There are of course several main reasons why the liberals lost the elections. Opinions of historians vary on this topic. Some historians see the defeat as the result of unpopular domestic and foreign policies, like Alabama Arbitration, however they cannot agree on which policies contributed the most. Others see this defeat as the consequence of poor election campaign by Gladstone; his promise to cut income tax simply did not appeal to people. On the other hand the importance of Conservative party in this defeat should not be overshadowed. After 1868 elections the Conservative reorganised the party and managed to create more positive and popular image.
When Gladstone became the Prime Minister he emphasised that his mission was to pacify Ireland, however the reforms he carried out in Ireland not only had limited effect but also alienated landlords and Anglicans. The disestablishment of the Church of Ireland in 1869, although appeared to deal with obvious Irish grievance, had little effect on ordinary people and was viewed by Whigs with deep suspicion.
The Irish Land Act 1869 gave certain rights to tenants; however tenant continued to be evicted because there was nothing to prevent a landlord from raising rents so high that the tenant was unable to pay. This attack on landlords rights when against 19th centaury beliefs about the rights of property owners '. This alienated upper classes. Even in Gladstone 's own cabinet Whigs like Clarendon and Argyll saw it as an outright attack on property which could spread to England. B Harrison claims that "fears for the security of property were more important than the licensing question in weakening the Liberal party".
The Irish University Bill 1873, which attempted to integrate university education in Ireland, was a complete disaster. The bill alienated Anglicans who wanted to keep control over education, whilst it was defeated by 3 votes, Gladstone resigned over it.
Bibliography:  "Gladstone and Liberalism" by Paul Adelman form "Britain 1867-1918", published by Institute of Contemporary British History, 1995  "Gladstone, Disraeli and later Victorian Politics" by Paul Adelman, 1990  "Gladstone and Disraeli" by A.H. Abbott, 1984