How to Deal with Loyalty Program Stagnation and Re-Engage Inactive Members

Most loyalty programs start with a bang. A new proposition on the market sparks curiosity, customers eagerly sign up, explore the benefits, and adoption rates soar. It's an exciting "honeymoon phase" where the brand and its customers build the foundations of a new relationship. But what happens when the initial excitement fades? When the program, once a customer magnet, becomes just a backdrop to daily purchases, and engagement, once so high, begins to decline? This is the moment when many mature programs fall into the trap of routine and stagnation.

Stagnation is a natural stage in a program's lifecycle, but it is by no means a final verdict. It's not a reason to panic, but a strategic signal to take action. Contrary to common belief, the key to reversing this trend isn't solely the relentless and costly pursuit of new members. The true potential or growth lies elsewhere – in strategically re-engaging your existing member base and boldly evolving your offerings in response to their real, changing needs.

In this article, we will guide you through the complete process of revitalizing a mature loyalty program. We will start by making an accurate diagnosis and identifying the key causes and risks associated with stagnation. Then, we will present a range of creative and proven strategies to help you re-engage dormant members.

Signs Your Loyalty Program Is Stagnating

With many programs offering similar, uninspired rewards, customers quickly lose interest. How can you really tell if your loyalty program has fallen into a state of stagnation? The first step is to conduct a thorough diagnosis using both data and qualitative feedback.

Analyzing Key Performance Indicators (KPIs)

A close look at your program’s data can reveal the subtle shifts in customer behavior that signal a decline. These metrics act as an early warning system, helping you spot stagnation before it becomes a major problem.

You should check what percentage of your customer base has made a transaction or interacted with your program in the last 6–12 months to see if this Active Rate is on a downward trend. Another crucial indicator is the Redemption Rate: what percentage of collected points are actually being redeemed for rewards? A low rate could mean the rewards are not appealing or are too difficult to achieve. It’s also wise to compare whether program members still shop more frequently and spend more than non-program customers, as a shrinking difference in Purchase Frequency & Average Transaction Value (ATV) is a key concern. Finally, you should constantly monitor your Churn Rate – how many members become inactive over a specific period – because a sudden increase is a major red flag.

You can read about other important indicators in the loyalty program in the article Best Loyalty Metrics: KPIs to Measure Program Success and Drive Engagement

Qualitative Analysis: Ask Your Customers

Metrics tell you what's happening, but they don't always explain why. To truly understand the root causes of stagnation, you need to hear directly from your members. Gathering this kind of feedback is essential for discovering the frustrations and unmet needs that your data can't capture.

• Satisfaction Surveys: Use simple tools like the Net Promoter Score (NPS) to ask members how likely they would be to recommend the program to friends.

• Feedback Analysis: Track what customers are saying on social media, in reviews, and through interactions with customer service.

• In-depth Interviews: Talk with a group of your most loyal and most inactive members to understand their motivations and frustrations.

Quantitve Analysis: Is Your Program Still Delivering a Positive ROI?

A stagnating loyalty program often fails to produce better financial results and may even see a decline in its return on investment (ROI). Analyzing your program’s ROI can reveal whether it's truly worth the resources you're putting in.

• Cost vs. Revenue Analysis: To see if your program is still effective, you need to look at the big picture. Are your investments in the program—such as rewards, discounts, and operational costs—resulting in a measurable increase in sales and profit margins? If your costs are rising faster than the revenue generated, the program might be operating inefficiently.
  

• Year-over-Year Performance Comparison: Evaluate whether your program is generating a growing share of your overall sales and customer loyalty. If the percentage of transactions from program members is falling, that's a clear sign of stagnation.
  

• Impact on Customer Lifetime Value (CLV): Program members should have a higher Customer Lifetime Value than the rest of your customer base. If your CLV isn’t increasing for program members or has become equal to that of non-program customers, it suggests the program is no longer fulfilling its purpose.

Ultimately, a loyalty program is a business tool. It needs to provide a clear and quantifiable return. If you find that the program is no longer generating a positive ROI, it may be a sign that it’s time to either refresh your strategy or consider a new approach entirely.

