Loyalty & Reward Programmes
February 8, 2024

Why Loyalty Programmes Fail: 10 Pitfalls to Avoid

Why Loyalty Programs Fail

In this article, we'll discuss the most common pitfalls that prevent you from reaching your loyalty programme goals.


Businesses with effective customer loyalty programmes see an improvement in revenue. According to a study, a customer retention increase of just 5% improves revenues by 25-95%.

Nevertheless, some businesses fail to achieve desired results because they fall victim to several crucial mistakes. One such error is not making the customer the centre of all decisions in the loyalty programme.

This can be the difference between merely functional loyalty programmes and truly effective ones. 




    1. Setting unrealistic programme goals
    2. Failure to communicate programmes effectively
    3. Not being able to target specific demographics with relevant and engaging rewards 
    4. Complicated programme structure and layout
    5. Unrealistic targets for customers to redeem rewards
    6. Overemphasising corporate goals
    7. Choosing the wrong type of loyalty programme
    8. Outdated technology to support programmes
    9. Not recognising potential of gamification
    10. Not recognising your most important customers
  • Prioritise the customer for better results 



10 Crucial Loyalty Programme Mistakes to Avoid at All Costs


1) Setting unrealistic programme goals

Usually, the first mistake of an unsuccessful programme is setting unrealistic goals and key objectives. A good method to follow is the SMART principle: Specific, Measurable, Attainable, Relevant and Time-based.

For a loyalty programme, SMART goals may look something like this: 

  • Specific - “we will offer valuable rewards to customers engaged in a simple points-based transaction.”

  • Measurable - “our goal is to increase customer sign-ups to our loyalty programme by 15-30%.”

  • Attainable - “recent tests on our pilot programme yielded a 15% (minimum) uptake on sign-ups.”

  • Relevant - “this goal will help generate net revenue retention (NRR) in the long term.”

  • Time-based - “we aim to see results by the end of the second quarter”. 

Always prioritise value and simplicity to create a tantalising and frictionless customer experience. Expand your programme so that it incentivises engagement and retention with elements such as gamification and tiered rewards.

However, you can ground your ambitions with realistic goals, using the SMART criteria and the other parameters we mentioned.


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2) Failure to communicate programmes effectively

Communication is a critical part of loyalty programmes. Usually, most businesses shout from the rooftops whenever there’s great news to share. It’s no different when it comes to announcing an exciting loyalty scheme!

However, the problem lies in not communicating customer loyalty programmes properly. Sometimes, businesses who give too much spiel, bewilder customers with information surpluses. Marketing might not truly reflect what's on offer when promoting a new loyalty programme. Some customers will consider communications about loyalty schemes annoying and irrelevant. 

Believe it or not, businesses give less attention in promoting new loyalty programmes altogether! This is often because of oversight caused by little omnichannel support. Or brand partners of significant size who restrict any name association with discounts (remember when we said inconsistent marketing?).  

Ensure promotions align with the brand and accurately represent the products by coordinating marketing and sales teams. Similarly, promote offers from partnered brands by highlighting the benefit of the reward or discount. For example try, “25% off your next shop” but leave out the name of the supermarket chain. 

These types of techniques put you in a good position to promote your loyalty programme effectively. A loyalty programme with a CRM helps find customers who may like new rewards.


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3) Not being able to target specific demographics with relevant and engaging rewards 

The rewards you offer in your loyalty programme will decide if it succeeds or fails. The best rewards are those that give customers real value, whether you're trying to get them to buy, make referrals or renew subscriptions.

Prioritise the needs of your target audience when selecting rewards for your programme. Businesses often choose rewards based on factors like availability, price, and convenience. This practice often leaves customers feeling dissatisfied and could result in programme failure.

Provide incentives beyond just your core offerings whenever possible. Giving customers a choice of unique incentives keeps them coming back for more and is essential for them to stay loyal to your brand.

Offering personalised and hyper-relevant rewards is effective for creating an emotional connection between your brand and customers.

JD Sports Triggered Rewards




Solutions like Propello provide tailored rewards based on buyer behaviour and data insights.

Your customers get 24/7 access to a wealth of relevant partner deals and discounts to help increase customer retention and customer lifetime value.




Triggered rewards based on customer behaviour

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4) Complicated programme structure and layout

Customers are often reluctant to sign up to complicated loyalty programmes that involve poor UI and UX design. For example, clicking through several web pages to redeem rewards or deciphering complex flowcharts to track progress.

Not providing an easy way for customers to check their reward balances is a major cause of friction. Customers sign up with the expectation of receiving benefits, not to be tested.

First, determine which user data is most crucial to capture at signup. Then provide customers with calls to action and guidelines for claiming and reviewing their rewards.

Your members should be able to describe your programme to others without resorting to complicated diagrams.

The type of loyalty programme you choose will often determine its complexity. For instance, if you take the point-based approach, make it easy for customers to monitor their points and redeem them for prizes. 

An instant reward programme structure, however, will provide constant rewards and incentives (funded by closely aligned brand partners) as part of your customers membership or subscription. This means no points to earn and redeem, just an added-value to entice your customers to stay with you.

Instant Rewards HelloFresh


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5) Unrealistic targets for customers to redeem rewards

Developing a unique customer loyalty programme is the goal for many brands. While that is commendable, many businesses make the mistake of establishing reward thresholds that are too high.

Customer engagement in your loyalty programme suffers if members feel they are not receiving their money's worth. Your targets should be simple, and you should explain them in detail. 

