How to Re-engage Dormant Loyalty Members and Reduce Program Liability

Customer loyalty is one of the most valuable assets a brand can cultivate, but when loyalty members go silent, they become more of a liability than a benefit. Nearly 50% of loyalty program members are inactive, which not only creates an ongoing financial burden due to unredeemed points but also presents a growing security risk.

Dormant accounts are often targets for fraud, with loyalty-related cyberattacks on the rise. In fact, an estimated $140 billion in loyalty rewards sit unused in accounts around the world, contributing to program liability and growing concern about breakage and loyalty liability.

But here’s the good news: dormant members aren’t lost—they’re just waiting for the right reentry point. With the right data, incentives, and timing, brands can reignite engagement, reduce program liability, and unlock meaningful revenue from members who already know and trust them.

Why Dormant Members Hurt Your Loyalty Program ROI

Dormant members often fly under the radar, but their disengagement silently chips away at the core value of your loyalty program. 

Dormant accounts silently chip away at a program’s performance. Financially, unredeemed points sit on your books as a future obligation, inflating loyalty program liability and reducing program profitability. Operationally, dormant or lapsed loyalty accounts represent a security gap. Fraudsters often target inactive loyalty profiles because users aren't monitoring them, allowing suspicious activity to go unnoticed. 

Perhaps most critically, disengaged members mean lost revenue. While many loyalty programs focus heavily on acquisition, reactivating lapsed loyalty members is often faster, cheaper, and more profitable. By building strategic campaigns to re-engage loyalty members, brands can restore these relationships and recover otherwise lost value.

Why Loyalty Members Go Dormant

Understanding why members become inactive is crucial as you begin to develop an effective member re-engagement plan. Inactive loyalty members leave for a few reasons:

• Lack of relevant rewards: If your catalog doesn’t match a member’s interests or travel style, points lose perceived value.

• Redemption friction: Complicated redemption experiences—no points-plus-cash options, unclear tiers—create frustration.

• Poor personalization
  or communication: Generic emails or infrequent touchpoints weaken emotional connection.

• Loyalty fatigue: Members juggling multiple programs (especially Millennials and Gen Z) can burn out easily.

• Evolving generational expectations: Today’s travelers expect more dynamic loyalty experiences. This means digital-first, highly personalized, on-demand rewards.

If your program isn’t delivering against these evolving expectations, members won’t just hesitate—they’ll disengage.

Identifying Inactive Loyalty Members

Once you have a core understanding of why loyalty program members go dormant, you can begin defining who they actually are within your system. Most programs use a 6–12 month window of inactivity (no logins, redemptions, or bookings) as a benchmark for their member reactivation strategy. 

But that’s just the beginning. Behavioral data is your strongest asset. Analyzing patterns can help identify inactive loyalty members with precision. This behavioral analysis also reveals what once motivated them and where their journey dropped off.

Use behavioral and transactional data to identify:

• Last redemption date or login

• Abandoned searches or cart activity

• Point balance trends over time

• Preferred engagement channel (email, mobile, SMS)

Then, segment these dormant users by relevant categories such as loyalty tier, traveler type, point balance, and last engagement channel. This enables more tailored re-engagement campaigns and improves campaign ROI as you're speaking directly to each member’s value profile and likelihood to return.

Proven Strategies to Re-engage Loyalty Members and Reduce Breakage

Effective strategies to re-engage loyalty members hinge on personalization, timing, and eliminating redemption friction.

Personalized Redemption Offers

One highly effective tactic is delivering personalized redemption offers that speak directly to a member’s past activity and preferences. AI-powered recommendation engines can help surface relevant, attainable rewards, rather than pushing broad discounts that may fall flat. Offering points-plus-cash options is also a proven way to remove redemption barriers and drive faster reengagement.

Surprise-and-Delight Campaigns

Surprise-and-delight campaigns are another effective tactic. These include birthday bonuses, “we miss you” messages, or limited-time exclusives. A timely example, such as “Book any package in the next 7 days and get 500 bonus miles,” can reignite a sense of urgency and emotional connection with your brand.

Limited-Time Incentives

Limited-time incentives also leverage behavioral psychology to inspire action. FOMO is powerful. Highlighting aspirational rewards—such as luxury travel, VIP upgrades, or exclusive experiences—with scarcity tactics can entice dormant users to re-enter the program while their window of opportunity is open.

Automated Winback Emails & SMS

Automated winback email and SMS campaigns also play a key role. These should be triggered based on cart abandonment, lifecycle milestones, or member inactivity thresholds. The best campaigns use dynamic content, such as showcasing destinations or perks previously searched by the member, to make each message feel personal and relevant.

Gamification and Progress Tracking

Gamification is another tool to engage loyalty members and keep them invested. Loyalty meters, badges, and progress tracking visuals help members visualize their progress toward the next reward. These visuals tap into a sense of achievement and forward momentum.

Loyalty Ecosystem & Rewards Catalog Expansion

In addition, expanding your loyalty ecosystem through third-party partnerships can help diversify redemption options. Offering non-travel rewards such as gift cards or merchandise ensures that even members with low balances can still find value, reducing breakage and boosting retention. And if you notice that dormant behavior is widespread, it may be time to evaluate your rewards catalog itself. Adding experiential rewards, such as curated getaways or unique activities, can make your program feel fresh and relevant again.

What Is Loyalty Breakage—and Why It Matters

Loyalty breakage refers to the portion of earned points or rewards in a loyalty program that are never redeemed by members. While some financial leaders may view breakage as a short-term win—since it reduces immediate payout obligations—the reality is more nuanced. High breakage can distort your program’s actual performance and signal deeper issues with member engagement.

Here’s why excessive breakage matters:

• It can mask underperformance. If members aren’t redeeming rewards, it may indicate that your program’s value proposition is misaligned with their expectations. Without redemptions, you’re not driving the behavioral outcomes that loyalty is meant to influence.

• It inflates perceived liability. Unredeemed points remain on your balance sheet as potential liabilities. Even if many of those points will never be used, the accounting impact can affect profitability projections, especially in highly regulated industries.

• It’s a red flag for disengagement. Members who accumulate points but never use them often feel disconnected from the program. This can signal poor personalization, lack of appealing rewards, or friction in the redemption process—factors that ultimately erode loyalty.

Reducing breakage isn’t just about balancing the books—it’s about restoring value to both your program and your members. When more members redeem rewards, they experience the benefits of participation, strengthening their emotional connection to your brand. It’s a win for engagement, retention, and long-term loyalty program success.

Measuring the Impact: KPIs to Track Re-engagement and Reduce Liability

Once your campaigns are live, tracking success is essential—not just to show ROI, but to optimize your strategy over time. 

Campaign-level metrics offer a view into the effectiveness of your messaging and timing. Whereas program-level metrics provide a broader perspective on overall loyalty health—tracking long-term engagement trends, redemption behavior, and the financial impact of your reengagement strategies.

To prove the ROI of your efforts, monitor these key metrics:

By tying performance data back to clear goals—such as reducing program liability, increasing redemption activity, and enhancing member lifetime value—you ensure that your strategy remains both agile and effective.

Dormant loyalty members shouldn't be seen as a lost cause. With the right data, tools, and tactics, brands can re-engage loyalty members and transform dormant accounts into active, high-value participants. Whether you’re combating loyalty liability, reducing breakage, or simply aiming to boost retention, investing in member re-engagement delivers measurable results.

At Switchfly, we help loyalty programs implement smarter, more flexible engagement strategies that unlock long-term value so you can re-engage your member base effectively. 

Ready to reignite your member base and reduce program liability? Contact Switchfly today to discover how we can assist you.