5 Reasons Why Customers Abandon Loyalty Programs (And Tips to Keep Your Customers Engaged)

Loyalty programs are designed to keep customers coming back, offering them exclusive perks and incentives as a reward for their purchases.

While these programs are a popular marketing strategy, a surprising number of customers end up abandoning them. In fact, 54% of loyalty program memberships are inactive. 

So, why do people walk away from what seems like free rewards and discounts? 

Why Customers Abandon Loyalty Programs

1. Increasing Competition and Oversaturation 

Fact or fiction: the average Canadian belongs to 14 loyalty programs. You may or may not be surprised to learn this is true.  

Long gone are the days where loyalty programs are new and special. Nowadays, more than 90% of consumer-facing businesses today have a loyalty program. 

But here’s the thing — customers have a limited attention span, and the increasing competition means higher expectations for brands to keep up with. With so many options available, customers are overwhelmed and often opt for programs that offer the most value and convenience (and are easiest to use). Loyalty programs that fail to meet expectations or provide enough benefits are quickly abandoned in favor of more rewarding options.

This crowded marketplace means brands need to stand out, not just by having a loyalty program, but by making it genuinely valuable and distinct from competitors. 

How to keep your loyalty program competitive:

• Keep an eye on the competition: Stay in the loop with what other brands are offering in their loyalty programs. If needed, tweak yours and make sure you're highlighting what makes your program stand out.
• Mix things up regularly: Don’t let your program get stale—refresh your rewards and perks often to keep things fun and exciting for your customers.
• Make it personal: Use what you know about your customers to offer rewards they'll actually love. The more personal it feels, the more likely they’ll stick around.
• Be everywhere they are: Encourage customers to engage with your brand across different channels—like social media, your website, or in-store—by giving them rewards for showing up in more places.

In a marketplace flooded with options, a well-crafted, engaging, and innovative loyalty program can be the key to retaining customers and building long-term brand advocates. With DataCandy Pro, you can offer social rewards that motivate your customers to share, refer, and engage, turning loyalty into meaningful connections and driving lasting growth.

2. Lack of Personalization 

Every customer is unique, and their rewards should be too. A truly effective program understands and caters to these different needs by offering personalized rewards and discounts. Without this level of personalization, customers may find the rewards and discounts irrelevant or unappealing, leading them to abandon the program.  

An Example of a Loyalty Program Without Personalization

Dillard's loyalty program faced criticism for its lack of personalization and limited reward options. Customers were required to spend $750 to earn a $10 reward, which could only be redeemed as a certificate or a 10% discount at Dillard's. This narrow scope failed to cater to a broader range of customer preferences and needs, leading to low engagement and dissatisfaction. The program's one-size-fits-all approach and minimal rewards made it less appealing to customers seeking personalized and flexible loyalty benefits.

Some questions you should ask yourself when building your loyalty program: 

• What was their motivation to join your loyalty program?
• Which products or services do they purchase most frequently? (pro tip: sku-based loyalty can automatically serve up offers based on their past purchases) 
• What channels of communication do customers prefer? 

Segmenting customers based on their shopping behaviour and preferences allows brands to deliver more meaningful and targeted rewards. By using customer data collected through your loyalty program, you can offer personalized rewards and offers. 

An Example of A Loyalty Program With Personalization

Mission Thrift Rewards offers personalized deals based on shopping habits, awards bonus points for birthdays, provides discounts for regular shoppers, and offers cashback on purchases. As a result, Mission Thrift saw incremental growth in average basket size and an increase in the number of items per sale. Customers felt appreciated, which motivated them to return and shop more often.

Tips to get started with personalization:

• Pay attention to shopping habits: Start by tracking what your customers are buying and how often. This helps you understand what they actually want—and when they want it.
• Make points feel personal: Use that shopping data to offer bonus points tailored to each customer’s behavior. Personalized perks feel more thoughtful and keep people coming back.
• Reward your big spenders: Give a little extra love to high-value customers by offering rewards based on how much they spend. For example, if your average sale is $22, try offering bonus points for purchases over $25—it’s a smart way to boost spending and loyalty at the same time.

Need help personalizing your rewards program? DataCandy’s powerful platform enables you to deliver tailored offers based on member profiles, shopping behavior, birthdays, and more, ensuring every customer feels valued and engaged with relevant, timely rewards that drive loyalty and increase lifetime value.

3. Confusing User Experience or Sign-Up Process

One of the biggest barriers to customer engagement in loyalty programs is a complicated redemption process or sign-up process. 

When customers have to jump through hoops, like filling out long forms, navigating unclear websites or apps,  dealing with confusing point structures, or just straight-up glitchy apps, it can quickly lead to frustration. 

If redeeming rewards is perceived as more trouble than it's worth, many customers will simply give up.

For example, Kohl’s launched its Kohl’s Rewards program to drive loyalty by offering 5% back on purchases and integrating Kohl’s Cash. While the program offers great value, many customers faced frustration due to a complicated sign-up and card activation process, especially with the co-branded Capital One Visa card. This difficult onboarding experience created barriers that discouraged some shoppers from fully engaging with the program.Imagine how much more effective the program could be with a simple, user-friendly sign-up process that makes earning and redeeming rewards effortless and inviting. 

