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Loyalty Programs

8 Reasons Why Customers Abandon Loyalty Programs

Written by 
Brad Davis
January 28, 2022

No one wants to find themselves asking: “Why are customers abandoning my loyalty program?”. But if you’ve crunched the numbers (which you always should!) and found that your loyalty program is accumulating an increased number of lapsed customers, it’s time to act fast.

In the US alone, the average business loses 15 percent of its customers each year (U.S. News and World Report study). And while consumers belong to an average of 14.8 loyalty programs, the typical customer is only active in 6.7 of these (Bond Brand Loyalty).

Perhaps the most staggering statistic of recent is that 78% of consumers report retracting loyalty at a faster pace than they were three years ago (Accenture Strategy).

What does all this mean?

In short, it means that consumers are growing less and less tolerant of shortcomings in value for money, customer service, product quality and the brand experience in general.

Thankfully, a loyalty program overhaul can take care of several of these shortcomings at once, and save your business from losing more customers. In an increasingly competitive loyalty space, here are 8 reasons why customers might be abandoning your loyalty program… and what you can do to change this.

1. Signing up is too complicated

sephora loyalty program signup example

Tip #1: Instant gratification and customer loyalty go hand-in-hand! So considering the signup process is the very first milestone in your customers’ loyalty experience, it has to be a convenient affair if you ever want them to reach the second milestone.

While it might be tempting to soak up as much info from your customers as possible right from the get-go; have a think about what you really need from them to get started:

  • Name
  • Email and/or phone number
  • Date of birth (so that you can treat them to a Birthday Gift each year – we’ll cover this bit later in the article!)

That’s all you need. Don’t worry, you’ll gather plenty of other useful data for valuable insights with every future transaction the customer makes. The first priority is making sure it doesn’t take longer than 20 seconds to register for your loyalty program.

2. The rewards structure is too difficult to follow

snakes and ladders template

If you’re anything like me, you probably lose interest in offers that you don’t understand fairly quickly. Another common trap that brands fall into is getting carried away with all kinds of perks, benefits, side-promotions, terms and conditions, exceptions and other caveats. Unfortunately, these things only muddy the waters of what your loyalty program actually offers.

By all means, keep your customers on their toes with exciting promos like “Double Points Days”, “Happy Hour Specials” and gamified Scratch & Win Instant Prize deals. However, it has to be done in a streamlined manner that doesn’t distract from the core “Buy X, Get Y” model.

Mobile apps are great for this, as the digital punch card can remain at the forefront of the app while other side offers, communications and even T&Cs can be filed under separate, easily accessible pages.

At Stamp Me, we encourage businesses to include a helpful explainer page on their website or socials. This serves as an instructional guide for how to get the most out of your brand’s loyalty program, which customers tend to appreciate.

tenaga kava loyalty program explainer page

Here’s Floridian Kava supplier Tenaga Kava’s explainer page as an example.

3. Customers aren’t fully aware of what your loyalty program offers

north face loyalty program signup process
Image Source: The North Face XPLR Pass Loyalty Program

Whether it’s in-store signage, an e-newsletter or other form of promotional material; a customer should instantly understand the incentive of joining your loyalty program. It might be that they’ll save money on every 6th purchase, or that they can place an order in advance to skip-the-queue, or that they won’t be charged for shipping on all online purchases.

On the other hand, it could be that your promotional material is fine, but once the customer is signed up the process becomes confusing and they lose track of what they are eligible for, and how to reap the rewards of repeat transactions/increased engagement.

In case you haven’t picked it up from all three points we’ve touched on so far – simplicity is crucial in loyalty. From registration to accruing points, redeeming rewards and all communication between brand and customer; be as clear and concise as possible.

4. Your rewards aren’t attractive enough, or they require too much effort to earn

Image Source: The North Face XPLR Pass Loyalty Program

A key reason why customers abandon loyalty programs is that they literally can’t see the benefit of engaging with it. Unless your business targets a very specific demographic, it can be difficult to create a loyalty program where the rewards appeal to everyone.

The last thing you want to do is create an environment where some customers feel alienated or neglected – this is worse than offering nothing at all!

A wider selection of rewards means customers can pick and choose as they please, however it also threatens to “muddy the waters” again and over-complicate things.

Notice how North Face customers are prompted to select their preferred activities upon signup? This ensures they receive tailored offers, which helps to instantly demonstrate the value of the loyalty program.

