Customers join plenty of loyalty programs – but actively use only a select few. Participation alone doesn’t prove loyalty, and it certainly doesn’t guarantee profit.

Half of our work at Loyalty & Reward Co is designing new programs. The other half is auditing and fixing programs that launched three to five (sometimes ten) years ago and then drifted. The pattern is familiar: measurement was never stood up properly, finance arrived too late (or took over without a clear north star), the platform looked “cheap and easy” but can’t flex to real business needs, and value has been clawed back so often that the program no longer changes behavior. It runs, but it doesn’t work.

If any of the signs below sound familiar, it’s time for a structured audit and strategic redesign, before complacency calcifies and member trust is harder (and more expensive) to win back.

The 9 Definitive Signs Your Program Needs a Redesign

Use this as a candid self-diagnosis. If you see three or more, you’re overdue for a reset.

1) Active Member Rate is falling

The share of members with at least one earn or redeem in the last 12 months (noting, this can be wildly different across industries) has slipped below a healthy threshold (or is trending down). A shrinking active core is the earliest signal that future revenue and margin are at risk. It usually points to brittle onboarding, long time-to-first-redemption, or benefits that no longer resonate.

What to test first: Reduce time-to-first-redemption with burnable welcome value and obvious progress cues (e.g., “You’re 60 points from your first reward”).

Bonus signal to watch: Tag Rate: the share of purchases correctly tied to a member. It’s not perfect (power users skew high), but a declining tag rate is a loud “something’s broken” signal: perceived value, identification friction, or frontline execution.

2) The Hoarding Problem (Low Redemption/Utilisation)

Benefits accrue, liability rises, and members rarely redeem. This means rewards are unclear, hard to reach, or simply not valued. Hoarding is not a good thing; it’s unclaimed promise.

What to test first: Price the first reward to be reachable in one to two trips. Offer 2–3 default redemption options (Good/Better/Best) and surface an “apply reward now?” prompt at checkout or POS.

3) Profit Erosion (The Race to the Bottom)

If the program leans on blanket discounts, average order value and gross margin will fall. Promotions that don’t change who buys or how often are just margin leakage dressed as loyalty. This is one of the most common problems that exists in bad or deteriorating programs: the business has become overlay fixated on the sugar hits to sales charts that promotions provide, without realising profit erosion.

What to test first: Replace indiscriminate %-off with behaviorally targeted offers (next-best action, category mix, basket-level nudges) and add experiential value that members love and finance can live with.

4) No Differentiation

Your program looks like every other “points for purchases” scheme in the category. It doesn’t reflect what’s distinct about your brand, product, or community. If a competitor can copy your program in an afternoon, you’re competing on price forever. Differentiating is one of the Essential Eight™ guiding principles for all best-practice loyalty programs (you can download a copy of the Essential Eight™ loyalty principles here). Our consultants advocate for an end to boring loyalty programs.

What to do: Introduce signature moments, i.e., things that only your brand can do, or access and services that solve real pains, that encode your brand advantage into the program.

5) Bloated Dormancy

Thousands (or millions) of “members” haven’t engaged in years, yet your media spend and operational cost carry on. If lifecycle comms are generic, timing is off, or in-store execution is patchy, dormancy balloons.

What to do: Segment by value and recency. Run a two-path reactivation: easy redemption for those close to a reward, graceful exit for those who are truly disengaged. Clean the file and stop shouting into the void.

6) Data Blindness

You can tally rewards being redeemed, but you can’t demonstrate CLV uplift, churn reduction, or incremental contribution. Either the KPIs were never agreed, test/control wasn’t implemented, or analytics are siloed.

What to do: Establish a rolling holdout or matched cohorts so you can quantify change. Align with finance on the “seven CFO metrics” (Incremental Revenue, Incremental Contribution Margin, ROI, Payback, LTV uplift, plus leading indicators like Tag Rate and Redemption).

7) Siloed Execution

Marketing “owns it,” but Customer Service, Stores/Frontline, Product, Ops, and Finance aren’t embedded. The result is great creative with inconsistent in-store identification, confused redemption, or frontline teams who don’t know what today’s offer even is.

What to do: Make loyalty a company system, not a marketing campaign; build a loyalty-first culture. Shared ownership, strategic meetings and a clear roles & responsibilities (even if informal) stop the experience breaking in the last mile.

