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In customer loyalty programs, what percentage of customers typically redeem rewards?

I work in the heating oil industry. We offer our auto-delivery customers a free liter coupon once their consumption reaches a certain threshold. Currently, around 50% of qualified customers actually redeem the coupon. How could I measure this customer loyalty program and improve it?

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In most customer loyalty programs, relatively few of the participants actually redeem their rewards. The most successful customer loyalty programs rely on both tangible and intangible (service, convenience, information, etc.) components. In the kind of research we conduct for clients, we are able to determine the effectiveness of each element based on its correlation, or contribution, to desired loyalty behavior. In the absence of this kind of quantitative evaluation, my recommendation is to debrief the redeemers and non-redeemers of the coupon to find out why they are/are not redeeming and also to determine what else the company can do to build value.

This was first published in April 2007

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