Why Loyalty Programs Fail at Engagement: How Arcade Revives it

Sounds ironic, but a loyalty program does not guarantee loyal customers.

The average U.S. consumer is enrolled in 19 loyalty programs. They actively use only 9. The rest sit dormant, installed yet forgotten. Half of the loyalty members will never redeem any rewards. 

Somewhere on your customer’s phone, your app is one of them.  

Not because they forgot your brand or a loyalty competitor won them over. But after the last purchase, there was nothing left to come back for. A few points in an account they won’t think about until they’re at checkout. 

This is the state of loyalty programs today.  

Brands across retail, mobility, fintech, and grocery have poured billions into successful loyalty programs. U.S. marketers dedicated 51% of their budget to loyalty this year. The engagement gap keeps growing anyway.  

The problem is not the rewards, as the sign-up rates are at an all-time high. It’s the drop-off that happens as users churn before they ever reach their first redemption.  

Let’s examine loyalty programs and how Arcade can help fill the app engagement gap.    

What’s Causing Loyalty Fatigue and How to Solve It?

The same three failure points appear across all loyalty categories. But for every weak spot, there’s a patch.  

1. Weak Spot: Every Loyalty Program Looks Identical 

Using an enterprise loyalty program in 2026 feels like Groundhog Day.

Sign up → Welcome discount → Points-for-purchase  → Redeem later → Repeat 

Same loyalty architecture, different logo. Even loyalty decision-makers know this, 80% cited lack of differentiation as the direct cause of customer disappointment with their loyalty programs.  

Customers feel it even more. They’re overwhelmed by the ‘sea of sameness’ and have responded with indifference and churn.

Loyalty members have the same lifecycle across every app, which is why 77% abandon loyalty apps within the first three days. 

And while your app sits unopened and inactive, their attention is somewhere else entirely. Your loyal customers are spending hours daily inside habit-forming apps: gaming rewards, content, and entertainment built for daily return. 

Traditional customer loyalty programs aren’t built for that world.   

Arcade Solution:
Make Your Loyalty Program Stand Out 

adjoe Arcade adds a premium gamification layer to your existing loyalty app, giving members a reason to open it daily. 

Through gameplay connected to premium mobile games and content, members earn real rewards without needing to make a purchase first.  

It creates daily engagement between purchase cycles, connecting your brand to premium mobile games and content your customers are already spending time on every day.

Members earn real loyalty rewards through gameplay. No purchase required or waiting until the next checkout. 

This drives what traditional loyalty programs can’t:

• Daily app opens outside of purchase moments
• Longer session lengths and frequency of in-app interactions
• Rewards earned through daily habits, not just transactions
• Brand loyalty built through repeated, enjoyable app engagement
• Stronger user retention across the customer lifecycle. 

That’s how you differentiate in a saturated market, a brand new engagement category your competitors haven’t built yet.

2. Weak Spot: No Loyalty Engagement Between Purchases

Open any major QSR or grocery loyalty app right now.   

You can order, check your points, and find a discount. And that’s it. 

No reason to open it on a random Tuesday when there’s no food or grocery purchase planned. The app was built for that transaction, and outside of it, it has nothing to offer.

This is the non-transactional void.   

And the metrics tell the story nobody wants to present in a board meeting.  

• Push notification open rates are declining. 
• Subscription churns are climbing. 
• No repeat purchases, regular cart abandonments.  
• DAU/MAU ratios are flatlining between purchase cycles.
• Low brand loyalty and rising churn.   

Every week a customer doesn’t open the app, the harder it becomes to retain them. Traditional loyalty apps underutilize touchpoints and stack up non-personalized experiences that feel intrusive. 

The result: app engagement & incremental revenue have left the room. 

Deloitte’s loyalty research points out that a clear driver of program engagement is perceived “overall value” – i.e., meaningful, ongoing rewards that exist well after the sign-up or purchase moments. 

But the question remains → How do you keep users engaged even when they’re not buying? 

Arcade Solution: Filling the Engagement Gap 

Arcade plugs directly into your existing loyalty app, which means your members never leave your ecosystem, and your brand doesn’t lose the interaction. 

Inside, customers land on a premium, branded catalog curated from the world’s top mobile gaming studios. They pick a game, start playing, and earn loyalty points based on time played or milestones reached. These reward milestones are hyper-personalized to your brand. 

Those points flow straight into their existing loyalty wallet, ready to redeem at their next purchase in-store or in-app.

These touchpoints are intentional. The milestones are short, achievable within a single session. More importantly, the rewards are attractive and not ‘one-off’, designed to engage and pull members back the next day and the next. 

The loyalty brands already running it speak for themselves:

• Fetch Rewards, the largest points-based rewards platform in the U.S., saw a 6% lift in app open rates and 10% growth in customer lifetime value within three months of launching Arcade.

• GasBuddy: Users who tried GasBuddy Games went on to earn reward points through gameplay. Repeat players now generate 60% of GasBuddy Games revenue.

Arcade meets your users where they are and brings them back to your app frequently, turning non-transactional moments into loyalty and repeat revenue. 

3. Weak Spot: Rewards Affect Margins 

The time between loyalty sign-up and earning rewards is too wide.

Picture this: A loyal customer makes a purchase and gains initial rewards. They check the balance and do quick math to calculate points earned for every dollar spent. At their current spend level, they’ll have enough to earn a meaningful reward by sometime next spring.  

Millennials grew up learning to wait, collecting airline miles, saving grocery stamps, and deferring gratification for a bigger payoff later. Now Gen Z, the first fully digital-native generation, is raised on instant gratification and feedback loops. 

Waiting six months for a Starbucks free-drink coupon isn’t that compelling.

There has always been a tension when designing loyalty programs: profit margins and churn rates. 

Every redeemed reward costs money. The longer a customer takes to redeem, the better the unit economics look on paper. But this model backfires quickly in modern digital systems. 

Because customers churn before they ever redeem. You gain no retained customers, and a user acquisition cost that’s down the drain. The margin protection strategy fails the very loyalty behavior it was trying to sustain.  

→ So how do you accelerate earning velocity without hurting margins? 

Arcade Solution: What if Your Loyalty Program Paid for Itself? 

Traditional rewards are a liability. Every point you issue is a future cost sitting on your balance sheet.

Arcade flips that equation, turning your expense line into a new app revenue stream. It designs the program so customers hit a small, meaningful reward early, not a free drink six months from now.

Here’s how: advertisers pay for every session of engagement their game receives within your program. That revenue flows directly back into the program, offsetting the cost of every point you distribute. 

The result? A self-funding loyalty program that generates its own net-new, performance-based revenue, one that completely covers what it costs to run.

Which means you can offer more rewards, more frequently, without absorbing the costs.

EndNote

There’s no denying that loyalty programs are overdue for a makeover. The brands that dominate the next decade will be the ones that engineer daily habits, not just checkout bonuses or one-off discounts.    

Your enterprise loyalty stack is missing an engagement layer. Something that bridges the gap between purchases, accelerates reward velocity, and funds itself in the process. 

That layer is adjoe Arcade.

See what it looks like inside your loyalty program – contact our loyalty solutions team.