Why your loyalty programme is probably failing (and it's got nothing to do with how much you offer as a reward)

Ease of redemption beats cash value

When the goal is long-term engagement, ease of earning matters, but ease of redemption matters more. There is no point having ‘money’ in the bank, if you have to go through hoops to just be able to use it! The fewer the restrictions on how and when a reward can be used, the more valuable it feels.

No one wants to do mental arithmetic to work out how much they need to spend to earn enough points for a free product, only to discover it can only be redeemed between certain dates, on selected items, and not on anything in the sale.

And yet that is exactly what most programmes still offer, across retail, hospitality or financial services alike. Many brands offer a high headline value that is hard to decode, wrapped in redemption rules that their legal team even struggles to explain. The result is predictable: customers zone out.

The stamp card has lasted decades for a reason

The humble stamp card, buy ten and get one free, has endured because the reward feels like a freebie, and the terms could not be simpler. A free coffee, after having bought ten, is hardly of high value, but the psychology of the small, tangible win does the heavy lifting, and the scale of the financial reward barely comes into it.

What the reward actually is matters as much as how big it is. A free coffee feels like a gift, while the same value offered as a discount feels like a transaction. A discount is easy to forget, because it is really just a slightly cheaper version of something the customer was buying anyway. A freebie as a reward feels like a gift, and a gift is what people remember.

In one study, researchers gave some car-wash customers a ten-space loyalty card with two spaces already stamped, and others a plain eight-space card beginning at zero. 34% of the head-start group earned their free wash, against 19% of those who started empty.³ Both groups still had to buy the same eight washes, so the head start cost the business nothing. What changed was the feeling. Those two pre-filled stamps land like a small gift, a leg-up the customer did nothing to earn, even though everyone else was in the same boat. Make the reward feel closer from the first purchase, and that feeling of being closer to it makes people more likely to earn it.

That is the gap worth paying attention to: the distance between what a brand believes its reward is worth and what a customer experiences trying to earn it. A reward that takes eighteen months to accumulate, can only be spent on specific products and expires in thirty days, sounds generous in theory. In practice, it generates frustration and, more often, silent disengagement. No complaint, no warning. Customers just switch from the scheme. And their detachment runs deep: in a large survey of loyalty programme members, more than half could not say what their points balance was, and four in ten had no idea what those points were worth.⁴

Most loyalty data tells you what customers did, not why they stopped engaging. Our free guide breaks down seven signs worth watching for.

Trust, not transactions

The coffee card works, and there's nothing wrong with it. But the same good feeling hits even harder when there's no loyalty scheme behind it at all, and a coffee is simply given because someone behind the counter felt like giving it.

The coffee chain Pret became known for doing exactly that. For years, its staff could give away a set number of hot drinks each week purely at their own discretion, no card, no app, nothing to collect first, just the person behind the counter choosing to treat the person in front of them. It costs the price of a coffee and buys something no points balance can: the feeling of being a regular, a face the staff know and value, rather than just another transaction.

Simplicity does the same job. When a promise is plain enough that a customer doesn't have to read the small print, that plainness itself signals the brand has nothing to hide. For almost a hundred years John Lewis ran on three words: Never Knowingly Undersold. It was a pledge never to be beaten on price, so customers never had to look anywhere else to feel they had done well. John Lewis dropped it in 2022 when online rivals made it too hard to hold, then brought it back in 2024, because a promise that simple is hard to replace.

That is the part most programmes miss. People come back when they trust you, and trust is built in small moments that feel genuinely for them rather than for your bottom line. Every one of these gestures feels like one person valuing another, the brand on their side rather than across the counter, never a transaction. That is also where belonging begins, and people who feel they belong don't shop around. Make it easy, make people feel valued, and you don't need to lock anyone in. They stay because they want to.

Trust is just as easy to break, and the fastest way is unfairness. Nothing sours a loyal customer faster than realising a newcomer is treated better than they are: the switcher gets the discount while their own renewal creeps up. Insurance and telecoms run on it, and it is why so few people feel rewarded for staying. Most will forgive a lot, but not the sense that their loyalty is being taken for granted.

You can't design this in a workshop

Whether it is the mechanics of earning and redeeming or the question of how brands can partner together, it comes back to the same thing: you can't settle it in a room. Ideation tells you what a programme could be. It doesn't tell you whether the loyalty you're designing for actually exists, or where it really lives.

That is what co-creation and testing are for, ideally before launch rather than after. Putting a real version in front of real members, watching them try to earn and redeem, asking which brand they think they are loyal to and why, is how you find out whether your assumptions hold before they cost you. On its own, ideation is only ever a hypothesis; it takes ongoing research with customers to find out whether it actually holds.

What this means in practice

When we work with clients on loyalty, the questions that unlock the most insight are rarely about reward mechanics. They are about behaviour. Where does friction show up in the journey? What share of earned rewards is ever actually redeemed? At what point do customers drift away, and what tipped them?

If you are reviewing a programme right now, look hard at your redemption rate, and measure it the honest way. Of everyone enrolled, how many have redeemed even once in the last twelve months? That figure is almost always more uncomfortable than the headline, and it tells you fast whether your programme is doing any real work. The wider data is just as stark: among loyalty programme members surveyed, more than a quarter have never redeemed anything, and the average person uses fewer than 60% of the schemes they belong to.⁵

The simplest programmes win, when the insight is right

Strip it back and loyalty comes down to a handful of things, none of them a points table. Make it easy, so a reward feels like a gift instead of homework. Be fair, so a loyal customer never finds out a stranger gets the better deal. Earn trust, in the small moments that put you on their side. And give people something to belong to, the kind of loyalty that doesn't move the moment someone else is a pound cheaper.

Anything less is really just habit, and habit holds only until a competitor makes leaving easy. The brands that last give people a real reason to stay, then keep checking, with the customers themselves, that the reason still holds. That last part is the hard one, and it is usually where the most interesting work begins.