Why Do Loyalty Program Members Become Inactive? The Most Common Causes of Stagnation

Are fickle customers or a poor experience to blame? What's the real reason behind a decline in loyalty? While it's easy to blame a lack of interest, the root causes of stagnation often lie within the program's strategy and execution. Let's delve into the most common reasons a once-thriving program can lose its momentum.

These causes can be divided into two main categories: internal factors, over which you have full control, and external factors, to which you must learn to react.

Internal Factors: Issues Originating Within Your Organization

These are areas that depend directly on your strategy, resources, and operational methods. Here, stagnation is often the result of flaws in the program's design or unrealized potential.

Sometimes, the program itself is the source of the problem. A once-exciting new offering can become a chore for customers if it suffers from one of these common pitfalls:

• Lack of a Strategic Plan: A program without clearly defined short- and long-term goals is like a ship without a rudder. If it was launched simply to "have a loyalty program," it will lack the direction needed to evolve. Without a strategy, brands often react to trends rather than proactively shaping their member experience.

• Focus on Acquisition Over Retention: The initial "honeymoon phase" often sees all resources poured into attracting new members. This focus on growth is vital, but it can lead to a significant oversight: neglecting the relationships with your existing base. When current members feel forgotten, their participation naturally declines, leading to a high churn rate and stagnating growth.

• Unattractive or Outdated Rewards: What was once a coveted reward can quickly become uninspired. If your rewards catalog hasn't been updated in years, it may no longer align with what your customers truly value. A lack of new, aspirational, or personalized rewards can lead to a low redemption rate, as members see no real benefit in participating.

• Overly Complicated Rules: A loyalty program should be effortless. If members have to read a complex set of rules to understand how to earn points or if redeeming a reward feels like a multi-step chore, they will simply give up. Friction in the user experience is one of the quickest ways to kill engagement.

Data is the lifeblood of a modern loyalty program, but simply collecting it isn't enough. Many programs fail to thrive because they don't harness the power of their data.

• Collecting Data Without Action: You may have a goldmine of information about your members—their purchase history, preferences, and browsing habits—but if this data just sits in a database, it's wasted. Without using it for segmentation, personalization, and targeted campaigns, you miss the opportunity to make your program feel unique to each member.

• Generic Communication: Treating all members the same is a surefire way to lose their attention. When everyone receives the same generic email or promotional message, it leads to "banner blindness." Members quickly learn to ignore your communications because they don't feel relevant, leading to lower open rates and click-throughs.

• Lack of Proactivity: A great loyalty program identifies customer disengagement early on. If you're not actively monitoring for signs that a member's activity is dropping off, you're missing a critical window to re-engage them. Proactive intervention, such as a personalized message or a special offer to win them back, can be the difference between a high churn rate and a thriving member base.

External Factors: The Influence of the Market Environment

Sometimes, even a well-designed program can lose momentum due to forces you don't directly control but must respond to strategically.

• Competitor Actions: The launch of an innovative new loyalty program by a rival or their intense promotional activities can suddenly make your offer less attractive and cause you to lose members.

• Changes in the Economic Situation: In times of inflation or economic slowdown, customers may shift their priorities. Price can become more important than points or status, and consumers may use products in your category less frequently, naturally reducing program activity.

• Evolution of Customer Expectations and Trends: What was exciting two years ago may be the standard today. Customers increasingly expect greater personalization, instant benefits, and value that goes beyond simple discounts. A program that fails to evolve with these expectations quickly becomes outdated.

Loyalty Program Fatigue - What It Is and How It Impacts Customer Loyalty

Loyalty Program Fatigue is the growing sense of exhaustion customers experience when faced with too many loyalty programs, apps, and reward schemes. With dozens of brands competing for attention through points, discounts, and offers, consumers often disengage and stop seeing value in joining “yet another” program. As a result, even a well-structured loyalty strategy can stagnate if it doesn’t stand out or address real customer needs.

It is important to recognize that loyalty fatigue can be both an external and internal factor influencing program performance. Externally, customers are oversaturated with competing offers, leading to reduced engagement. Internally, brands may unintentionally cause stagnation by overcomplicating program mechanics, relying too heavily on discounts, or failing to innovate. Together, these factors can significantly weaken customer retention and loyalty growth.

