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Measure and Strengthen Your Loyalty Rewards Program - Risk and Financial Services - Global

Measure and Strengthen Your Loyalty Rewards Program

If yours is a company with a loyalty rewards program for your customers, ask yourself the following questions:

  • Do we have a best-in-class method for assessing redemption rates and costs?
  • What are the costs and benefits of making changes to our program?
  • What motivates customers to use our program?
  • Does it improve loyalty and bring in business?

Risks Come With All Loyalty Rewards Programs

Loyalty rewards programs have become a "needed to play" feature for many companies seeking to attract customers by offering rewards (e.g., points or miles) that accumulate over time before they are redeemed. They are popular and can help build a brand.

But as customers earn points, your organization can accumulate risks that must be managed in three main areas:

  • the proportion of rewards that will be redeemed
  • the timing of reward redemptions
  • the variety and cost of goods or services for which rewards will be redeemed.

Towers Perrin Can Improve Your Loyalty Rewards Program

We can apply our extensive experience with clients, coupled with sophisticated nontraditional actuarial and statistical models, to evaluate the risks of your loyalty rewards program and help you consider ways to make it more effective. Our approach recognizes those unique features that are likely to impact the proportion of rewards redeemed by members, including geography, type of membership, enrollment date and other special factors.

We know about trends in redemption rates over time. For example, redemption rates are typically higher among newer members compared to longer-term members. This kind of information enables us to give you a better understanding of the drivers of your rewards program. It can also enable you to assess potential changes, including the potential impact on costs.

In fact, support to improve data collection, along with superior quantification of risk and related volatility, is a core service that we offer to our clients.

A Record of Success With Loyalty Rewards Programs

Towers Perrin works with loyalty rewards programs in the hospitality, financial, airline and retail industries. Our approach has been received with enthusiasm by management and company boards.

To discuss how Towers Perrin can assist your company, please contact us to learn more.