Tips to improve your customer experience:

• Keep sign-up short and sweet: Make joining your loyalty program quick and hassle-free. The easier it is to sign up, the more people will actually do it.
• Go digital for convenience: Offer a mobile app or digital card so customers always have your program at their fingertips—no more forgotten punch cards!
• Make it smooth and simple: Your website or app should be easy to use and free of bugs. A glitchy experience can turn people off fast.
• Talk points in dollars: Help customers see the value by explaining what their points are actually worth. When they understand the real benefit, they’ll be more excited to earn and redeem.

User experience and ease of use are crucial for loyalty programs to be successful. A seamless, intuitive process encourages participation and keeps members coming back. Brands that prioritize a straightforward redemption process, clear instructions, and easy navigation are more likely to retain loyal customers and prevent abandonment.

4. Poor Customer Service 

Customer service can make or break the success of a loyalty program. When customers experience poor service while trying to redeem rewards or resolve issues, it leaves a lasting negative impression. If support is hard to reach, unhelpful, or slow to respond, members may feel frustrated and disengaged.

Tips to deliver strong customer service:

• Respond quickly and get it right: Make sure your team is getting back to customers fast—and with helpful answers. A quick, clear response can make all the difference.
• Train your team like pros: Support staff should know the ins and outs of your loyalty program so they can handle questions confidently and keep things running smoothly.
• Be easy to reach: Offer different ways for customers to contact you—like live chat, email, or even social DMs. The easier it is to get in touch, the happier your customers will be.

Brands that prioritize responsive and effective customer service create a more satisfying loyalty experience. Quick resolutions, clear communication, and helpful support staff contribute significantly to customer retention.

5. Changes in Program Rules

Nobody likes change, especially when it means confusing changes to rules in their loyalty programs. Customers often feel blindsided and overlooked, leading to frustration and distrust. 

For example, in 2015, Sephora changed its Beauty Insider Reward Program so that points expire and the birthday gift requires a minimum purchase online. This caused customers to go into an online frenzy, with many long-time customers complaining about the new rules and feeling confused. Many felt that their business wasn’t valued and boycotted these changes by shopping for cosmetics at Sephora’s competitor, Ulta, instead. 

Another example of how frequent and confusing changes in program rules can harm your loyalty program is Starbucks’ Rewards Program. In an attempt to refresh their rewards program, Starbucks introduced a new scheme that changed the value of each star. Customers were left confused by the new value system and what that would mean for the stars they worked hard to earn. In response to customer complaints, Starbucks eventually addressed the concerns and introduced a better structured points system. 

Tips to retain customers during program changes: 

• Take it slow and keep it clear: Roll out changes gradually and be upfront about why you're making them. When customers understand the "why," they’re more likely to get on board.
• Answer questions before they’re asked: Put together a simple, easy-to-follow FAQ that covers any common concerns. It'll save everyone time and show customers you’ve thought things through.
• Handle complaints with care: If people aren’t happy, listen and respond with empathy. A thoughtful and professional approach can turn a complaint into a chance to build trust.
• Show the value behind the change: Make sure the updates actually make your program better—and let your customers know exactly how they benefit. If there’s extra value, don’t be shy about highlighting it!

Loyalty programs will inevitably need to evolve to keep up with changing customer demands, but how those changes are communicated and managed can make or break customer trust.

Pro tip: Proactively addressing customer concerns—and having a clear communications and public relations strategy—is essential for retaining loyal customers and keeping them engaged.

How to Improve Your Loyalty Program and Retain Customers

To minimize loyalty program abandonment, brands need to prioritize user experience, streamline redemption processes, and offer rewards and discounts that customers actually value. 

Here are some strategies that can help:

• Get to know your customers: By collecting customer data and demographics, you can segment them and provide personalized rewards and discounts that truly resonate.
• Be clear about what they’re getting: Make the perks of your loyalty program super easy to understand—whether it’s showing the dollar value of points or putting up signs about member-only deals. The more obvious the value, the better.
• Make it a breeze to use: Ensure your loyalty program is easy to join, navigate, and redeem points. A seamless experience encourages more consistent engagement. Think of it this way: easier to earn points = more frequent shopping; and easier to redeem = more perceived value and customer loyalty.
• Reward those who keep coming back: Create tiered rewards or exclusive offers for frequent customers to encourage repeat business and brand loyalty. You can even throw in perks for social media engagement to help build community (but we'll dive deeper into that in another post!). 

Conclusion

Loyalty programs are a powerful way to encourage repeat business, but only if they are executed effectively. 

Brands that prioritize personalization, deliver excellent customer service, and streamline their processes have a powerful opportunity to strengthen loyalty. By recognizing common customer pain points and addressing them proactively, companies can not only retain their members but also build deeper, lasting relationships that drive long-term engagement.