Did you know that many consumers don’t fully utilise the rewards earned from rewards-based marketing campaigns? This phenomenon, known as breakage, offers a substantial opportunity for businesses to enhance the value of rewards they provide to customers. Leveraging reward redemption breakage enables businesses to offer more valuable rewards than their budget initially allows, ultimately boosting consumer engagement and campaign success.
Breakage happens when consumers fail to redeem the rewards earned through marketing campaigns or behavior change initiatives. Factors such as forgetfulness, busy schedules, and distractions contribute to the limited utilisation of these rewards. Expiration dates and associated terms and conditions can also lead to rewards being forgotten. However, businesses can capitalise on this situation by offering rewards that resonate better with their target audience. Understanding the concept of breakage empowers businesses to strategically design reward programmes that exceed their original budget, providing higher-value rewards.
While breakage presents opportunities, it also poses challenges for effective campaign planning and budgeting. The unpredictable nature of rewards breakage makes it challenging for businesses to accurately predict campaign costs. Overcoming this challenge involves engaging a rewards risk coverage provider.
Determining the full extent of rewards campaign breakage is possible only at the end of the campaign. This presents a challenge for accurate budgeting and provisioning. The costs associated with promotions can fluctuate significantly, exposing businesses to financial risks. To mitigate these risks and potential additional costs from over-redemption, businesses can rely on reward risk coverage, ensuring effective management of unforeseen expenses related to offering more valuable rewards. Partnering with a reputable risk management company is highly recommended for businesses aiming to optimize breakage to its fullest potential. These companies leverage their specialised expertise to forecast the percentage of total rewards liability by considering key factors related to breakage.
By leveraging reward redemption breakage, businesses can surpass their budget limitations and provide more valuable rewards to consumers. This increased value drives higher levels of engagement, participation, and loyalty. Understanding the potential of breakage and utilising it strategically allows businesses to create compelling rewards programmes that steer desired consumer behavior and achieve campaign objectives.