8) Tech-Debt Nightmare

The program runs on an inflexible, legacy stack: no meaningful testing, no real-time rules, weak CDP/CRM integration. Many clients were sold on “cheap/easy” platforms that can ‘do it all’ – not what the business or customers actually need.

What to do: Decide whether to refactor or re-platform. Go back to first principles: what are the business objectives, what behaviors are we trying to drive, what will our customers find valuable, and how are we going to measure success. Set performance SLOs, require event streaming, promotion/rules flexibility, observability, and built-in fraud/ATO controls. Tech should implement strategy, not dictate it.

9) All Transaction, No Emotion

A reward mix built only on discounts and free shipping misses the emotional drivers that research shows actually build loyalty: status, access, recognition and community. Monetary rewards trigger transactions; emotional rewards create attachment. Loyalty is emotional, so design with that in mind.

Why Programs Stagnate (Patterns We See Weekly)

• Set-and-forget: The program launched, dashboards turned on, and then nothing shifted for 3–5+ years. Markets moved and customer expectations changed; the program didn’t
• Myopic benchmarking: “I love my airline/banking/hotel program – let’s do that” or “My competitors have this program, so we should design that but better.” Industries and economics aren’t interchangeable; copying can be fatal
• Tech before strategy: The well-trained salesperson and platform demo defined the program. Strategy and commercial modelling were bolted on later
• Measurement never stood up: No agreed KPIs, no holdouts/matched cohorts, no ROI readout the CFO trusts
• Finance timing imbalance: Finance was either missing early (value got over-promised) or over-indexed late (value got starved). Balance is the game
• Model misfit: There are so many different types of loyalty program frameworks and models, and some just will not work with certain businesses or organisations for many reasons. Points can be extraordinary for high-frequency or predictable high-value categories; they can flop in ultra-low-engagement models. Cashback can be brilliant when it recirculates value into your ecosystem; it’s a margin leak when it doesn’t. The right mix depends on the behaviors and economics, not personal preference.

The Loyalty Program Redesign: Our Three-Pillar Method

Ready to fix your loyalty program for the long term? A stagnant program isn’t fixed by a single promo or a new tier name. You need a structured reset that balances data and emotion, strategy and tech, member value and margin. Here’s how we do it.

Pillar 1: Audit & Diagnosis (Quant and Qual)

What we look at:

• Data signals: Active rate, tag rate, time-to-first-redemption (TFR), redemption/utilisation, points issuance vs burn, liability trend, breakage assumptions, offer ROI, fraud losses
• Causality scaffolding: Rolling holdout and/or matched cohorts to measure incremental revenue and contribution, versus what would have happened anyway
• Lifecycle & frontline reality: Email/app push, on-site banners, POS prompts, staff scripts. Dashboards tell you what happened; members and staff explain why
• Competitive and category context: What your competitors do, and more importantly, what you should do given your economics and brand

Deliverable: An Audit & Diagnosis Report with the problems and opportunities clearly prioritised, CFO-grade KPIs defined, and a First-Success Plan (engineering the loyalty loop from join → earn → first redeem).

Why this matters: Being only data-driven can miss emotional value; being only emotion-led can miss the P&L. Audit marries the two.

Our approach: We use a proprietary ROI Optimisation Tool as one of the first lines of diagnosis – quantifying incrementality and monetisation of unused assets before prescribing changes.

Pillar 2: Value Proposition & Program Architecture

What we define:

• Outcomes & KPIs: The business results we’re targeting and how Finance will read success
• Target behaviours: The specific actions to incentivise (first purchase, 30-day repeat, basket build, category trial, app adoption, referrals, reviews, sustainable actions)
• Value we can return: Sustainable sources – direct margin, supplier benefits, partner value, services, access/experiences, balanced across transactional and emotional layers
• Framework mix (fit > fashion): Selection and combination from the toolbox (punch/stamp, currencies, tiers, member benefits, discounts, credits, referrals, merchant-funded, surprise & delight, gamification, hybrids) driven by our economics, brand, and objectives

Actions:

