Why Loyalty Programs Fail in 2025 and how to avoid them?

Why are loyalty programs not working? The real reasons behind customer churn

Data-driven loyalty programs serve as tools to enhance engagement and build consumer trust. However, something that should, in theory, maintain relationships and drive repeat purchases often proves ineffective in reality. Why does this happen? What will customer loyalty trends 2025 look like?

Understanding the decline in customer loyalty

There is no company in the world that has never lost a customer. Today’s consumers are more aware and demanding than ever before. With easy access to information, loyalty is no longer just a matter of habit.

Customers return to brands that provide them with a sense of security and trust. The key factor in building loyalty is trust, which is shaped by personalized, positive experiences. When people feel that their needs are understood and that they are treated with respect, their relationship with a brand gains deeper significance. This bond is strengthened by intuitive shopping experiences, reliable customer service, and open, honest communication. Ultimately, loyalty is not the result of random interactions—it is the outcome of sustained efforts to build valuable relationships.

Focusing on this aspect is crucial because, according to research by Fred Reichheld, increasing the customer retention rate by 5% can boost a company’s profits by up to 95%. Over time, loyal customers tend to spend more, repeatedly returning for additional products and making larger purchases. Retaining a customer is the most cost-effective way to increase profits. Entrepreneurs are well aware of this fact. As shown in the Global Customer Loyalty Report 2025, a staggering 31% of marketing budgets in 2024 were allocated to loyalty and CRM-related activities.

How poor communication affects loyalty programs success

Why do loyalty programs fail? The average person processes around 34 gigabytes of information daily. This overwhelming data load makes it challenging to capture and retain attention. If a brand does not actively remind customers about its loyalty program, promote it, and engage participants, another brand will take its place. Loyalty programs compete with countless other content sources, so their communication must be both compelling and effective.

Consistent engagement with participants is the key to success—a loyalty program cannot be forgotten after the initial registration campaign. Companies that regularly inform customers about new opportunities and rewards maintain a high level of interest.

Another common loyalty program mistake is the lack of personalized messaging. Customers are more likely to engage when they receive messages tailored to their needs. Personalization—such as informing users about their accumulated points or suggesting rewards—can significantly increase participation.

Equally important is the clarity of program rules, communication, and calls to action. Messages about the loyalty program should be concise and direct: “Check your rewards,” “Earn extra points,” or “Claim your discount.” Ineffective loyalty strategies often overlook this crucial aspect.

If customers do not understand the program rules or fail to see its value, they lose interest. The Bridging the Loyalty Gap report reveals that 68% of customers leave because they feel the company does not care about their needs. Poor communication frequency, lack of personalization, or overly aggressive messaging can all discourage participation in the program.

The impact of reward structures on customer retention

Reasons customers leave loyalty programs and abandon loyalty programs lie in the reward structure. Companies must carefully design their incentive systems, offering benefits that align with consumers’ preferences and expectations.

Rewards should genuinely appeal to customers, encouraging further engagement—whether in the form of discounts, freebies, or exclusive event access. The timing of rewards is also crucial. Unexpected bonuses or personalized offers can create a sense of exclusivity and excitement, strengthening the bond between the customer and the brand. This directly affects loyalty program ROI.

Experience shows that one of the biggest issues in loyalty programs is the low value of rewards. Studies indicate that as many as 37% of participants drop out when the rewards are unappealing. Another challenge is overly complex program structures—if a program requires too much effort and time, consumers quickly lose interest.

Why personalization is key to loyalty programs engagement

According to a Gartner report, brands risk losing up to 38% of their customer base due to insufficient loyalty program personalization. Customers expect loyalty programs to be flexible and tailored to their lifestyle—options such as choosing rewards and sharing accounts can significantly boost engagement.

How to improve customer loyalty? Today, artificial intelligence plays a key role in designing personalized loyalty programs. Data from the Global Customer Loyalty Report 2025, published by Antavo in collaboration with EPAM, leaves no doubt: using AI in loyalty programs has surpassed 37%, with another 50% of companies planning such implementation. In the near future, nearly every loyalty program will be AI-driven.

Modern IT systems, such as those offered by RITS, enable the customization of program features to match real customer needs. Too little personalization in loyalty marketing renders a program unremarkable, while excessive personalization may be perceived as intrusive.

Common pitfalls in loyalty programs design

Why are loyalty programs not working? Many companies fall into design traps that, instead of fostering relationships, lead to customer frustration. The most common loyalty program mistakes include:

Overly complicated participation rules.
Delays in issuing rewards.
Lack of transparency in point allocation.
Rewards that do not align with customers’ actual needs.
Ignoring signs of declining loyalty program engagement.

Avoiding these common pitfalls enhances loyalty program effectiveness. A well-structured program, predictive analytics, customer retention, personalized communication, and a clear value proposition help attract and retain customers.

The role of customer expectations in program failure

Modern consumers expect not only rewards but also a unique experience. If a program fails to deliver real value, customers abandon it. Marketing Metrics highlight that the probability of selling to an existing customer is 60-70%, while for a new customer, it drops to just 5-20%. As customer expectations continue to rise, fostering loyalty requires a flexible approach and continuous strategy refinement.

Achieving this is possible through the smart integration of data analytics with tech solutions for customer retention. At RITS, we excel at this! Contact us, and together we will develop the optimal solution for your business.

Warsaw, April 17, 2025

Interested in the best Loyalty Programs? Get in touch with us! At RITS, we know everything there is to know!

We’ll help you find the loyalty system that best fits your company’s needs and capabilities, run all the necessary tests, and handle the implementation, integrating your new loyalty tool with your existing systems.

Aleksander Zamoyski, New Business Account Manager at RITS Professional Services, will be happy to share his expertise: a.zamoyski@rits.center.

Let’s stay in touch!