This way, hikers aren’t offered discounted snowboarding gear, and kayakers aren’t offered rewards on race-related accessories, for example.

Once you’ve overcome this hurdle, it’s important to ensure you’re not losing customers due to the fact that it requires too large a commitment to achieve your rewards. A $5 discount on a $250 purchase is hardly a display of mutual loyalty between the brand and the customer, is it?

By tweaking your points-to-rewards ratio (the amount of money spent or loyalty points required to unlock rewards), you might find that your loyalty program’s retention rate suddenly spikes.

5. Your program isn’t making the best use of customer data and insights

data analytics

One of the main advantages of having a digital loyalty program for your customers is that it gives your business valuable insights into individual customer behaviour, preferences and shopping habits.

With a digital loyalty program, you can send each customer targeted communications and offers based on their unique needs and preferences. However, you have to be using the data correctly in order for this to work.

Another key benefit to accurately using customer data is that you can create an omnichannel experience. Have you ever noticed how Spotify will be paused on the same song you were listening to from your last session, even if you log in on a different device? Or how your Domino’s Pizza app will recommend the same order that you placed last time, even though your last order was placed from your laptop?

These are examples of an omnichannel system, whereby customers can pick up where they left off through various channels and devices, for a more wholesome and interconnected experience with a single brand.

A digital loyalty app becomes yet another channel for customers to engage with your brand through, and it has to be in sync with your other channels, or customers will grow frustrated.

Let’s say you add items to your basket on Sephora’s website, and then abandon your shopping session. These items will still appear in your cart on the Beauty Insider app later. A good digital loyalty program uses customer data to provide a more convenient experience where brand engagement can be done over multiple days, via multiple devices.

Is your rewards platform accurately storing each customer’s data, and using it to provide them with an increasingly tailored omnichannel experience? If not, it might be time to switch to a more sophisticated digital loyalty app provider that allows you to automatically send Birthday Rewards and other personalised features.

6. Lack of communication is causing customers to forget about the loyalty program

duolingo we haven't seen you in a while lapsed customer

Don’t forget to talk to your customers! Perhaps your loyalty program is very well structured, and the reason for high abandonment rates is simply that customers aren’t aware of everything the program currently has to offer.

Whether it’s via SMS, email or Push Notification, generally the signup process gives your business access to some form of communication with every loyalty program member. Be sure to keep them in the loop about industry news, exciting promotions and spontaneous offers just for them.

You can even set it up so that lapsed customers who haven’t made a purchase in the last three weeks receive a Buy One Get One Free offer. Meanwhile, maybe lapsed customers of three months get something for absolutely free, just to entice them back.Asking for feedback is also useful. Even if the customer is never coming back, they might be willing to disclose what your loyalty program did/didn’t do that made them lose interest.

At the end of the day, ongoing communication keeps your brand front-of-mind.

7. Customers have no idea how much progress they’ve made, or where they currently stand

a customers rewards status online

Whether it’s in exercise, financial savings or a new hobby; the best motivation to “stick with it” is when you start to see results. So when it comes to loyalty programs, don’t forget to show your customers how far they’ve come.

If your loyalty program operates on a points-based system, send reminders of how many points are required to attain their next reward, and what they need to do to earn those points.

For tiered rewards programs, you can periodically upgrade lower-tiered customers to a higher tier for one month so they can see all the perks and benefits that are waiting just around the corner.

Badges and leaderboards are a great way to gamify your loyalty program for increased engagement too.

Why not brainstorm some different ways in which you can keep your customers’ eyes on the prize?

8. Your competitors are offering a better loyalty experience

what makes a good loyalty program

This final point is quite straightforward. If your competitors are doing a stronger job of the points listed above, then your customers are likely to pick up on this. From here, it’s only a matter of time before they jump ship.

It’s important to keep an eye on what your competitors are doing – are they rolling out any features that your loyalty program isn’t? Are their loyalty programs developing and innovating faster than yours is?

If you suspect your loyalty program is inferior to competitors, it might be worth spending some time researching emerging trends in the loyalty space. Many brands make the mistake of getting lazy – be sure to continue innovating your loyalty program with enticing new features and functions for your customers to enjoy.

Why are customers abandoning your loyalty program?

While there’s no limit to what direction you can take your loyalty program in, there’s certainly a limit to what might be dissuading customers from continuing to engage with it. By paying close attention to your customers’ needs, you can keep them coming back time and time again.

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