In practice, most small business loyalty programs quietly die, are survive way too long on life support. Not with a bang. They just stop working, stop getting used, and eventually get abandoned. The punch card sits in a drawer. The app nobody downloaded collects dust. The points system confuses staff more than it helps customers…

They're too complicated to use

The number one killer. A loyalty program only works if customers can participate without thinking about it.

When someone's at your counter with three people behind them, they're not going to stop and figure out how your tiered points system works. If your cashier has to explain it, it's already too complicated. If the customer has to do math to understand what they're earning, you've lost them.

The programs that stick are almost embarrassingly simple. Buy 9, get 1 free. Earn a stamp per visit. Spend $50, get $5 back. Customers understand it instantly, staff can execute it without training, and nobody has to think twice.

Complexity is usually a sign that someone over-designed it. Tiers, multipliers, expiry windows, category exclusions, using _points_ in general — these things feel strategic but they just create confusion. Start with the dumbest simple version of your program and only add complexity if there's a real reason to.

The rewards aren't good enough to care about

Even a simple program fails if the reward at the end isn't worth the effort. Why would a customer commit if it's just not worth it?

A 5% discount after 10 visits is technically a reward. But it doesn't feel like one. There's no moment where the customer thinks "okay, that was worth it." It just kind of happens and then disappears.

Good rewards have two qualities: they feel meaningful and they're easy to understand the value of. A free coffee after 9 visits is clear. A free drink after 5 dinners is clear. "$3 off your next purchase of $30 or more excluding alcohol and gift cards" is not clear.

The other mistake is setting the threshold too high. If customers need 20 visits before they earn anything, most of them will give up before they get there (or they won't start). The first reward should be achievable within a reasonable timeframe, something like 4 to 6 visits for a frequent buyer. That first redemption is what converts a casual customer into someone who actually thinks of themselves as a regular.

There's nothing reminding customers it exists

This one is underrated. Most loyalty programs don't fail because customers don't like them. They fail because customers forget about them.

Someone signs up, gets their first stamp, and then doesn't think about your business for three weeks. By the time they come back, they've forgotten the card at home, lost the app, or just moved on. The program had no way to reach them in between.

This is where most paper and app-based programs fall flat. Paper cards can't send a notification. Apps only work if people actually open them, which they won't unless you give them a reason to.

Even worse, some POS-powered loyalty programs exist mostly in the background (looking at you, Square), only rearing their head if a staff members mentions it, or if the merchant has bothered to configure interaction notifications (this doesn't happen often). These programs often exist without the customer even knowing they're "participating". They don't track points or stamps, and they never get the reward because they don't know they have it! Not a smart way to keep your brand top-of-mind.

A reminder that says "you've got $8 sitting in your account" or "you're two visits away from a free one" is genuinely useful. It gives the customer a reason to come in that isn't just a generic promo. And because it's tied to something they've already earned, it doesn't feel like spam. It has value.

Without that follow-up, you're relying entirely on the customer to remember on their own, and most of them won't.

You have no idea who your customers actually are

This is the quiet failure underneath all the others, and remedying this can be worth a lot.

A paper punch card tells you nothing. You don't know who's on their 8th visit. You don't know which of your regulars hasn't been in for a month. You don't know whether the people redeeming rewards are your best customers or just coupon hunters.

Without customer identification, your loyalty program is basically anonymous. You're rewarding behaviour you can't see, from people you can't reach, with no way to follow up, or reach out to specific segments.

A basic digital system changes this. When customers identify themselves, even just by scanning a QR code or tapping a card, you start building an actual picture of who's coming in and how often. That's when the program starts generating useful information alongside useful revenue.

It doesn't need to be complicated. Even a simple digital stamp card that ties visits to a phone number or email gives you more to work with than a paper card ever could.

The fix is simpler than you think

Most loyalty programs don't need a rebuild. They need a simplification.

Make the reward obvious. Make it achievable. Give yourself a way to reach customers between visits, and make sure you actually know who your customers are!

The businesses that get loyalty right aren't doing anything fancy, they've just removed every bit of friction between the customer and the reason to come back. And their customers will come back.