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Loyalty Program Mistakes: What Brands Can Learn From the Lidl Case Study

Discover the biggest loyalty program mistakes brands make and what businesses can learn from the Lidl case study with expert insight from Loyalty Works.

Introduction

Launching or refreshing a loyalty program is one of the most effective ways to improve customer retention, increase repeat purchases and strengthen long-term relationships. Yet despite the best intentions, many brands fall into the same loyalty program mistakes that reduce engagement instead of increasing it. Creating a successful loyalty program isn’t simply about offering discounts or rewarding purchases. Today’s customers expect programmes that are easy to understand, genuinely valuable and tailored to their behaviour. When those expectations aren’t met, even well-designed initiatives can struggle to deliver the desired results. A recent example comes from Lidl. Its transition from the long-standing Coupon Plus model to the new Lidl Plus Points system sparked widespread discussion among shoppers. While Lidl introduced the changes to provide greater flexibility and choice, many customers focused on what they felt they had lost rather than what they had gained. The lesson for marketers isn’t that Lidl made the wrong decision – it’s that customer perception can be just as important as the rewards themselves. At Loyalty Works, we’ve helped brands across multiple sectors design loyalty programs that encourage lasting customer relationships without falling into these common traps. Time and again, we’ve found that the most successful programs aren’t necessarily the ones offering the biggest rewards – they’re the ones that customers instantly understand and genuinely value. In this guide, we’ll explore the biggest loyalty program mistakes, examine what businesses can learn from Lidl’s recent changes and highlight how best-in-class brands build loyalty programs that customers love.

Why Loyalty Program Mistakes Can Damage More Than Customer Retention

Many organisations believe a loyalty program only affects repeat purchases. In reality, it influences how customers perceive your entire brand. When a loyalty program becomes confusing, difficult to achieve or inconsistent, customers don’t simply disengage from the rewards, they begin questioning whether the brand still understands their needs. One of the biggest loyalty program mistakes is assuming customers will judge a new program objectively. Behavioural science tells us the opposite. One of the biggest loyalty program mistakes is assuming customers will judge a new program objectively. Behavioural science tells us the opposite. People naturally compare new experiences against what they already have. If a familiar reward disappears or becomes harder to earn, customers often experience a stronger sense of loss than appreciation for any new benefits introduced. This psychological principle, known as loss aversion, helps explain why loyalty program changes can sometimes receive negative reactions even when the overall value proposition has improved. The Behavioural Insights Team has published research showing how behavioural science influences customer decision-making and why perception can be just as important as reality. This is exactly why Loyalty Works always encourages brands to think beyond the mechanics of earning points or redeeming rewards. A successful loyalty program should make customers feel recognised, appreciated and confident that remaining loyal continues to deliver value. The brands achieving the greatest customer retention aren’t necessarily rewarding customers more frequently – they’re making every interaction feel worthwhile. That balance between commercial objectives and customer experience is where Loyalty Works helps organisations create loyalty programs that continue delivering value long after launch.

What Happened With Lidl Plus? A Lesson in Loyalty Program Mistakes

When Lidl introduced its updated Lidl Plus Points system, the objective was clear: modernise the customer experience and give shoppers greater flexibility in how they earned and redeemed rewards. Rather than relying on the previous Coupon Plus spend thresholds, customers could now collect points and choose rewards from a catalogue, creating a more personalised experience. From a strategic perspective, the change made sense. Flexible rewards often appeal to a broader audience, while points-based systems provide brands with greater opportunities to personalise offers, encourage repeat purchases and analyse customer behaviour. However, customer reaction highlighted one of the most important loyalty program mistakes businesses can make. Many shoppers compared the new experience with the old one rather than evaluating it on its own merits. Some felt the rewards were now harder to achieve or required higher spending to unlock comparable value. Others simply preferred the simplicity and familiarity of the previous system. Whether those perceptions reflected the actual value of the new program wasn’t the key issue. The real challenge was that many customers felt they were receiving less. This demonstrates an important lesson for every organisation considering changes to an existing loyalty program. Customers don’t judge changes solely through financial value, they judge them through emotion, habit and expectation. At Loyalty Works, we regularly help brands navigate these moments. Introducing new technology, reward structures or customer journeys can absolutely improve long-term engagement, but success depends on bringing customers along with the journey through clear communication, gradual transitions and rewards that feel immediately worthwhile. The Lidl example reminds us that even the strongest brands can face challenges when evolving a loyalty proposition. Rather than viewing it as a failure, marketers should see it as a valuable reminder that customer perception is often just as powerful as customer value.