• Design the proposition: A crisp member promise that links outcomes, behaviours, and value returned
• Choose frameworks by fit: Map frequency, margin, basket dynamics, and brand identity to the right mechanics (often a hybrid). Avoid copying category darlings that don’t match our economics
• Engineer earning & extraction: Define what earns (transactional + non-transactional), thresholds, partner rails, and how value is extracted (redemption/credits/benefits), with first success priced for speed (early, achievable first reward)
• Membership model: Join/migration rules, identity & householding, privacy/consent, eligibility, grace periods
• Status/benefits (only if warranted): Progression logic, protections, recognition we can actually fund
• Lifecycle communications: Onboarding, first success, habit loops, reactivation; align in-app/email/site/POS and frontline scripts so the promise is delivered at every touchpoint
• Commercial modelling: Guardrails for margin, discount caps, liability/breakage assumptions; stress-test with Finance
• Measurement plan: Leading indicators across the customer journey aligned to CFO metrics

Deliverable: A Program Detailed Design & Requirements Pack: value proposition, framework rationale, earning/extraction rules, membership model, benefits/tiers (if any), lifecycle comms outlines, partner constructs, commercial model/guardrails, and the measurement spec. This feeds technology choices and the phased roadmap in Pillar 3.

Why this matters: It prevents “tech driving strategy,” avoids sameness, and ensures every mechanic has a clear behavioral job, a funding source, and a path to measurable, CFO-grade outcomes, so Pillar 3 can implement confidently and we can evolve without drifting back into set-and-forget.

Pillar 3: Technology & Implementation Roadmap

Even a brilliant design will stall without the right delivery engine. We bake the “operating system” into implementation so the program never drifts back to set-and-forget.

Choose the right platform:
Keep, refactor, or re-platform. Decide what to own internally vs what a vendor should handle (see our loyalty platofrm Buy vs Build guidance). Connect the basics: CDP/CRM (identity), POS/e-com (earn/burn), payments & partners, fraud/risk, monitoring & alerts. Configure rules, tiers/benefits (if any), data feeds, and permissions.

Testing and prove it works:

• Test thoroughly: unit + integration + performance
• Shadow run (if changing platforms): replay 60–90 days of events and compare balances/earns/burns/refunds/partner activity
• Edge cases: reversals, partial burns, tier up/down, expired vouchers, offline mode
• MVP/Pilot (when major changes): small rollout, read results, fix issues
• Cutover basics: pause writes → final export → load → reconcile (agree tiny variance with Finance) → switch → smoke test → hypercare

Run, improve, and keep evolving:

• Measure what matters: revenue added, profit after costs, ROI/payback/LTV; early signals (active rate, time-to-first-redemption, redemption rate, tag rate, points issued vs used & liability).
• Own it together: Marketing, Product, CS/Stores, Ops, Finance, Risk.
• Rhythm: ship one meaningful change per month, keep a small holdout group, and do a quick quarterly check against the north star

The First-Success Moment (Make It Unmissable)

Everything above pays off faster if you engineer the loyalty loop: join → earn → first redeem. That initial redemption is the member’s first success, the moment they understand the program, feel the win, and are most receptive to repeating the behavior.

How to shorten time-to-first-redemption (TFR):

• Set a burnable welcome value sized for an immediate or next-trip reward
• Offer low-friction burns (e.g., “200 points = $2 off”) with one-tap apply
• Show progress (“You’re 40 points away”)
• Add staff prompts at POS (“You’ve got a reward. Use it now?”)
• Give choice at redemption (Good/Better/Best) so everyone finds a fit
• Celebrate the moment: confetti in-app, “First reward unlocked!” badge, and a small bonus toward the next one to keep momentum. These micro moments are underestimated by many organizations

Measure TFR and Redemption % by join cohort each month; ship one focused change; read results; repeat. This simple loop turns intent into habit.

Conclusion: From Stagnant to Strategic

A neglected program turns into a tax on margin. The nine signs above are early alarms, not reasons to burn everything down, but prompts to get disciplined. With a balanced approach: Audit & Diagnosis → Value Proposition & Program Architecture → Technology & Implementation, and measurement baked into delivery, loyalty becomes a compounding growth engine again.

Need help with the next step?

If your program hasn’t been touched in years, or never had real measurement, contact us. We can run a full audit or use our ROI Optimisation Tool, diagnose incrementality and monetisation gaps, and map a phased plan that fits your economics (not someone else’s). Then we’ll help you ship fast, starting with the first-success moment that gets members back into the loop.