Unredeemed loyalty points are not profit but a deferred liability in your books and a customer who stopped caring. Treat them with three things: a notification the moment a reward is earned, a low first redemption threshold, and an expiry of at least a year published from day one.
Why merchants celebrate the wrong number
An owner looks at the report, sees that forty per cent of points issued were never spent, and counts it as a saving. The arithmetic is correct and the operational reading is entirely wrong: you did not save forty per cent of your programme cost, you paid for a programme that failed to work on forty per cent of your customers.
A reward is not a gift handed over at the end; it is the engine that pulls the customer along the whole route. When nobody reaches the end, the engine stopped halfway — and every point you issued before that went out for nothing.
Reading your outstanding balance
| Situation | What it means | What to do |
|---|---|---|
| Small balances spread across many | The threshold is far too high | Lower the redemption floor |
| Large balances held by a few | Big customers do not know what it is worth | Tell them their balance in riyals |
| Old balances with no movement | Those customers have already left | A win-back campaign, not a system change |
The first is the most common and the easiest to fix. A customer holding thirty points against a hundred-point threshold sees a number leading nowhere, and stops looking at it. Lower the floor to something reachable in three visits, and you will watch the outstanding balance fall and visits rise in the same month.
The third is entirely different and no system tweak addresses it. A balance untouched for six months belongs to a customer who left, and the points are a symptom rather than the illness. Treat the absence itself, or accept that these people have gone and stop counting their balances as a live obligation.
The accounting liability, at its true size
Every point issued is a promise of service not yet delivered. In a small shop the figure stays small and deserves no anxiety, but it grows quietly month after month. The risk is not its size but that all of it can be called at once: a single reminder campaign is enough to convert two years of balance into rewards in one week.
The third figure pays best of the three. A "your balance expires in a month" notification combines a genuine service to the customer with a solution to your problem in one message: they do not lose what they collected, and you convert a dormant liability into a visit in a month of your choosing.
Four steps that shrink the outstanding balance
- Notify automatically on qualification The moment a balance completes is the highest-response point in the entire programme, and missing it is the leading cause of points piling up.
- Show the balance in riyals rather than units "180 points" is an abstraction; "your balance is 9 riyals" is an amount whose owner knows what to do with it.
- Lower the threshold for the first redemption only Make the first reward very close, then return to your usual floor. That first experience is what convinces a customer the programme is real.
- Warn a month before expiry Not on the final day — a late notification annoys people and produces no visit.
Note that all four steps raise your visible cost and lower your outstanding balance at the same time. That is not a flaw; it is the goal. You are converting a sleeping liability into visits, and paying for a programme that works rather than keeping attractive figures in a report nobody reads.
Should you expire old points?
Expiry is a legitimate tool when it is published from the start and the window is reasonable. But it treats the symptom rather than the illness: it tidies your books without bringing anybody back. And if it arrives as a surprise or with a short window, it buys an accounting settlement at the price of trust you will not easily recover.
The working rule: at least a year, stated on the back of the card from day one, with a warning a month ahead. With those three conditions expiry becomes a policy customers understand. Without any one of them it becomes a surprise they tell other people about.
Common questions
Does low redemption not make my programme cheaper?
Cheaper and less effective at once, which is a poor bargain. A reward costs you once and buys a full cycle of visits before it, so saving the reward cost usually means you lost the visits too. A low cost here is a symptom rather than an achievement.
How do I handle a huge balance held by one customer?
Speak to them directly rather than waiting. Offer a staged redemption or a special reward suited to the size of their balance, which turns a large liability into a moment of recognition they remember. What you must not do is change the terms retrospectively to shrink it, which costs you your best customer.
Should I record outstanding points as an expense?
Better to hold them as an estimated liability rather than an expense already incurred, and update it monthly against your real redemption rate. That gives you a picture that is both conservative and realistic, and prevents the surprise of a month when many people redeem at once.