I often get asked by founders and marketing leads how to stop their loyalty programme from becoming a financial headache. Points liability — the future cost of outstanding rewards — quietly grows on every balance sheet and can turn a neat retention tool into a budgeting problem. One of the most effective levers I’ve used to manage that risk is tiered expiry rules. In this post I’ll explain what they are, why they work, common design patterns, legal and customer-experience considerations, and a step-by-step approach to implementing them without destroying trust or activation.
What are tiered expiry rules?
Tiered expiry rules are a system where loyalty points (or credits) expire based on defined bands or tiers — typically tied to either the age of points, customer activity, or the value of the points balance. Instead of a single “all points expire after 24 months” policy, you might have several expiry horizons: for example, points earned in the last 12 months never expire; points 12–24 months old expire after 24 months; and older, low-value balances expire sooner unless the customer reactivates their account.
It’s a practical compromise between a) letting points sit indefinitely (which inflates liability) and b) harsh, blanket expiry rules (which can upset customers). Tiered expiry gives you control and lets you tailor expiry to behaviour and business risk.
Why tiered expiry rules help with points liability
There are three core reasons I recommend tiered expiry:
Common tiering models I’ve used
There isn’t a single right answer — it depends on margin structure, typical purchase frequency, and brand tone. Here are patterns that have worked in real projects:
Example table: a practical expiration schedule
| Points Age | Expiry Window | Activation/Protection Rules |
|---|---|---|
| 0–12 months | Never expire (or 36 months) | Protected for active customers |
| 12–24 months | Expire after 24 months | Expiry can be extended by a purchase or login |
| >24 months | Expire after 12 months | Low-value balances auto-expire unless reactivated |
How to design tiered expiry for your business
Design should start with data. Here’s a process I use during audits and builds:
Legal, regulatory and fairness considerations
Expiry rules are regulated in some jurisdictions. In the UK and EU, consumer protection is strong: expiry terms must be clear, not misleading, and you should not retroactively change the value of points already earned without clear notice. Common legal best-practices I follow:
Customer experience: preserving trust while reducing liability
Expiry can feel punitive if handled badly. I’ve seen programmes lose goodwill when customers find small balances vanish without warning. To prevent that, combine fairness with nudges:
Implementation checklist (technical and operational)
Here are the practical steps I follow when rolling out tiered expiry:
Key metrics to monitor
To know whether tiered expiry is working, track these KPIs:
Real-world examples
I helped a mid-sized fashion retailer reduce points liability by 28% in 12 months by introducing a tiered expiry combined with a reactivation micro-offer: points older than 18 months were flagged as “at risk” and customers received a targeted 10% off next purchase if they used any of their at-risk points within 30 days. We measured net margin per reactivation and only scaled the approach once it proved profitable.
Another client with subscription-based services used balance-protection tiers: they preserved a small evergreen balance for subscribers (to avoid churn complaints) while expiring excess accruals more quickly. This reduced liabilities while keeping VIP sentiment positive.
Tiered expiry is not a silver bullet, but when designed thoughtfully it’s a powerful tool: it aligns finance and marketing objectives, improves forecastability, and creates natural reactivation opportunities. If you’d like, I can review your points ageing report and sketch a tiered expiry schedule tailored to your customer behaviour and margins.