The Loyalty Program Mistakes Hidden Behind the Headlines

It’s easy to focus on media headlines or social media reactions, but beneath every loyalty story are broader strategic lessons that apply across almost every industry. The Lidl case isn’t really about supermarkets. It’s about how people respond when something familiar changes. One of the biggest loyalty program mistakes brands make is concentrating entirely on commercial objectives without considering the customer journey. Increasing purchase frequency, collecting better customer data and improving return on investment are all worthwhile goals, but customers only remain engaged if the experience feels rewarding from their perspective. Behavioural psychology offers a useful explanation. People are naturally resistant to losing something they already value. Even when a replacement provides equal or greater long-term benefits, the initial feeling of loss often outweighs the potential gains. This is why communication is such a critical part of any loyalty strategy. Rather than simply announcing changes, successful brands explain why improvements are being made, demonstrate the benefits clearly and help customers achieve quick wins that reinforce the value of the new experience. Loyalty Works believes the best loyalty programs don’t surprise customers – they guide them. Whether introducing new technology, refreshing rewards or redesigning a customer journey, the most successful transitions are those that make customers feel excited rather than uncertain.

Five Loyalty Program Mistakes Every Brand Should Avoid

While every business is different, there are several common loyalty program mistakes that appear across almost every sector.
  • Making rewards too difficult to achieve. If customers feel rewards are out of reach, motivation quickly disappears.
  • Changing the program without clear communication. Even positive changes can generate frustration if customers don’t understand the reasons behind them.
  • Focusing purely on discounts. Long-term loyalty is built through emotional engagement, recognition and memorable experiences – not just lower prices.
  • Creating unnecessary complexity. Customers shouldn’t need to study your loyalty program to understand how it works. Simplicity drives participation.
  • Launching and leaving the program. The best loyalty programs evolve continuously using customer insights, performance data and ongoing optimisation.
These principles apply regardless of industry. Whether you’re a retailer, hospitality brand, financial services provider or B2B organisation, avoiding these common mistakes creates stronger engagement and more sustainable customer retention. At Loyalty Works, every loyalty strategy is built around making the customer experience intuitive, rewarding and commercially effective from day one.

Why Customer Perception Often Matters More Than Reward Value

One of the most surprising lessons from behavioural science is that customers don’t always make purely rational decisions. Two loyalty programs may offer identical monetary value, yet one will significantly outperform the other simply because it feels more rewarding. That’s why successful loyalty strategies focus on creating positive emotional moments throughout the customer journey. Customers enjoy seeing progress towards rewards. They appreciate personalised offers that reflect their preferences. They value recognition for their loyalty rather than feeling like just another transaction. When these emotional drivers are present, engagement naturally increases. Conversely, when customers feel confused, overlooked or disappointed, even generous reward structures can struggle to build long-term loyalty. This is where Loyalty Works takes a different approach. Rather than starting with discounts or points, Loyalty Works begins by understanding customer behaviour, business objectives and the emotional moments that encourage repeat engagement. From there, every aspect of the loyalty program is designed to strengthen relationships while delivering measurable commercial outcomes. The result is a loyalty strategy that customers genuinely enjoy participating in, and one that continues to deliver value for both the customer and the brand.

What Best-in-Class Loyalty Programs Do Differently

Learning from the biggest loyalty program mistakes is only half the story. The brands achieving exceptional customer retention don’t just avoid common pitfalls – they actively design experiences that customers want to engage with again and again. The strongest loyalty programs share several characteristics regardless of industry. They are simple to understand, easy to participate in and provide clear value from the very first interaction. Customers don’t have to calculate whether a reward is worthwhile or wonder how close they are to earning it – they know exactly what they’re working towards. Rather than relying solely on discounts, leading brands create a sense of progression and exclusivity. Early access to products, personalised recommendations, VIP experiences and recognition for continued loyalty often deliver far greater emotional value than another percentage off at the checkout. Another defining feature is personalisation. Modern customers expect brands to recognise their preferences and purchasing habits. Generic offers are becoming less effective, whereas relevant rewards based on individual behaviour encourage stronger engagement and increase customer lifetime value. At Loyalty Works, these principles underpin every loyalty strategy. Rather than offering a one-size-fits-all solution, the team works closely with each client to understand their audience, business objectives and customer journey before designing a program that delivers measurable results. Ultimately, the best loyalty programs aren’t remembered because they offered the biggest discounts, they’re remembered because they made customers feel valued.

