reassess program structure and communication

Loyalty Program Breakage Rate Benchmarks

We have 4 relevant benchmarks in our benchmarks database.

Common Pitfalls

Many organizations overlook the importance of customer communication in loyalty programs.

• Failing to educate customers about program benefits can lead to underutilization. Without clear messaging, customers may not understand how to earn or redeem rewards, resulting in higher breakage rates.
• Neglecting to update program offerings can make them stale. If rewards do not align with customer preferences, engagement will wane, leading to increased breakage.
• Overcomplicating redemption processes frustrates customers. A convoluted experience can deter them from using their rewards, increasing the likelihood of breakage.
• Ignoring customer feedback prevents necessary adjustments. Without insights into customer preferences and pain points, organizations may miss opportunities to enhance the loyalty program.

Improvement Levers

Enhancing the Loyalty Program Breakage Rate requires a focus on customer experience and program relevance.

• Streamline the redemption process to make it user-friendly. Simplifying steps and reducing barriers can encourage customers to take advantage of their rewards.
• Regularly communicate program updates and benefits to customers. Keeping customers informed fosters engagement and encourages them to utilize their rewards effectively.
• Solicit customer feedback to refine the loyalty program. Actively seeking input allows organizations to adapt offerings to better meet customer needs and preferences.
• Introduce limited-time offers or promotions to incentivize redemption. Creating urgency can motivate customers to engage with the program and reduce breakage rates.

Loyalty Program Breakage Rate Case Study Example

A leading retail chain faced a significant challenge with its Loyalty Program Breakage Rate, which had soared to 30%. This high rate indicated that customers were not redeeming their rewards, leading to dissatisfaction and a potential decline in repeat purchases. The company recognized that its rewards structure was outdated and did not resonate with its customer base.

To address this issue, the retail chain conducted extensive customer surveys and focus groups to gather insights. Based on the feedback, they revamped the loyalty program, introducing more relevant rewards and simplifying the redemption process. Additionally, they launched an educational campaign to inform customers about the benefits and how to maximize their rewards.

Within 6 months, the breakage rate dropped to 15%, significantly improving customer satisfaction and engagement. The new program not only encouraged more redemptions but also drove an increase in repeat purchases, contributing to a 10% rise in overall sales. The success of this initiative reinforced the importance of aligning loyalty programs with customer expectations and preferences.