Why Loyalty Programs Fail and What Successful Ones Do Differently

There is a problem sitting inside most loyalty programs that does not get talked about loudly enough.

The program exists. The database is growing. First purchases are happening. And then, quietly, customers leave anyway. It is called a leaky bucket. And for premium retailers, especially, it is expensive.

Adrienne Rice, Senior Director of Performance Media at M+C Saatchi Performance, recently wrote about this in The Drum. Her argument is direct: most loyalty programs are optimised and built around points. The better ones create good experiences that customers remember.

Points Are Not the Problem. They Are Just Not the Answer

According to the Harvard Business Review, there are more than three billion loyalty program memberships in the U.S. alone. That is a very large number.

But here is what it actually tells us. When every brand has a loyalty card, the card stops meaning anything.

The standard playbook looks like this. Offer a first purchase discount. Capture the email. Start the marketing sequence. Watch the unsubscribe rate tick up. Repeat. The transaction happened. The relationship did not.

Loyalty to the discount is not loyalty to the brand. Sophisticated buyers, especially in premium categories, can tell the difference. They can also tell when a brand has not really thought about what comes after the initial offer.

Churn is Not Just an Inconvenience. It is a Real Number

A 2021 McKinsey study found that 71% of customers feel frustrated by impersonal experiences. That frustration rarely shows up as a complaint. It shows up as a churn.

Peacock is a useful example of what that looks like at scale. Despite covering the Super Bowl and the Winter Olympics in Q1 2026, the platform posted losses of $432 million. Its churn rate sits at around 9%, compared to roughly 6% for competitors like Netflix, Hulu, Disney, and HBO Max. The content investment was significant. The loyalty infrastructure did not hold the audience after the tentpole events aired.

The lesson is not that churn is inevitable. It is that strong content, or strong product, alone that is not enough to stop it.

The Experience is the Mechanic That Actually Works.

Adrienne Rice uses Rodd & Gunn, a premium New Zealand menswear brand, as her main case study. It is good one, because the brand has made a deliberate choice to compete on something other than price.

The tiered program is simple by design. Entry-level members get 10% off purchases, access to preview sale events, and free U.S. shipping. Platinum members receive 15% off all purchases, plus exclusive benefits such as free in-store tailoring and invitations to brand events. Clean, easy to understand.

But what actually sets the program apart is what happens inside the stores. Rodd & Gunn’s flagship locations, called lodges, offer high-end dining and cocktail bars alongside the retail experience. Customers are not just coming to buy a shirt. They are spending time inside a world the brand has built for them. That is a very different proposition.

“This is more akin to a Soho House membership than a retailer. The reason customers stay is the experience, and the discounts are wrapped together.”

Adrienne Rice, Senior Director, Performance Media, M+C Saatchi Performance

The two-year product guarantee adds another layer. It signals that the brand expects to still be in the relationship two years from now. That is the opposite of a points-expiry warning.

Other brands have arrived at the same conclusion through different routes. Nike gives loyal members free access to its Run Club and Training Club apps, earning a place in customers’ daily lives on days when nobody is shopping. REI sells outdoor gear while building a community for people who actually go outdoors. An Incisiv study found that 63% of shoppers prefer experience-based rewards over discounts.

A Loyalty Program is also a First-Party Data Engine

This is where the loyalty conversation and the media strategy conversation meet.

“A well-designed loyalty program is a first-party data engine. Every member is an opted-in customer who has told you what they buy, when they buy, and what they’re willing to give you their phone number for.”

Adrienne Rice, Senior Director, Performance Media, M+C Saatchi Performance

The data sharpens segmentation. It reduces wasted budget on audiences that were never likely to convert. It gives creative teams real signals to work from, not assumptions.

In practice, Rodd & Gunn uses paid social to drive loyalty sign-ups. The loyalty database then powers retargeting around two major sale events per year, the only significant sales the brand runs outside of Black Friday. That cadence is deliberate. By keeping sale moments rare, the discount remains meaningful and does not erode the full-price perception for the rest of the calendar.

There is also a basic usability point worth mentioning. Rice notes that 63% of customers will abandon a loyalty program they cannot understand. Complexity is not depth. In loyalty programs, simplicity is the feature.

So What Does This Mean in Practice?

The brands that keep treating loyalty as a discount delivery mechanism will keep getting customers who leave the moment a better offer appears somewhere else. That is a predictable outcome of a predictable strategy.

The ones that invest in experience, in belonging, in access, in being part of how the customer sees themselves, will build something considerably harder for competitors to replicate.

For premium brands especially, competing on price is not a sustainable long-term strategy. The leaky bucket does not get fixed with more points. The experience might just be what fixes it.

This post summarises an article by Adrienne Rice originally published in The Drum. Read the full piece: The best loyalty programs offer more than just points.