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Pros and Cons of Implementing a Points Based Loyalty Program

Pros and Cons of Implementing a Points Based Loyalty Program

One of the more useful tools in a loyalty marketer’s arsenal used to build better brand advocates and avoid the adverse effect of discounting products, many loyalty programs issue points as “virtual currency” allowing participants to keep track of their earned benefits. Typically, users receive points for hitting predetermined benchmarks that reward them with a variety of incentives, which can include prepaid Visa cards, gift cards, digital rewards, goods, and services from the issuing organization. This could include bonus products, bonus thresholds, and channel marketing opportunities. These loyalty programs are a marketing stable for market research, automotive, health, and wellness, sales incentives to mention a few.

Compiled below are a few of the Pros and Cons to help guide those considering developing their own points based loyalty program:

PROS

  • Widely used and simple for users to understand.
  • Offers greater competitive advantage because earning and reward thresholds can be easily adjusted
  • Because points are more flexible and targeted in a brand management solution, these types of promotions are perceived by users as more creative for select marketing schemes.  
  • Eliminates price discounting, especially for promotions on product brands that do not allow discounting.
  • Can use to reward customers or employees.
  • Virtual currency can be resold to vendors to help support the program
  • Points programs assist in the collection of customer data for cross-selling and targeted promotions and targeted promotional opportunities.
  • Leveraging the difference between points issued and points redeemed (breakage) can result in a reduction of marketing costs.

CONS

  • Just another points program because of the proliferation of points programs.
  • The requirement of thousands of points to be earned to redeem for a reward causing the “halo effect” devaluing the points programs concept.
  • Ongoing program management is required to reduce program fatigue depending on the community of users.  
  • Ongoing investment in redemption opportunity requirement for program success.
  • Upfront investment, and more complicated to put together.  
  • Currency management and customer service required
  • Need to put a contingency on the balance sheet for outstanding points
  • Can be more expensive than cash back if not using a self-selecting user marketplace to allow selection of items lower than the cost of cash

As you work through the pros and cons of points based loyalty program, you will discover finding the right reward management solution provider is an essential component in driving a program’s success. All Digital Rewards (ADR) is a leading technology company specializing in customer loyalty and promotions, program development, design, and implementation. We can help you navigate through the pros and cons as they present themselves. You have a partner from beginning to end when working with the All Digital Rewards team.

For more information on Key Components of a Successful Loyalty Program call us now at 866-415-7703!





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