Businesses heavily invest in loyalty programs to develop long-term connections with their consumers, yet a significant portion of the rewards offered through these programs is rarely redeemed. This unclaimed value, known as loyalty breakage, can lower the return on investment while distorting how engaged members actually are.
Although some level of breakage is common in any loyalty program, consistently high breakage rates may cause friction in the customer journey. Understanding what loyalty breakage is and why it happens can help brands improve customer engagement and maximize the value of their loyalty programs.
What is Loyalty Breakage?
Breakage refers to the points that members earn but never redeem before they expire. While unredeemed rewards may reduce fulfillment costs in the short term, they can also make members feel less valued. Over time, this can erode customer loyalty.
Research also shows that breakage remains a widespread challenge, with 41% of loyalty points issued globally expiring unused each year. Because breakage directly influences redemption activity and outstanding reward liabilities, brands should monitor it alongside other key loyalty metrics.
Why Does Loyalty Breakage Happen?
Loyalty breakage often occurs when members deal with barriers that make redeeming rewards less appealing or more difficult. Some of the most common factors include:
- Reward Expiration – Short validity periods reduce the chances that members can use their points or rewards, especially if they are unaware of the deadline.
- Complicated Redemption Processes – When claiming a reward requires navigating multiple stages, filling out excessive forms, or deciphering unclear instructions, user friction increases. This burden frequently causes members to abandon the process entirely.
- High Redemption Thresholds – Some loyalty programs require members to accumulate a substantial number of points before qualifying for even a baseline reward. This could reduce motivation, especially among less frequent consumers.
- Infrequent Communication – Without timely reminders about point balances, expiring rewards, or new offers, members are more likely to forget about their rewards altogether. According to Deloitte’s 2025 survey, 40% of loyalty program members said they sometimes forget to redeem their rewards, highlighting how a lack of communication can reduce engagement.
- Limited Redemption Options and Reward Relevance – Providing only a small selection of rewards, restricting where and how points can be redeemed, or offering generic and unappealing options can weaken the program’s overall appeal, making members less inclined to claim rewards.
Whether it’s a complex process, an unclear deadline, or benefits that simply don’t attract customers, anything that adds effort or undermines perceived value could lower redemption rates. Identifying and addressing these frictions within a loyalty program is critical to minimizing breakage and keeping members engaged.
How to Reduce Loyalty Breakage
A loyalty program doesn’t need a complete overhaul to reduce loyalty breakage. Small, deliberate changes to how rewards are structured, communicated, and redeemed can significantly change how often members actually use them.
From personalization to redemption timing, the following strategies can help brands reduce breakage and drive long-term retention:
Personalize the Reward Experience
When rewards are tailored to a customer’s preferences or purchase history, they become more enticing than generic incentives. For example, brands can offer discounts on specific products or categories that a member already buys, making the benefit feel relevant.
This same principle also extends beyond the reward itself. Businesses can use customer data to suggest items or services that align with a customer’s interests or previous purchases, turning a loyalty program into a more curated experience. Members are more likely to redeem a reward if it feels relevant to their needs and interests.
Encourage Timely Redemptions
Limited-time offers and capped rewards can urge members to act immediately. Sending reminder emails or push notifications before a reward expires helps keep it top of mind. Meanwhile, countdown timers or visual highlights on websites or apps make the expiration dates easier to notice. These reminders are especially useful for those who might be interested in the reward but are likely to forget about it amid competing promotions or everyday demands.
Introduce Micro Redemptions
Allowing members to redeem smaller amounts of points earlier can make rewards more achievable and encourage customers to stay engaged in the program. Instead of making consumers wait until they earn enough points for a greater incentive, micro redemptions allow them to spend what they have accumulated sooner. These incremental rewards may give members a sense of accomplishment, motivate repeat engagement, and keep them actively involved in the redemption cycle.
Use Gift Cards
Gift cards can be an effective way to encourage customers to redeem their rewards. By allowing members to convert points into gift cards, brands offer a flexible incentive that can be used by the member or shared with others. This can help reduce breakage by turning abstract reward points into a more tangible, spendable incentive that customers are more likely to use.
Integrate with Other Marketing Campaigns
Integrating a loyalty program with broader marketing campaigns can reduce breakage by creating more timely opportunities for members to redeem their rewards. Linking redemptions to seasonal promotions, flash sales, or holiday seasons makes rewards feel more time-sensitive and valuable, encouraging members to use their points before they expire.
An online loyalty program supports this by combining incentives, promotions, and customer data in a single system, helping businesses execute targeted campaigns and prompt redemptions at the right moment.
Turn Unredeemed Rewards Into Real Customer Engagement with BUZZEBEES
Loyalty breakage is often treated as an unavoidable outcome of running a rewards program, but in many cases, it reflects how the program is structured and how easily members can engage with it. By paying closer attention to the root causes of unredeemed rewards, businesses can make smarter decisions on how to improve participation and overall program performance.
As one of the Philippines’ and Southeast Asia’s leading loyalty and CRM platform providers, BUZZEBEES can help brands design strategies that reduce breakage and strengthen long-term customer engagement. With mobile-first CRM solutions built for real-time engagement, BUZZEBEES supports businesses in creating reward systems that drive actual reward redemption.
To learn more about building a loyalty program that reduces unredeemed rewards, reach out at analyn.b@buzzebees.com.
