How to Refresh Your Loyalty Program: Key Approaches and Pitfalls to Avoid

Revamping a loyalty program can be an exciting yet challenging task, especially when it’s time to adapt to changing customer needs and brand evolution. Recently, an old client, a beauty retailer, reached out to me for a program redesign. I had developed their original loyalty program about 7-8 years ago, and after all the shifts the world has experienced—particularly post-COVID—the need for a fresh approach was clear.

Their existing loyalty program was a tiered points system, effective for its time and budget. They were concerned that new members weren’t sticking around, and that the program was too transactional, offering little in terms of building a genuine connection with the brand. These are common issues, and they highlight the importance of refreshing loyalty programs to maintain long-term customer engagement.

When Should You Redesign a Loyalty Program?

Loyalty programs should evolve with customer expectations, industry trends, and brand identity. Here’s a framework I follow, known as the EMBRACE rule, to determine if it’s time for a program refresh:

Engagement and Motivation: If your program doesn’t foster deeper relationships or provide personalized experiences, it’s time for an upgrade. Loyalty should be about more than just transactions—it should help build long-term engagement.

Brand Relevance: If your brand’s value proposition has evolved—whether incorporating sustainability, a digital-first approach, or changing consumer preferences—your loyalty program must adapt to reflect these shifts.

Adapt to Competition: A successful program should always be informed by the competitive landscape. If competitors are offering more compelling rewards or experiences, you risk losing out.

Effectiveness: If your loyalty program is no longer delivering a strong return on investment (ROI), it’s definitely time for a refresh. Poor ROI can kill engagement and undermine the value of the program.

The general rule of thumb is that loyalty programs need significant enhancements every 5 years. But a word of caution: change shouldn’t happen too frequently. While Millennials and Gen Z are more receptive to change, people still appreciate transparency and stability in a loyalty program. Too many changes can lead to confusion and disengagement.

Pitfalls to Avoid When Redesigning a Loyalty Program

One of the biggest mistakes I see brands make is rushing into a redesign with preconceived solutions. You might think you already know what’s wrong, but true innovation comes from understanding the deeper needs of your customers and the internal teams that support the program. This requires proper research—just like the initial design process.

The EMBRACE framework encourages you to invest in both consumer and stakeholder research to ensure that any changes align with customer expectations and internal capabilities. Skipping this step is a recipe for failure.

Learn from Past Data and Insights

A critical element of redesigning a loyalty program is leveraging the insights gathered from the original program. Don’t overlook what you’ve learned over time. For example, when I worked on one project, we found that redemptions were focused on a specific category of goods—products that never went on sale. This insight led us to adjust the burn side of the equation, making those products more central to the rewards strategy. In another case, we realized that the redemption threshold was too high, causing churn after each reward. By adjusting the points needed for redemption and offering smaller rewards more frequently, we helped retain customers and keep them engaged. Additionally, it’s important to listen to those who are directly involved in the program, like the IT team, call center staff, store employees, and even loyalty managers. They can offer invaluable feedback on customer pain points and operational challenges that you may not immediately see.

Iterative Changes and Effective Communication

Rolling out program changes incrementally can be a great way to ease both customers and employees into the new system. This strategy allows you to gather data on how the changes are performing without overwhelming your audience. It's also less likely to trigger backlash since change, especially when driven by a business, can often be seen as self-serving. However, no matter how you implement the changes, over-communicating is key. Your customers and frontline teams need clarity on how the changes will benefit them. Always explain the “why” behind the redesign and make sure the process is transparent. This helps build trust and prevents any confusion.

In summary, a well-executed loyalty program refresh isn’t just about offering new rewards or incentives. It’s about creating deeper customer relationships, ensuring your brand remains relevant in an evolving market, staying competitive, and ensuring the program delivers a strong ROI. By following a thoughtful and research-driven approach, you can redesign your loyalty program to meet the changing needs of your customers and your business. Avoid rushing, learn from past experiences, and ensure that every step you take is driven by customer insights and clear communication.

A successful loyalty program revamp is a long-term investment—don’t treat it like a quick fix.

In the next one, let's talk about enhancing loyalty program engagement through personalized experiences. As always your comments and feedback on this one is appreciated.

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