Glossary
What is breakage in loyalty?
Breakage is value you gave out that nobody ever used: stamps that never reach a reward, vouchers that expire unused. It looks like money saved and mostly is not, because a lot of breakage usually means people gave up on your programme.
Breakage is one of the few loyalty terms that means something specific in accounting as well as in marketing, and the two readings pull in opposite directions.
The finance reading
Value issued and never claimed reduces the eventual cost of the programme. If you have recognised a liability for outstanding rewards, an estimate of breakage is how you size what will never be claimed.
The marketing reading
Nobody redeems because nobody got there. A programme with very high breakage is usually one where the threshold was too high, the expiry too short, or the reward not worth chasing. You have collected the margin and lost the behaviour change you were paying for.
What to do with it
Treat it as a diagnostic rather than a revenue line. If breakage is climbing, look at your threshold before you celebrate.
Common questions
Is high breakage good?
Rarely. It reduces the cost of the programme and usually signals that customers stopped believing they would finish, which is the opposite of what you were buying.
How does it relate to accounting?
Breakage assumptions are how businesses estimate what portion of outstanding obligations will never be claimed. Treatment varies by jurisdiction, so take advice.
Related terms
- Loyalty liabilityThe value of outstanding rewards and unused vouchers you still owe.
- Redemption rateThe share of issued rewards or vouchers that customers actually use.
- ExpiryThe optional date after which a voucher can no longer be redeemed.
- Reward thresholdHow many stamps or points a customer needs before a reward unlocks.