To overcome loyalty fatigue, companies should prioritize personalization, simplicity, and meaningful experiences over generic rewards. Leveraging advanced analytics, AI-driven personalization, and gamification can help keep members engaged while differentiating the program from competitors. By addressing both external pressures and internal design flaws, brands can revitalize their loyalty strategy and build stronger, long-term customer relationships.

The Risks of Not Evolving Loyalty Program

Ignoring the signs of a stagnating loyalty program can have serious repercussions that go far beyond a simple dip in engagement. It’s a strategic risk that can impact your brand's financial health and its very relationship with customers.

Financial and Business Consequences

When a loyalty program ceases to evolve, its return on investment inevitably declines. It transitions from being a powerful tool for growth into a mere business cost, a drain on resources with little to no tangible return. This is where the most significant threat lies: the potential loss of your most valuable customers. Your most loyal patrons, who may feel unappreciated or that their loyalty is being taken for granted, are the very ones most at risk of leaving. They may be tempted to switch to a competitor who offers them a more modern, rewarding, or emotionally engaging experience. Over time, this erosion of your most valuable relationships leads to a loss of your competitive advantage. What was once a unique selling proposition that set your brand apart becomes just a standard feature or, worse, a legacy system that falls behind the market.

Loss of Brand Image and Customer Relationship

A neglected loyalty program can seriously tarnish your brand's reputation. It can lead to the perception that your company is outdated or isn't keeping up with the modern expectations of its customers. It weakens the emotional bond you’ve worked so hard to build. Customers cease to feel like they are part of an exclusive, valued community. Instead of being an exciting extension of the brand, the program becomes a forgettable transaction. This breakdown can be expensive to repair.

To prevent this decline and strengthen your relationship with customers, you need a strategic approach that breathes new life into your loyalty program.

Beyond Reactivation: Evolving Your Program to Prevent Future Stagnation

Once you have diagnosed the causes of stagnation, it's time to take action. The key is to transform the program from a simple points-based system into a dynamic, rewarding experience that truly values your customers.

Case Study: Re-Engaging Dormant Customers with Data-Driven Segmentation

Let's look at a real-world example. One of our clients, a major customer goods retailer, noticed their customer base was stagnating and the percentage of inactive members was growing. The key was not just to identify inactive members, but to segment them to understand the reasons behind their inactivity.

Using advanced machine learning algorithms, our analytics team segmented these "hibernated customers" into distinct groups such as 'Dormant Regulars,' 'Deal Hunters,' 'Previous Online Shoppers,' and 'One-time Buyers.' This allowed for a granular understanding that went far beyond a simple 'active vs. inactive' label.

Next, we conducted a detailed analysis of past communications, focusing on messages that had an above-average correlation with re-engaging these dormant segments. We identified the key characteristics of successful messages – from content and subject lines to the channel and timing – that resonated with each specific group.

Based on these insights, we launched dedicated communication campaigns aimed at "waking up" each segment. For some, the focus was on reminding them of the program's core benefits. For others, it was a highly targeted promotional offer with parameters tailored to their profile. These activities were managed continuously using a "test and learn" methodology, allowing for constant analysis and optimization. As a result, the effectiveness of the campaigns grew month by month, steadily increasing the percentage of re-engaged members.

This chart visualizes the direct results of the "test and learn" methodology described in the case study. The vertical axis represents the re-engagement rate (the percentage of "awakened" customers), while the horizontal axis shows four consecutive months of the campaign.

Thanks to the consistent application of the “test and learn” methodology, we increased the effectiveness of our activities month by month. As a result, in the fourth month of the project, we managed to “awaken” over 7% of the entire analyzed dormant customer base just through communication activities.

This deep, data-driven understanding of your customer segments is the essential foundation for any revitalization effort. Once you know who you're trying to re-engage, you can implement exciting and effective strategies to bring them back. We have presented several possible solutions below.

Enrich the Program with Gamification and Surprise Elements

To inject excitement back into your program, you need to go beyond basic transactions. One of the most effective ways to do this is by introducing elements of gamification and surprise.

• Add Challenges and Missions: Instead of just rewarding a purchase, give members "missions" or challenges that make participation more engaging. For example, you can offer bonus points for buying a specific product, visiting a store three times in a month, or reaching a certain spending threshold. These tasks make the program feel more like an interactive game and less like a chore.

