Points Plus Money: Uncovering the Impact of Mixed Currency Redemptions

Many loyalty points are earned and redeemed each year. Yet, despite the continued growth of loyalty programs, many consumers struggle to accumulate enough points for meaningful rewards, creating an engagement barrier. To address this, some firms offer mixed currency redemptions, allowing consumers to combine points and money for rewards, expanding access and value, especially for those with low point balances. However, many firms remain hesitant due to uncertainty about whether the strategy could reduce profitability or weaken program loyalty, reflecting mixed views on its value. Despite this divergence, little is known about its impact. Using detailed transaction data from a major loyalty program, this study examines how mixed currency redemptions influence consumer behavior and firm profitability through an instrumental variables control function approach that leverages variation in the pricing of mixed redemption menus. Results show that mixed currency redemptions significantly increase both consumer engagement and program profitability, particularly through higher direct point purchases, without reducing activity in other channels. Contrary to concerns that they might weaken the program's lock-in effect, mixed redemptions do not increase disengagement. Although designed and marketed as a solution for low balance consumers, they also drive strong behavioral responses from high balance consumers, a segment often overlooked in mixed redemption strategy. Behavioral patterns suggest a cognitive mechanism whereby mixed redemptions enhance consumers' understanding of point value. These findings demonstrate that mixed currency redemptions can unlock broader and more profitable engagement across consumer segments and offer underutilized strategic value.