In a highly competitive market landscape, retaining customers is not just an advantage—it’s essential. Many businesses have turned to loyalty points programs to foster long-term relationships and encourage repeat interactions. Yet, measuring the success of these programs can be complex. While metrics such as total registered users, monthly active participants, and transaction volume are valuable, one metric stands above the rest as a unique indicator of a loyalty program's impact: points breakage.
What is Points Breakage, and Why Does it Matter?
Points breakage refers to the percentage of loyalty points earned by customers but left unredeemed. A lower breakage rate typically reflects higher customer engagement, suggesting that users find the loyalty program valuable and are motivated to use their rewards. Points breakage is calculated as follows:
Breakage Rate = (Points Earned − Points Redeemed) / Points Earned
Sample Calculation:
- Earned Points: 120,000
- Redeemed Points: 80,000
- Breakage Rate: (120,000 - 80,000) / 120,000= 33.33%
The global average points breakage rate sits at around 25%. Programs with rates well below this benchmark indicate stronger customer engagement and effectiveness in driving brand loyalty. Conversely, higher breakage rates often signal that a program’s rewards are either difficult to redeem or lack relevance, reducing customer motivation to engage. For businesses striving to create impactful loyalty programs, reducing points breakage becomes a critical success metric.
Case Study: SEAOIL VIP’s Success with a Low Points Breakage Rate
SEAOIL, a leader in the local fuel industry, implemented the SEAOIL VIP App in partnership with RUSH to enhance customer loyalty and engagement. Launched in 2022 and running through September 2024, the SEAOIL VIP loyalty program allows customers to earn points for various interactions, including registrations, referrals, and most importantly, purchases. With straightforward earn-and-burn mechanics and highly accessible redemption processes through mobile, SEAOIL’s program has consistently engaged customers, as reflected in its impressively low breakage rate.
SEAOIL’s breakage rate of 1.05%—significantly below the global average—demonstrates the program’s success in encouraging customers to redeem their points and remain active in the loyalty ecosystem.
Key elements contributing to SEAOIL’s success include:
- Accessibility: Customers can earn and redeem points conveniently through their mobile phones, reducing barriers to engagement.
- Relevance: Points can be redeemed for rewards that align with customer preferences, making the program highly attractive and motivating.
- Simplicity: Clear earn-and-burn mechanics encourage customers to engage frequently, ensuring they recognize the value in each interaction.
By focusing on these factors, SEAOIL has cultivated a highly engaged customer base, evidenced by one of the lowest points breakage rates in its industry.
Implications for Loyalty Program Success
For companies seeking to replicate such success and strengthen their own loyalty programs, RUSH’s white-label Loyalty Points program provides a proven framework. With extensive experience powering successful programs, including SEAOIL’s, RUSH designs loyalty solutions that drive measurable engagement and retention, ultimately contributing to long-term customer loyalty.
Conclusion
The SEAOIL VIP loyalty program highlights how effective program design and strategic customer engagement can dramatically reduce points breakage, positioning SEAOIL as a leader in loyalty success within the fuel industry. Businesses interested in creating high-impact loyalty programs can leverage RUSH’s expertise to build programs that not only lower points breakage rates but also deepen customer relationships.
To learn how to get your loyalty program #PoweredByRUSH, connect with our team to discover how we can help you foster customer engagement and build brand loyalty. Book a demo with us here.