Customers should navigate redemption of rewards with relative ease. A great customer experience increases engagement and fosters brand loyalty. But it also strikes a balance of appropriately rewarding certain customer behaviours. For example, offering free shipping after a set amount of repeat purchase.



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6) Overemphasising corporate goals

Customers often stop participating in a loyalty programme when they feel there is no benefit. Loyalty programmes that offer customer incentives can only be successful when both parties benefit from participation.

You're missing the point as a business if you can't demonstrate the value you provide to customers. Placing too much emphasis on your own goals will eventually drive away your loyalty programme members.

Despite being a member of about 13 loyalty programmes, the average consumer participates in only half of them. Offering low-quality incentives or setting overly restrictive rules can drive users away and increase churn rate.


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7) Choosing the wrong type of loyalty programme 

Choosing the wrong loyalty programme is often the result of not researching or lack of testing. Consider demographics, your business model and even your product or service. Each programme works differently and builds trust in their own unique ways.

For example:

Points based loyalty programmes are best suited to businesses with high order frequency and low order value. 

Instant reward aka 'always on' are best suited to businesses that operate a membership, subscription or recurring revenue model that need to prioritise customer retention.

Luckily, there are several excellent choices for loyalty programmes available today. Study your target demographic and the data collected to inform your decision. Evaluate each loyalty programme to ascertain which best complements your product offerings.


Download our guide to help you discover which is the best loyalty programme for your business based on industry, demographics and other crucial criteria:

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The best customer loyalty programmes show how much a company values its customers. Every business should have a strategy in place for retaining its most valuable clients.

Study your current clientele and identify their spending patterns, such as their yearly total. What are some of the things that they frequently purchase? Do your offerings live up to their expectations? How can you improve your relationship with them?

Doing this will help you pick the right programme, one capable of creating a customer for life.


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8) Outdated technology to support programmes

Deploying functionally rich and scalable white label technology will reduce time-to-market. You can launch and scale third party platforms quickly. They are designed to accommodate larger volumes of customers and are fully supported by specialist loyalty marketers.

Older tech systems or in-house loyalty solutions can be labour-intensive to manage. Plus, they may experience restrictive data collection. That is a problem for brands that wish to effectively market to their target demographic.

They need access to specific customer information. Customers are more likely to become emotionally loyal when offered personalised communications and services.


Over 80% of consumers reported that they would patronise brands that offer personalised experiences.


They will be more loyal to your brand if you use their information to create relevant and valuable content and offers. While many organisations may have access to this wealth of information, few actually use it.

Rather than focusing on personalisation efforts, internal resources are often allocated legacy technology or manual processes. To avoid such situations, you need to leverage technology and implement real-time reporting and dashboards. These insights can power top-of-funnel acquisition or win-back campaigns, among other uses.

Using a dashboard, your marketing team can easily examine marketing and sales data. This helps determine which campaigns and rewards are performing well. You may also find it useful for assessing various marketing channels performances over a certain period of time.
Without such a system in place, you might find it difficult to gather and act on customer data that highlights their behaviour. With access to programme data, you can constantly test and adjust your reward strategy to maximise value.

In a tiered programme, for instance, data may show that customers are finding it difficult to navigate between tiers. Achieving the target could be too difficult, or the reward might not be sufficient to motivate them to complete it. Having this information shows you the customers’ pain points and how you can improve the programme in general.

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9) Not recognising potential of gamification

Gamifying your loyalty programme is among the best techniques for boosting customer engagement. The mechanisms of gamified loyalty programmes are popular because they remind people of games they already enjoy. 

A study reported brands that engage their customers with gamified elements enjoy a 63% lower rate of customer attrition. After all, getting quality service is great, but winning a prize by participating in and winning a game will always be a more memorable experience.

The use of gamification in loyalty programmes takes many forms. Leaderboards and treasure hunts provide new and exciting adventures for programme members.

Not only does this lead to higher retention, engagement and a healthier bottom line. After all, it alters spending habits and fosters positive behavioural change. Gamification also encourages brand ambassadors to share such novel experiences on channels such as social media.

Gamification in loyalty programmes


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10) Not recognising and lack of ability to target your most important customers

While it's important to treat all customers fairly, rewarding all customers equally won't make your highest-spending customers feel valued. 

There are two approaches to this: as a first rule, be consistent with how you treat everyone. Simply put, repeat or low-spending customers should be treated the same as one-time buyers as part of your overarching customer service strategy. 

Secondly, you should consider providing tiered rewards of increasing value. This entails providing various benefits to customers based on the amount they spend in your store.

To nurture your relationship with your best customers, you should acknowledge them. Recognising and rewarding customers for their actions is crucial. Companies that implement a multi-tiered VIP rewards system recognise the value of their best customers and offer them rewards accordingly.

Always keep in mind that VIP perks don't have to cost more. Giving people advanced notice of sales and exclusive access to new products costs nothing but will be highly valued.


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Prioritise the Customer for the Best Results

Treating all customers fairly is different to treating them equally. Reward customers in proportion to the loyalty they demonstrate. Prioritise high spenders or frequent buyers so that they receive the best benefits and rewards.

To nurture your relationship with your best customers, you should acknowledge them. Recognising and rewarding customers for their actions is crucial. Companies that implement a multi-tiered VIP rewards system recognise the value of their best customers. Offer these customers excellent rewards accordingly.

Always remember that VIP perks don't need to cost more; exclusive access to new products costs nothing but people will highly value it. Just remember to give every customer a great service though. For example, customers that don't shop as frequently should still have access to customer support.

Quality of service should be for all. Quality and value of rewards should scale with loyalty.


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