The 3 Strategies to Maximize Your Rewards Liquidity

What is rewards liquidity?

The rewards liquidity of a loyalty program refers to how easily their points or rewards can be earned, redeemed, utilized, or converted into other forms of value. In the same way as monetary liquidity refers to how readily cash or assets can be used, rewards liquidity pertains to the usability, flexibility, and real-world applicability of loyalty program points or rewards.

A loyalty program with high rewards liquidity tends to be more attractive to customers, as it gives them greater flexibility and a wider range of options when it comes to utilizing their earned points. It feels less restrictive and more comparable to having additional spendable currency.

How is rewards liquidity measured?

In order to measure the rewards liquidity of a loyalty program, we looked at the methodology used by the Heritage Foundation* to score the economic freedom of countries. In many ways loyalty programs are built very similar to economies and can therefore be evaluated by the same underlying principles. Let’s take look:

How does rewards liquidity relate to economic freedom?

Beneath the fun and engaging customer-facing applications that loyalty programs are, the fundamentals are much like economies. By taking the above mentioned pillars and translating them to the basics of loyalty programs, we can see the relation:

• Tax Burden translates to Reward Liquidity Tax → Tax imposed on loyalty points when redeemed for partner goods and services.
• Business and Monetary Freedom translates to Reward Earning and Spending Freedom → How freely members can earn and spend points in a loyalty program, based on the point’s value.
• Trade Freedom translates to Reward Exchange Freedom → The ability of transferring or using points across various programs and partners.

Just like countries, it is important for loyalty programs to allow their points “economy” to foster and be used effectively by their loyalty program members.

With that understanding, of what rewards liquidity is, its basics and how it is measured, we can now focus on the three strategies that will help you maximize your loyalty program’s rewards liquidity.

Strategy #1: Simplify how your members earn points

An important step towards maximizing your loyalty program’s rewards liquidity is by simplifying the process through which your members earn points. The easier and more straightforward for your customers to earn points, the better. This means giving your loyalty program members various ways to earn points, in a clear and intuitive way. To name a few examples:

• give 1 point per unit of currency spent on each purchase
• every time a member logs in to your online store they earn points
• offer bonus points or point multipliers on select products and services

Transparency is key – customers should easily understand how their actions translate into points. The simpler the process, the more engaged your customers will be, which ultimately helps increase the liquidity of your rewards program.

Strategy #2: Offer amazing redemption options

The value and liquidity of loyalty program points largely depends on what they can be redeemed for. Offering a wide variety of attractive, relevant, and tangible redemption options that cater to the interests of your members will significantly increase your loyalty program rewards liquidity. Your members will actually have a reason to spend their points. Besides the usual discounts and coupons, here are other examples:

• perks such as free shipping for a month
• unique experiences such as making-of tour or behind the scenes tour
• unique services such as priority treatment or skip the line passes

The more desirable and varied the redemption options, the more value each point holds in the eyes of your members, leading to increased program engagement and greater rewards liquidity.

Strategy #3: Make your loyalty points exchangeable

One of the most powerful ways to boost the liquidity of your loyalty program is to make your points exchangeable. This gives your members more freedom on how they use their points, incentivizing them to spend their points on what they care about, which in turn engages them to come back to earn more points. This strategy would allow them to:

• transfer points to others
• exchange points across different programs
• even convert points into cash or other forms of value.

In a world where consumers seek flexibility, exchangeable points not only enhances the perceived value and usability of the points but can also provide you a competitive edge for your loyalty program.

Key Takeaway

Your loyalty program’s rewards liquidity determines how interesting, engaging and valuable your loyalty point is. In order to operate a thriving loyalty program it is important that your customers and members can easily earn and spend their points. As seen above with the model for economic freedom, the more monetary and trade freedom there is, the more an economy can grow. Therefore an increase in liquidity of said economy or in this case loyalty point will result in a successful loyalty program.

In our Global Rewards Liquidity Report 2023 we show you in depth data and analysis of how the rewards liquidity of your loyalty program points matters so much.