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Overview

The Redemption Ratio is how many points make one dollar of redeemable value. The field on the Reward Bank extension holds one whole number, not a pair like 10:1. The default is 1 — one point is worth one dollar. Set it to 10 and ten points are worth one dollar. Two numbers decide what a member experiences, and neither means anything alone:
  • The earn rate on each Collectible Reward — how many points an action gives.
  • The Redemption Ratio on the Reward Bank — what those points are worth when the member spends them.
There is no correct pair in the abstract. The one that works is where the cost per way to earn is sustainable for you and the reward is reachable for the member. This page describes how to get to those numbers.

Work Backward From the Reward

Start at the end. Decide what the first meaningful reward is and what it costs you, then work back to the ways to earn.
  1. Pick the first reward a member should reach. Something they would genuinely want — a $10 coupon, a free product, a shipping credit.
  2. Estimate what it costs you. Include fulfillment fees and the incremental cost of the reward. For a coupon or credit, model expected redemption and purchase behavior rather than treating retail value or gross margin as the cost by itself.
  3. Decide how long it should take. Make the reward reachable within a timeframe that matches how often members normally interact with you, while keeping the cost sustainable.
  4. Divide. The points earned across those interactions, set against the reward’s point cost, gives you the earn rate.

Set the Cost per Action

Once you have the earn rate, price each way to earn against it. Purchases are usually the anchor. A dynamic Collectible Reward calculates point value as a percentage of transaction value. The program’s realized cost also depends on the Redemption Ratio, how much issued value members redeem, and the cost of the reward they choose. Non-purchase actions are priced differently. A review or a profile completion has no transaction value, so price it against what the action is worth to you — the conversion lift from having reviews, or the targeting value of the data.
Price every dynamic reward with a maximum per transaction. Without a deliberate cap, an unusually large order issues an unusually large reward, and the exposure scales with your best customers’ order values.

Make the Numbers Legible

Numbers members cannot do arithmetic on are numbers they will not chase.
  • Round numbers beat precise ones. An earn rate of ten points per dollar is easier to hold in your head than 7.5.
  • State the reward, not the rate alone. “500 points gets you a $10 coupon” tells a member more than “10 points per dollar”.
  • Keep one earn rate where you can. A single rate across every way to earn is easier to communicate than a different rate for each.

Decide the First Threshold

The minimum redemption amount decides how long a member holds a balance before they can do anything with it. Set it too low and members redeem constantly for trivial value, and the program costs you a transaction fee each time without building any habit. Set it too high and members give up before reaching it, leaving you with a growing balance of points that were never worth anything to anybody. The minimum and maximum are configured as Redemption Minimum Value and Redemption Maximum Value alongside the ratio. Setting either to 0 disables it.

Watch What Happens After Launch

The numbers you launch with are a hypothesis. Check them against these:
  • Share of issued value redeemed. A low figure can mean the threshold is out of reach, the rewards are not wanted, or members have not had enough time to accumulate points.
  • Time to first redemption. How long a member takes to reach their first reward. If it is far longer than you designed for, the earn rate is too thin.
  • Unredeemed value. Interpret the trend alongside member growth, seasonality, and time since launch.
  • Cost per way to earn. What each one is actually costing, against what you modeled.
See Reward Bank Reports.

Changing the Ratio Later

Changing the Redemption Ratio changes the value of points members already hold, so treat it as a policy change rather than a configuration tweak. Before changing a live ratio:
  • Check what your program terms say about changes to point value.
  • Prefer changing what points are worth going forward over revaluing existing balances.
  • Consider adjusting earn rates on individual actions instead, which leaves the value of held points untouched.
  • Tell members before it takes effect.
The Redemption Ratio belongs to the Reward Bank, not to an individual campaign variant. Test a new ratio in a sandbox or separately targeted Reward Bank before changing the live bank. See Testing Your Loyalty Program.

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