Why Points Programs Cost More Than They Deliver

Several retail chains across Latin America have loyalty programs with most of their customers enrolled.

And yet, those customers do not meaningfully change their purchasing behavior—even though the retailer is investing between 1% and 2% of total sales into the program.

Whether it takes the form of a points program, cashback, or a special member price—the equivalent of a few cents off every purchase—the format changes.

The outcome, in most cases, does not.

“Discounts and promotions are necessary, but not sufficient, to create loyalty. Consumers use them to optimize value, not to build long-term commitment.”

The Visible Cost and the Hidden Cost

A well-designed points program typically allocates between 1% and 2% of participant sales to fund rewards.

And that is before adding the costs of technology, administration, communication, customer service, and logistics.

But there is another cost that rarely appears in the marketing budget.

The financial liability.

Every point issued and not yet redeemed represents a future obligation on the company’s balance sheet.

As the program grows, that liability grows with it.

And when it becomes too large, many companies resort to the same solution: accelerating point expiration through terms and conditions that few customers ever read.

“Unredeemed points become a liability on the balance sheet. When they expire, the company saves money—but at a cost that never appears in a spreadsheet: customer trust.”

The Night the Points Disappeared

A customer spends months accumulating points for a meaningful reward.

Then one day they discover those points are gone.

Perhaps there was a notification.

Perhaps there was not.

Either way, it was buried somewhere most customers never noticed.

The frustration is not merely emotional.

It is strategic.

That customer did not simply lose points.

They lost a reason to choose that retailer over another.

What was intended to be a loyalty program became a source of distrust.

How Many of the Coupons You Send Are Actually Used?

The answer is often uncomfortable.

Research on points-based programs consistently shows that a significant portion of issued incentives are never redeemed.

Customers abandon the program.

Points expire.

Or they never accumulate enough value to obtain a reward worth pursuing.

The industry calls this breakage: the percentage of rewards issued that are never redeemed.

For the company, breakage may appear to be a financial benefit.

For customers, when they eventually discover it, it often feels like a broken promise.

At the same time, the actual savings customers perceive at the shelf are usually minimal: a small percentage of cashback credited months later, or member-only discounts on products they were already planning to buy.

“A high coupon redemption rate indicates that a promotion successfully motivated customer action. A low redemption rate suggests the offer should be reconsidered—or that it was targeted at the wrong audience.”

The Customer Who Actually Responds to Discounts

There is one type of customer who actively responds to broad discounts and mass-market promotions:

The cherry picker.

They visit when promotions are available, fill their basket with discounted products, and disappear when the offer ends.

They are highly visible during promotional sales spikes.

They are also among the least profitable customers.

“Winning customer preference is more profitable than chasing customers through discounts. Loyalty is built through consistency and relevance, not isolated incentives.”

What the Investment Should Be Generating

The problem is not that retailers invest in loyalty.

The problem is what they receive in return.

A points program with unreachable rewards or negligible discounts rarely creates meaningful purchasing effort.

Customers do not increase spending.

They do not visit more often.

They do not shift their purchasing choices.

They simply accumulate points—and eventually forget about them.

In our experience, the difference between an investment that generates measurable ROI and one that does not comes down to a single factor:

Whether the incentive is both aspirational and attainable enough to motivate customers to change their behavior.

With an investment equivalent to just 0.33% of sales—without financial liabilities, expiration policies, or fine print—we achieved 5.4% sales growth and a 358% ROI.

Not because customers received a discount.

But because they were given a compelling reason to return, spend more, and make different purchasing decisions.

The goal of a loyalty strategy should not be to distribute rewards.

It should be to generate measurable growth.

If you would like to explore how to transform your loyalty investment into measurable business results, let’s talk.

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Sources

• VML Consulting. Loyalty Pulse LATAM 2026. Regional study on customer loyalty and loyalty program participation across Argentina, Mexico, Colombia, Chile, and Peru.

• KPMG. How Customer Loyalty Is Won in 2026. Report on emerging consumer loyalty trends and expectations.

• FasterCapital. Loyalty Program Costs: A Comprehensive Guide for Entrepreneurs. Analysis of the cost structure and economics of points-based loyalty programs.

• FasterCapital. The Expiration of Loyalty: Addressing the Challenge of Expiring Points. Review of the financial implications of unredeemed points and their impact on customer trust.

• Galanta / Muviria. Calculating Point Value in Loyalty Programs. Analysis of breakage rates, reward liabilities, and financial accounting considerations.

• Vibetrace. Coupon Redemption Rate Benchmarks. Industry benchmarks and analysis of coupon redemption performance across sectors.

• Carrefour, Consum, and DIA. Public terms and conditions of their loyalty programs in Spain. Comparative reference for member benefits, reward structures, and customer value propositions.