What period should I set for the points expiration?
Designing and launching a customer loyalty program is one thing, but managing it can take time and a more detailed approach. If you're planning or already using a points-based loyalty program, you need to answer one important question - what do you do about points expiration?
What is points expiration?
Points expiration is a process in rewards programs that sets a time frame of activity for accumulated loyalty points. It's also a great tool for motivating customers to actively participate in your Rewards program, spend points, and make purchases. Setting a strict time frame for redeeming loyalty points can be helpful from a program management perspective. However, if you set a points expiration date without studying the behavior of your customers specifically, it can affect your Brand image.
When it comes to whether loyalty points should expire, there are two very different views on this question. Before enabling this setting, let's delve deeper into this topic and review a few key points 😉.
Pros and Cons of enabling points expiration
Encourages customers to come back to your store
Without points expiring, customers have no pressing need to earn and use points, which can limit repeat purchases and sales in general.
Keeps the brand on top of your customer's mind
No one likes to lose, and that's exactly how overdue points feel. To avoid this, customers will remember your brand and their unused loyalty balance more often to keep participating in your program.
Easier program management
With an expiration policy, you can limit situations where customers with indecently high loyalty scores come into your store to claim dozens of free rewards in one go. Moreover, stagnant high balances make it difficult to differentiate active from dormant users.
Worsens customers’ experience
If your expiration policy is not implemented properly, it can cause your customers to feel cheated. Loyalty programs should be built with both parties in mind. For a moment, try to put yourself in their shoes. Imagine that you received an email telling you that if you don't spend your points within the next month, they will disappear. That will probably make you a little angry.
How the ‘Points Expiration’ works in Growave?
In Growave, we offer you to set up dynamic expiration for the whole points balance where points expire after a certain amount of time if they aren’t used or the customer didn’t earn more points.
A dynamic expiration is one of the best ways to increase your purchase frequency with a loyalty program. This type of expiration allows you to motivate customers much more effectively. This is because they don’t view expiration as happening in the immediate future, they can continue to save points for bigger rewards (if they choose).
You can find more details in the following article.
Which period should I set up for points expiration?
Each company has a unique customer behavior which is important to consider in the points expiration period.
1) First, you should find out your Purchase frequency:
Number of orders (365 days) / number of unique customers who made order (365 days) = AVERAGE PURCHASE FREQUENCY
2) Now we can find out your Points' Expiration period. Here we can use ‘Time between purchases’. We want to set up point expiration so that customers who are considered dormant (haven’t purchased from you in while) can be emailed telling them their points will expire.
365 days/Average Purchase frequency (during 365 days) = Time Between purchases
This method takes your company sale cycles into account rather than just setting it. Maybe you sell furniture or household appliance which someone buys every 3-5 years. Having a point expiration of 6 months is not going to do you much good.
What you can do in Growave to ensure that your customers are aware of points' expiration date?
- Mention the ‘Points expiration’ period and logic in FAQ
- Enable notification about the points expiration date
- You can make double/triple notifications before points expiration using our integration with Klaviyo
- Mention points expiration logic and rules in the Terms& Conditions doc
So, should the points expire or not?
There are pros and cons to both sides of this question. In the end, it all depends on what your company wants to achieve with the loyalty program and your overall marketing strategy. If you want better liability management and more control over your program, then expiration may well be a good option for you. However, if you're worried about ruining the customer experience and driving people away from your rewards program, then expiration may not be the best solution. The next step you can take is to research what your competitors are doing and test different approaches and methods 💻.