Why Most Loyalty Programs Fail to Drive Real Behavior

Intro: The Core Shift — From Enrollment to Engagement

Most loyalty programs are built on a flawed assumption: that signing up a customer is the same as winning their loyalty. New data from Upside and EY reveals that assumption is costing businesses real revenue. The vast majority of consumers—86%—say rewards matter to them. But far fewer actually use the programs they join. Only 59% of shoppers use a grocery loyalty program regularly. That number drops to 49% for fuel and convenience stores and just 38% for restaurants. The gap between stated interest and actual behavior is a strategic blind spot. If your program isn't driving repeat purchases, you're not building loyalty—you're just collecting data.

The Data: A Wide Gap Between Interest and Action

Upside's survey of 3,400 consumers, released July 15, 2026, paints a clear picture: consumers want rewards, but most programs fail to deliver enough value to change shopping habits. Enrollment is at or near all-time highs, according to EY research, yet nearly half of consumers say they’re willing to shop outside a program if they find a better deal elsewhere. That means millions of “loyalty members” are actually one good competitor offer away from defecting. The programs that win aren't the ones with the most members—they're the ones that consistently influence purchase decisions.

Why Traditional Programs Miss the Mark

Patricia Camden, loyalty leader for EY Americas, explains the root cause: “For many years programs were designed almost entirely around the heaviest users. The thinking was if you reward the people already spending the most, you'll get more of that behavior. That can work, but it also leaves a lot of value on the table.” This approach ignores the middle tier—customers who like your brand but aren't fully committed. They're enrolled, but they're not engaged. And because the program doesn't give them a reason to choose you over a competitor, they drift away. Camden warns: “If the program isn't actively nurturing the next cohort coming up behind them, the top of the pyramid eventually starts to thin out.”

The Preference-First Shopper: Your Most Valuable (and Fickle) Customer

Upside identifies a key segment: “preference-first” shoppers. These consumers show high brand affinity and high price sensitivity. They like your store, but they also care deeply about staying within budget. They join programs at places they already like—and they tend to like a lot of places. That makes them valuable targets, but also hard to lock in. Winning their business requires differentiation. Generic points programs won't cut it. Exclusive experiences, personalized offers, and immediate rewards are what move the needle. Immediacy is especially critical. Programs that ask customers to spend hundreds before seeing a benefit lose fence-sitters. Those that reward small behaviors early on build momentum and deeper loyalty over time.

How to Build a Program That Actually Changes Behavior

Camden points to a real example from the casual dining sector. One company identified a segment of customers who used to visit every couple of months but had slowly drifted away. Instead of pouring all investment into weekly regulars, they built a plan to win back that middle group with small welcome-back offers and personalization. The result: a “meaningful share” of the drifting cohort began visiting once or twice extra per quarter, and some started engaging in higher-value behavior over time. “The program wasn't just protecting the top of the pyramid, it was building the next version of it,” Camden said. The lesson is clear: stop treating loyalty as a one-size-fits-all reward system. Design it to nurture specific behaviors at each stage of the customer lifecycle.

What This Means for Your Business

If you run a loyalty program, the data should be a wake-up call. High enrollment numbers can mask low engagement. Start measuring active usage—not just sign-ups. Identify customers who are enrolled but not buying regularly. Test small, immediate rewards to re-engage them. If you're in grocery, fuel, or restaurants, the opportunity is especially large: the majority of your members aren't using your program regularly. That's not a failure of your customers—it's a failure of your program's design. For businesses without a loyalty program, the lesson is that launching one isn't enough. You need to build it around behavior change from day one. And if you're a small business with limited resources, focus on personalization and immediacy—two things you can do better than big chains.

Bottom Line: The New Loyalty Mandate

The era of enrollment-for-enrollment's-sake is over. Winning loyalty now means earning it every day with offers that feel personal, immediate, and valuable. The brands that close the gap between what consumers say they want and what they actually do will capture the next wave of growth. The rest will watch their “loyal” customers drift away to the next best deal.

Source: Marketing Dive