Top Loyalty Program Blunders Brands Keep Making And How to Stop Burning Money on Loyalty

The average consumer is enrolled in eight loyalty programs but actively participates in only five, a gap that shows how easily loyalty investment can fail to translate into engagement.

The opportunity is huge. Antavo’s 2025 Global Customer Loyalty Report found that 83% of loyalty-program owners who measure ROI reported a positive return, with an average reported return of 5.2X revenue against cost. Loyalty and CRM accounted for an average of 31.4% of respondents’ marketing budgets.

So why do some loyalty programs become growth engines while others become expensive discount machines?

The answer often lies in the strategy behind the rewards.

Why a Loyalty Program Is No Longer Optional

Customers have more choices, more channels and less patience for irrelevant offers. Deloitte’s 2026 research found that 72% of consumers are more likely to spend with a preferred brand because of its loyalty program, while 56% say loyalty programs increase their spending.

But enrollment is not loyalty.

A customer who signs up for points and never returns isn’t retained. A customer who waits for discounts isn’t necessarily emotionally connected to the brand.

The real objective is to create repeat behaviour, higher lifetime value and stronger customer relationships.

7 Loyalty Program Blunders, With Real-World Lessons

1. Making every customer the same

A blanket discount may be easy to launch, but it can waste reward spend on customers who would have purchased anyway.

Real-world lesson: Starbucks

In 2026, Starbucks redesigned its U.S. Rewards program around Green, Gold and Reserve tiers, with higher tiers offering additional earning potential and exclusive benefits. Starbucks reported 35.5 million 90-day active Rewards members, while Rewards members generated nearly 60% of U.S. company-operated revenue in fiscal 2025, more than $13 billion.

The strategic lesson is powerful: use loyalty to influence behaviour, not simply subsidize existing behaviour.

2. Changing the rules without understanding the customer

Loyalty programs create expectations. Change the economics too aggressively and customers can feel that the value they were promised has disappeared.

Real-world lesson: Delta SkyMiles

Delta’s proposed 2024 SkyMiles changes triggered substantial member feedback, after which the airline modified elements of the planned changes.

The lesson isn’t that loyalty programs should never change. They should.

The lesson is: model customer impact alongside financial impact.

3. Confusing complexity with value

More tiers, more rules and more rewards do not automatically create more loyalty.

EY’s 2026 Loyalty Market Study found that loyalty programs are delivering results by conventional measures, but customer perceptions of that value don’t always match program performance.

Real-world lesson: Sephora

Sephora’s Beauty Insider program combines tiers with exclusive products, experiences, birthday benefits and reward choice. Its membership reached almost 46 million by the end of 2025, according to Sephora leadership.

The takeaway? Perceived value matters as much as monetary value.

4. Rewarding only the purchase

A customer’s relationship with a brand doesn’t begin and end at checkout.

Real-world lesson: Marriott Bonvoy

Travel loyalty programs have long demonstrated the power of rewarding customers across a broader journey, stays, dining, experiences and partner interactions can all become opportunities for engagement.

The same principle works elsewhere.

A bank can reward card usage, bill payments and referrals. An automotive company can reward servicing and referrals. A retailer can reward purchases, reviews, app engagement and advocacy.

Don’t build loyalty around one transaction. Build it around the customer lifecycle.

5. Treating digital loyalty as a coupon channel

Real-world lesson: McDonald’s

McDonald’s has turned digital loyalty into a major global customer-engagement engine. At the end of 2025, it reported nearly 210 million 90-day active loyalty users across 70 markets, with approximately $37 billion in systemwide sales to loyalty members during 2025.

The important part isn’t simply the size of the membership.

McDonald’s connects loyalty with its app, ordering, convenience and personalized customer experience.

The lesson: Your loyalty program should connect to the customer journey rather than exist as a separate marketing database.

6. Ignoring personalization

Real-world lesson: Tesco Clubcard

Tesco has increasingly used Clubcard data and personalized challenges to move beyond generic promotions. Its Clubcard Challenges initiative uses individualized targets and rewards to encourage specific shopping behaviours.

The strategy is straightforward:

Don’t ask, “What offer should everyone receive?” Ask, “What offer is most likely to change this customer’s next behaviour?”

That distinction can dramatically improve reward efficiency.

7. Treating loyalty data as if it carries no responsibility

Loyalty creates valuable first-party data, and that creates equally important privacy obligations.

In 2026, Canada’s Privacy Commissioner raised concerns about Loblaw’s retention and anonymization of PC Optimum customer data after account deletion. Loblaw agreed to implement the Commissioner’s recommendations.

The lesson: Data can power personalization, but trust is part of loyalty too.

What Should Brands Actually Do?

The smartest programs are built around incremental value.

Before funding a reward, ask: Would this customer have purchased anyway?

If yes, the reward may simply reduce margin. If a targeted incentive brings back a lapsed customer, increases basket size or accelerates the next purchase, the economics can look very different.

Brands should therefore focus on:

• Behaviour-based rewards
• Customer segmentation
• Personalized offers
• Tier and milestone programs
• Gamification
• Referral incentives
• Reward choice
• Partnership and coalition benefits
• Real-time campaign optimization
• Incremental revenue
• Customer lifetime value
• Reward cost-to-revenue ratios
• Churn and retention

The KPI shouldn’t be “How many points did we issue?” It should be “What did those points make the customer do?”

The 2026 Loyalty Shift: From Points to Intelligence

The next generation of loyalty is moving beyond points accumulation toward personalized, data-driven, and AI-assisted engagement.

AI can help brands identify customers likely to churn, determine which incentive is appropriate, predict campaign response, and identify situations where no incentive is necessary at all.

That last capability can be particularly valuable.

Sometimes the smartest reward is the reward you don’t have to give.

A Loyalty Partner Can Remove the Operational Burden

Building a sophisticated loyalty program internally can mean managing rules, tiers, rewards, campaigns, customer segments, redemption, integrations, analytics, fraud controls, and continuous optimization.

A specialized loyalty platform can take much of that complexity off the brand’s plate.

Novus Loyalty brings together loyalty management, rewards, gamification, offer and campaign management, segmentation and analytics to help brands build and scale loyalty programs across industries.

Its NoCXy AI capabilities can further help brands turn customer and transaction data into actionable insights, identify behavioural patterns, and make smarter loyalty decisions.

The goal isn’t to give away more. It is to reward better. Because the biggest loyalty-program blunder isn’t spending money on loyalty. It’s spending money on loyalty without knowing whether customers are becoming more loyal.