When — and How — to Build Hurdles into a Loyalty Program

Although rewards programs are designed to save customers money, most of them also include policies such as spending minimums that limit customers' ability to actually reap the benefits of the program. If set up correctly, these hurdles can be a win-WIN for both companies and their customers. Redemption hurdles allow companies to price segment their customers so they can meet more needs. Companies can use industry market research and prior purchase data to set hurdles that will separate customers into groups based on their Frequency and Amount. Program rules should be communicated clearly to avoid surprises. It is possible for companies to design rewards programs that will maximize profits and customer satisfaction.

Have you ever signed up for a rewards program only to discover that your points are no longer valid? You are not the only one if that is the case. Research shows that loyalty program members lose up to a third of the savings they could have earned from these programs due to redemption hurdles: policies such as expiration dates, spending minimums, and other requirements that hamper customers from actually reaping the benefits of membership