In the world of customer loyalty, the point-based system has become a go-to model for businesses aiming to reward their customers for their purchases and engagement. Whether you’re an online retailer, a high-street store, or a service provider, rewarding customers with points for every transaction can help build stronger relationships and encourage repeat business.
However, one question often arises when designing these programmes: Should the points reset at the start of each year, or should they carry over indefinitely?
For many brands in the UK, the decision to reset points annually is a common practice. But like any marketing decision, there are both pros and cons to this approach. In this blog, we’ll explore the key considerations and help you decide whether resetting your customer loyalty points every year is the right strategy for your brand.
Why Do Some Brands Reset Points Annually?
The idea behind resetting points each year is often rooted in the concept of encouraging continual engagement. By starting fresh at the beginning of each year, businesses can inspire customers to re-engage with the programme, make more purchases, and work towards new rewards.
Here are some of the most common reasons brands choose to reset their points each year:
1. Encouraging Consistent Spending
By resetting points annually, brands can create a sense of urgency and encourage customers to make purchases within a given timeframe. Customers may feel the pressure to “use up” their points before they expire, motivating them to return to the brand and make more purchases.
2. Simplicity in Programme Management
A reset allows businesses to easily manage their loyalty programmes, particularly for businesses with a large customer base. If points accumulated over multiple years, it could lead to complicated accounting and logistics. A reset helps to simplify reward structures, ensuring businesses can deliver consistent and manageable rewards to customers.
3. Avoiding Point Hoarding
Some customers may accumulate points without redeeming them, essentially hoarding them for large future rewards. A reset at the end of the year helps to ensure that customers are actively engaging with the program and redeeming points regularly, rather than accumulating them indefinitely. This could also reduce the financial liability on the company’s part, as accumulated points represent a liability in the company’s books.
4. Clear Annual Milestones
With a yearly reset, you create a clear timeframe for achieving rewards. Customers may feel a sense of accomplishment by reaching certain milestones within the year, and having a reset ensures that everyone has the same starting point, keeping the program fair and consistent for all participants.
The Pros of Resetting Points Annually
1. Creates Urgency and Boosts Spending
One of the key benefits of resetting points is that it encourages customers to engage with the program within the current year, driving increased spending. When customers know that their points will expire at the end of the year, they’re more likely to make a purchase before the reset happens, rather than letting their points go unused.
• Example: A customer who accumulates points over several months might be motivated to make a larger purchase in December to redeem those points before they disappear.
2. Clear Timeframe for Customers
An annual reset offers customers a simple, transparent structure for when their points will reset. This makes it easier for them to plan their purchases and keep track of their points balance. It’s a clear incentive to engage consistently with the brand throughout the year.
• Customers know that if they don’t redeem their points in the current year, they’ll lose them. This adds an element of excitement and anticipation for customers looking forward to rewards.
3. Opportunity for New Programme Features
Each new year offers an opportunity to refresh your loyalty programme with new rewards, offerings, or tiered structures. This can help keep the programme exciting and prevent it from feeling stale. By resetting points annually, you can introduce new benefits that align with customer preferences or seasonal changes.
• For example, a brand might introduce holiday-themed rewards or offer bonus points for certain activities at the start of a new year, which re-energises the programme.
4. Minimises Loyalty Programme Liability
The longer customers hold onto their points, the greater the potential liability for the brand. If customers accumulate large point balances and redeem them all at once, it could create an unexpected financial burden. Resetting points annually reduces this liability by ensuring that points are redeemed within a set period and are not carried over indefinitely.
The Cons of Resetting Points Annually
1. Frustrating Loyal Customers
For customers who have been consistently loyal and have built up a significant number of points over the course of the year, an annual reset can feel like a disincentive. They may feel their efforts have been “wasted,” especially if they were close to reaching a larger reward.
• Customer dissatisfaction: If a customer has spent a significant amount of money or time accumulating points, they may be unhappy with the annual reset, which could impact brand perception and customer retention.
2. Missed Long-Term Engagement
If you reset points each year, you might miss out on fostering long-term loyalty with customers. Some customers may not engage with the programme in a given year but still remain committed to your brand over time. Resetting points annually could discourage customers who are less frequent but still loyal.
• Example: A customer who only shops with you during the summer or holiday season might not earn enough points to reach a reward before the end of the year, despite being a loyal customer for several years.
3. Risk of Short-Term Focus
While resetting points annually can encourage customers to spend in the short term, it may undermine long-term loyalty. When customers know that they must spend to redeem points within the year, they might prioritise short-term rewards over continuing to develop a deeper relationship with the brand.
• Brands may inadvertently create a culture where customers are motivated by instant gratification, rather than building a sustained relationship with the business.
4. Customer Confusion
Resetting points at the end of the year can also create confusion or dissatisfaction among customers if they are not clearly informed about the reset policy. Without proper communication, customers may be unaware of the expiration and feel caught off guard when their points are suddenly wiped out.
• Clear communication is key to preventing frustration, but even with clear messaging, some customers may still feel unhappy with the reset.
Alternatives to Annual Point Resets
If you’re concerned about the drawbacks of an annual reset, there are alternative strategies to consider:
• Rolling Expiry: Instead of resetting all points annually, allow points to expire after a set period of inactivity (e.g., 12 months from the last purchase). This allows customers to keep their points as long as they continue to engage, but rewards them for frequent activity.
• Tiered Rewards with Milestones: Rather than resetting points, create a system where points are used to unlock specific rewards, but milestones or tiers are set over a longer period. This encourages sustained engagement and progression without the reset pressure.
• Bonus Points for Engagement: Instead of resetting points, offer bonus points for customers who engage with your brand in specific ways (such as social media sharing or writing reviews). This helps keep customers engaged and balances the incentive to redeem points.
Conclusion: Is an Annual Reset Right for Your Brand?
The decision to reset points annually depends largely on your business goals, customer base, and how your loyalty programme is structured. If you’re looking to drive immediate engagement, encourage spending, and maintain a manageable programme, resetting points every year can be effective. However, if you want to foster long-term relationships and avoid frustrating loyal customers, you may want to consider alternative strategies.
Ultimately, the key is to ensure that your customers understand the structure of your loyalty programme and feel that their loyalty is truly being rewarded. If you choose to reset points annually, communicate this clearly and provide enough incentive for customers to stay engaged throughout the year. With the right balance, a well-designed loyalty programme—whether it resets or not—can be a powerful tool for building lasting customer relationships.