• Implement "Surprise & Delight": A powerful way to prevent stagnation is to break the routine. Surprise & Delight is a strategy where you spontaneously give members unexpected bonuses, a free gift on their birthday, or early access to a sale. These small gestures make customers feel uniquely appreciated and create a positive, memorable connection with your brand.

Appreciate Loyal Customers Beyond Their Transactions

True loyalty is about more than just a customer’s spending habits. A powerful loyalty program rewards members for their overall brand engagement and makes them feel like a valued part of a community.

• Encourage Reviews and User-Generated Content: A simple transaction-based program overlooks the many ways a customer can add value. You can change this by rewarding members for sharing their opinions and User-Generated Content. Award points for writing a product review, posting a photo with your brand's hashtag, or referring a friend. This turns your members into brand advocates and makes them feel appreciated for their contributions, not just their purchases.

• Build Community: Make your members feel like they are part of an exclusive group, not just a list of customers. You can create a dedicated space for them, such as a private Facebook group, a members-only online forum, or by hosting exclusive events. This fosters a sense of belonging and strengthens the emotional bond between your customers and your brand. The program becomes a gateway to a special community, which is far more powerful than a simple discount.

Personalize Rewards with Artificial Intelligence to Build Deeper Bonds

Personalization is no longer a luxury – it's a necessity. To truly make a member feel valued, you must move beyond generic offers and make the rewards feel like they were created just for them. By leveraging the power of data and Artificial Intelligence (AI), you can offer rewards that are deeply relevant and exciting.

• Dynamic Offers: Instead of showing everyone the same list of rewards, an AI-powered system can analyze a customer’s past purchases, browsing history, and preferences to present them with a personalized selection of items they are most likely to desire. This makes the program feel unique to each user and significantly increases the chance of redemption. The rewards become a reflection of the customer’s individual journey, rather than just a generic catalog.

• Predictive Personalization: AI can go a step further by anticipating what a specific customer will find most valuable at a given moment. The system can predict future behavior and preferences, allowing you to proactively offer an exclusive discount on a product they've been eyeing or a special bonus for a new item they're likely to enjoy. This isn't just about matching a product to a customer; it's about making them feel seen and understood by your brand. This level of customization creates a much stronger emotional connection and a greater incentive to stay engaged.

By adopting these methods, you can create a program that feels unique and valuable. For an even deeper dive into what makes a loyalty program truly stand out, explore how to craft a powerful Unique Value Proposition (UVP). A strong UVP ensures your program isn't just another offering on the market, but a compelling reason for customers to choose your brand and stay loyal.

For more on creating a unique loyalty program, read our article: How to Craft a Unique Value Proposition for a Loyalty Program.

Best Practices for Introducing Changes to Your Loyalty Program

Even the most well-designed loyalty program needs to be updated. When it's time to make a change, a careful approach is key to maintaining customer trust and ensuring a smooth transition.

Communication, Testing, and Transparency

Change can be unsettling, especially for your most loyal customers. To make sure your program’s evolution is a success, focus on a few key principles:

• Announce changes in advance: Nobody likes being surprised. Inform customers about upcoming changes ahead of time and clearly explain the benefits to them. When they feel informed and valued, they're more likely to embrace the new features.

• Test with a smaller group: Before rolling out changes to your entire member base, run A/B tests on a selected segment. This allows you to gather feedback, evaluate the changes' effectiveness, and fine-tune the experience before a full launch.

• Provide a transition period: Give customers time to adjust to new rules, especially if the changes affect their accumulated points or status. A clear transition period and a transparent communication plan will prevent frustration and reinforce trust.

Preventing of Loyalty Program Fatigue

Once you've revitalized your program, the challenge becomes keeping it fresh and exciting for the long term. This requires a proactive, continuous strategy.

• Constantly update the program's value: Don't let your rewards get stale. Regularly check to see if your rewards are still appealing to your members. By listening to your customers and adapting your benefits to their changing needs, you ensure the program remains relevant.

• Implement continuous improvements: Don't wait for a major redesign to make changes. Consistently test and roll out small, incremental improvements to the program's mechanics and rewards. This keeps things interesting and shows members that the program is constantly evolving for the better.

• Promote non-monetary benefits: Highlight the unique advantages of being a member that aren't tied directly to spending. This includes exclusive benefits like early access to products, members-only content, or invitations to special events.