How Loyalty Works Helps Brands Avoid Loyalty Program Mistakes

Every business has different customers, different objectives and different commercial challenges. That’s why copying another brand’s loyalty program rarely delivers the same results. Instead, Loyalty Works takes a strategic approach that focuses on creating long-term engagement rather than short-term transactions. Through its range of loyalty strategy and program services, the team works with brands to design customer experiences that drive measurable growth while avoiding common loyalty program mistakes.  The process begins with understanding what motivates customers to return. From there, Loyalty Works designs a program that balances commercial performance with customer experience, ensuring rewards are achievable, communications are engaging and the overall proposition remains simple to understand. This approach helps businesses avoid many of the most common loyalty program mistakes, including:
  • Launching overly complicated reward structures.
  • Focusing purely on discounts instead of customer relationships.
  • Failing to communicate changes effectively.
  • Neglecting ongoing optimisation after launch.
  • Missing opportunities to personalise the customer experience.
Rather than viewing a loyalty program as a standalone marketing initiative, Loyalty Works helps businesses see it as an ongoing customer engagement strategy that evolves alongside their audience. That strategic thinking enables brands to build stronger relationships, improve retention and maximise the long-term value of every customer.

Case Study: Creating Long-Term Customer Loyalty Through Strategic Program Design

One of the best examples of avoiding loyalty program mistakes comes from Loyalty Works’ partnership with The Perfume Shop. Working alongside the retailer, Loyalty Works helped evolve its customer loyalty strategy into a program that rewarded shoppers in meaningful ways while supporting wider business objectives. By combining customer insight with a carefully designed rewards structure, the program encouraged repeat purchases, strengthened customer engagement and created a more rewarding experience for members. Rather than relying solely on discounts, the strategy focused on delivering value throughout the customer journey, ensuring customers had compelling reasons to return beyond price alone. This collaborative approach demonstrates an important lesson from the Lidl case study. Successful loyalty programs aren’t simply built around rewards – they’re built around customer behaviour. Understanding what motivates customers, communicating clearly and continually refining the experience allows brands to create loyalty programs that remain relevant as customer expectations evolve. It’s exactly this strategic thinking that has enabled Loyalty Works to support leading brands across retail, hospitality and leisure, helping them develop loyalty programs that generate measurable commercial results while building genuine customer advocacy. You can explore more examples on the Loyalty Works Our Work page. 

Could Your Loyalty Program Be Making These Mistakes?

Every loyalty program reaches a point where it needs to evolve. Customer expectations change. Technology develops. Business priorities shift. The challenge isn’t deciding whether to make changes, it’s making them without damaging the trust and engagement you’ve already built. The Lidl case study reminds us that even carefully planned improvements can generate unexpected reactions if customers don’t immediately understand the benefits. Before introducing changes to your own loyalty program, ask yourself:
  • Is the value proposition immediately clear?
  • Will customers feel they’re gaining something rather than losing something?
  • Have we communicated the reasons for the changes effectively?
  • Are rewards still motivating the behaviours we want to encourage?
  • Does the program strengthen emotional loyalty as well as transactional loyalty?
Answering these questions honestly can help prevent some of the most costly loyalty program mistakes before they impact customer retention. With the right strategy, businesses can transform their loyalty program into one of their most valuable long-term assets.