• Maintain transparency and simplicity: Always make sure the rules are easy to understand. Avoid complex mechanisms that can confuse and frustrate members, as this is one of the quickest ways to cause program fatigue. A simple, transparent program is far more likely to retain a customer's attention over time.

A loyalty program is a living organism – it requires attention, continuous development, and adaptation to the customer’s changing needs. Stagnation is not the end, but a signal for action. By listening to your customers, testing new solutions, and reacting proactively, you can transform your program from a cost into a powerful engine for growth.

If, however, your strategy requires fundamental changes to get off the ground, you might need a complete redesign. Planning a major overhaul? Read our guide on effective loyalty program redesign: Redesigning a Loyalty Program: Best Practices for Revamping Your Current Loyalty Performance or a New Relaunch.

Examples of Re-engaging Members in the Program

Once you have a clear diagnosis of why your loyalty program is stagnating, it’s time to find inspiration for revitalization. The key is to look at brands that have successfully transformed their programs from a simple transaction-based system into a dynamic, rewarding experience. Here's a look at how DSW (Designer Shoe Warehouse) revitalized its program.

Re-engaging Customers Through Personalization and Social Connection

As a major footwear retailer, DSW faced a challenge common to many mature loyalty programs: its basic points system was no longer enough to stand out against growing online competition. Instead of searching for new, complicated mechanisms, DSW decided on a fundamental overhaul, rebranding its program as "DSW VIP." The key to its success was adding an emotional and social layer. Within the program, customers could earn points not only for purchases but also for completely new, non-transactional actions, such as donating old shoes for recycling as part of the DSW Soles4Souls program. This brilliant move combined loyalty with a social purpose, giving customers a sense that their engagement had a greater meaning. Additionally, DSW introduced deep personalization, allowing members to choose their own benefits, for example, earning more points for purchases in a category they were interested in, like running shoes. Instead of a single, universal reward, the program became "tailored" to each customer. The whole experience was completed with an element of surprise, with regular free gifts offered to the most engaged members, which built positive emotions and a sense of being appreciated. This example shows that a mature program can be successfully revitalized when it stops being just a transactional tool and becomes a meaningful element of the bond between the customer and the brand.

Sustainability as a Driver of Customer Loyalty

Decathlon, a global sporting goods retailer, is another prime example of a brand that successfully revitalized its loyalty program by adapting to a new consumer mindset. Recognizing that today’s customers value brands with a purpose, Decathlon evolved its loyalty program in Poland from a simple transaction-based model to one that rewards sustainable behavior.

Decathlon’s new strategy rewards customers not just for what they buy, but for their commitment to an eco-friendly lifestyle. The program now offers rewards for activities that promote environmental protection, such as choosing products labeled "Eco-design" and participating in initiatives that give products a second life. This change strengthens the bond with its community and reinforces a shared commitment to a healthier planet. Decathlon also created a circular economy within its loyalty program by introducing its "2nd Life" and "BuyBack" services, which allow customers to purchase returned items at a reduced price or sell their used gear back to the company. As a further extension of this green approach, the company launched a rental service for sports equipment, "Decathlon Rent," which minimizes the need for customers to buy new gear and aligns perfectly with the brand’s commitment to sustainability. Decathlon's approach proves that loyalty programs can evolve from a simple rewards system into a powerful platform for promoting a shared purpose. By rewarding customers for their eco-conscious decisions, Decathlon has not only revitalized its program but also built a stronger, values-based connection with its community. This strategy shows that true loyalty can be fostered by making customers feel like they are part of a movement that is bigger than just a transaction.

Summary on How to Revive Loyalty Programs

As we've seen, stagnation doesn't have to be the end. It is a natural signal that a loyalty program needs to evolve. The key to success is not relentlessly chasing every new customer but strategically working with your existing member base. By listening to the needs of both your most and least loyal members and then introducing changes based on data and creative solutions, you can transform your program from a "dead" tool into a dynamic ecosystem. Remember, a loyalty program is an investment in your customer relationships, not just in rewards. Are you ready to give your program a second life? If you need assistance with your program, feel free to contact us or book a call to explore how we can support your efforts in creating an even more engaging and successful loyalty program.