Conclusion

Every loyalty program offers an opportunity to learn, adapt and improve. The Lidl case study demonstrates that even successful brands can face challenges when evolving their customer rewards strategy. The biggest takeaway isn’t that Lidl changed its program, it’s that customer perception, communication and simplicity are just as important as the rewards themselves. For organisations looking to strengthen customer retention, avoiding common loyalty program mistakes starts with understanding what customers truly value. A successful loyalty program should be easy to understand, rewarding to participate in and flexible enough to evolve alongside changing customer expectations. At Loyalty Works, helping brands achieve exactly that is at the heart of everything we do. By combining customer insight, behavioural science and strategic program design, we create loyalty solutions that build stronger relationships and deliver measurable business growth. If you’re planning a new loyalty initiative or considering refreshing an existing one, now is the perfect time to learn from the experiences of others. Download our latest eBook, How Not to Build a Loyalty Program, to discover more real-world examples, practical advice and best-in-class comparisons that will help your business create a loyalty program customers genuinely love. Or get in touch with Loyalty Works to explore how we can help design a program tailored to your customers and your commercial goals.

Frequently Asked Questions

What are the biggest loyalty program mistakes?

Some of the most common loyalty program mistakes include creating overly complex reward structures, making rewards difficult to achieve, communicating changes poorly and focusing only on discounts instead of building emotional customer loyalty.

Why did the Lidl loyalty program receive attention?

Lidl’s transition to a points-based rewards model highlighted how changes to an established loyalty program can influence customer perception. While the new system aimed to offer greater flexibility, some customers felt they were losing value compared with the previous rewards structure, demonstrating the importance of communication and expectation management.

How can businesses improve customer loyalty?

Businesses can improve customer loyalty by offering relevant rewards, personalising customer experiences, keeping loyalty programs simple to understand and continually reviewing performance to ensure the program evolves alongside customer expectations.

Why should businesses work with Loyalty Works?

Loyalty Works specialises in designing and optimising loyalty programs that increase customer retention, encourage repeat business and create long-term customer engagement. By combining strategic consultancy with proven loyalty expertise, Loyalty Works helps businesses avoid common loyalty program mistakes while delivering measurable commercial results.

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FAQs

Do loyalty cards still work in 2026?
Yes, when they’re designed around real customer behaviour. Modern loyalty programs work best when they are simple to understand, rewarding to use, and integrated into the customer journey. Programs that combine clear incentives with engaging experiences consistently drive repeat business and brand preference.
What types of loyalty programs can I run?
Loyalty programs can take many forms, including points-based schemes, digital loyalty cards, growth or engagement schemes, competitions, and gamified experiences. The right format depends on your objectives, whether that’s increasing spend, improving retention, encouraging referrals, or driving engagement.
What rewards work best in a loyalty program?
The most effective rewards are meaningful and achievable. This can include discounts, free products, experiences, or access to exclusive offers. Prizes that feel timely, relevant, and valuable to your audience tend to outperform rewards that are large but difficult to reach.
How do I track the performance of a loyalty program?
Key metrics include repeat purchase rate, redemption rate, customer engagement, and average spend. Monitoring these helps you understand how customers interact with your program and where it can be optimised to drive better results.
Can loyalty programs really improve customer retention?
Yes. Loyalty programs give customers a reason to return and choose your brand more often. By rewarding ongoing engagement, not just transactions, they help build stronger habits and longer term relationships.
Are loyalty programs suitable for small and mid-sized businesses?
Absolutely. Loyalty programs can be scaled to suit any business size. A simple digital scheme or points-based platform can be just as effective for independent businesses as more complex multi-channel programs used by larger brands.
How can digital tools improve a loyalty program?
Digital loyalty cards, online portals, claim forms, and automated reward fulfilment make programs easier to manage and easier for customers to use. Digital platforms also provide better visibility of data and performance, helping brands refine their approach over time.
What roles do competitions and gamification play in loyalty?
Competitions and gamified mechanics add excitement and motivation. Features such as prize draws, progress tracking, and bonus challenges can increase participation and keep customers engaged beyond standard earn-and-redeem models.
How does prize and gift fulfilment fit into a loyalty program?
Reward fulfilment is a critical part of the loyalty experience. A reliable prize portal and fulfilment service ensures rewards are delivered smoothly, on time, and with minimal effort for both brands and customers – helping protect trust and satisfaction.
What mistakes should I avoid when launching a loyalty program?
Common mistakes include making rewards too hard to reach, overcomplicating the mechanics, and failing to communicate the program clearly. Loyalty works best when customers understand how it works, see value quickly, and are reminded about it consistently.