Are You Building Loyalty, or Just Buying It?
Most loyalty programs aren't building loyalty. They're renting behaviour. There's a difference, and it's costing brands more than they realise.
Loyalty is one of those words that gets thrown around in marketing strategy documents with enormous confidence and surprisingly little precision. Everyone says they want loyal customers. Almost nobody agrees on what that actually means, and even fewer have a clear view on how to build it.
Loyalty is when a customer chooses you again and again, even when they have other options. It is not a program. It is not a tier structure. It is not a points balance. It is a behaviour, and it is the result of an emotional relationship between a customer and a brand.
There are two kinds of loyalty operating in the market, and most brands are only building one of them.
The first is true loyalty. This is emotional, identity-driven loyalty where the customer sees themselves in your brand. They trust it. They advocate for it. They would feel a genuine sense of loss if it disappeared. Think Apple. Think Patagonia. Think your local coffee shop that you travel twenty minutes out of your way to visit. This kind of loyalty is relational, not transactional. It is earned.
The second is manufactured loyalty. This is built through incentives, switching costs, points programs, status tiers, and locked-in subscriptions. The customer keeps coming back, but the critical question is: if you removed the program tomorrow, would they still show up? Would they still choose you? More often than not, the honest answer is no.
As Ben puts it: “Loyalty isn’t marketing. You can market to achieve it, but loyalty is actually a customer behaviour.”
This distinction matters enormously for how you invest in your customer retention strategy. Because if you are spending big on a points program that is essentially paying people to return rather than inspiring them to return, you are building a liability, not a brand asset.
The Forces Making Loyalty Harder to Earn (and More Important Than Ever)
Several things happening in the market right now have converged to make loyalty both more valuable and more elusive.
Customer acquisition costs are climbing. The cost to bring in a new customer has roughly doubled across most categories in the last five years. Digital advertising is more expensive. Attention is fragmented. Retention is no longer a nice-to-have metric sitting quietly in a CRM dashboard. It is a commercial necessity.
At the same time, customers have more choice than ever. In most categories, there is minimal friction left in the purchase journey. You can switch banks, telcos, insurance providers, and grocery stores with relatively little pain. The only things holding customers in place are genuine preference or a well-designed incentive structure. And the problem with relying on incentive structures alone is that competitors can replicate them.
The subscription economy has also changed consumer expectations. It has trained people to think about ongoing relationships with brands rather than one-off transactions. But that cuts both ways: customers in subscription relationships are constantly re-evaluating whether you are worth the monthly fee. Convenience is not a moat anymore. It is just the minimum.
A Taxonomy of Loyalty Marketing Programs
Let’s go through the main mechanics brands use to market towards loyalty, and where each one works and where it falls apart.
Points-Based Programs
The most common form. Spend money, earn points, redeem for rewards. Airlines, supermarkets, coffee chains, and beauty retailers have all built substantial businesses on top of this mechanic.
The core appeal is straightforward: customers feel rewarded for spending, and the accumulation dynamic drives frequency. The clever ones layer in tier mechanics as well, creating a spend-to-progress structure that changes customer behaviour.
The problems are equally straightforward. Points are confusing. The value of a point is opaque, and brands devalue them constantly. Qantas reportedly carries billions of dollars of unredeemed points on its balance sheet, which is a liability in every sense. Customers who have held on to points for years can become genuinely resentful when they expire or are suddenly worth less than expected.
Points programs are also easy to copy. If every competitor in your category offers them, they stop being a differentiator and become table stakes. You are spending money just to stay in the game.
Tiered Programs
Tier programs tap into something deeply human: status and recognition. Bronze, silver, gold, platinum. The more you spend, the higher you climb. The higher you climb, the more you feel like a valued member rather than a customer.
Mecca is a strong local example. Their Beauty Loop program has been running since 2010 and is genuinely effective at driving aspiration and changing purchase behaviour. Steph notes how the program shows you not just what you need to reach the next tier, but what it would take to reach the tier above that. It is clever psychology: they are always pulling you toward a goal slightly beyond reach.
Airlines have mastered the dual approach, combining points with tier status. Lounge access, priority boarding, status recognition: all of it taps into a desire to feel elevated. As Steph puts it, there is something powerful about the idea that everyone is equal until you board the plane.
American Express runs perhaps the most sophisticated tier program in the market. The card structure moves through green, gold, platinum, and centurion. Centurion is invite-only, reserved for platinum cardholders who clear around $100,000 USD in annual spend. The platinum card is made from metal, which makes an audible sound when you set it down on a restaurant table. None of that is accidental. The fee itself is a filter, creating a self-selecting community of cardholders who have already committed financially. “Member since” is printed on the card, making tenure visible and meaningful.
Ben worked for American Express in London and New York and offers a clear reading: “Amex proves that loyalty doesn’t have to be free to be effective. You can run a program that makes money for the business and gets customers to pay for the privilege.”
Cashback and Discount Programs
Simpler, cleaner, and often more effective for high-frequency, low-consideration purchases. You spend money, you get money back. There is no mental maths involved. No calculating the redemption value of a point or trying to remember which retailer gives you double rewards on Tuesdays.
Everyday Rewards from Woolworths fits broadly into this category. It sits quietly in the background, accumulating vouchers that surface every few weeks. The real product is your data, and most customers know it. The program works because the value is tangible and the friction is low.
The risk with cashback programs is that you are training customers to expect a discount. Once you start, it is very hard to stop. Customers conditioned to receiving cashback will punish you if you remove it. You have essentially created a permanent price reduction dressed up as a reward.
Coalition Programs
Flybuys is the canonical example in Australia and New Zealand. Multiple brands, one loyalty currency. Customers earn across a network of retailers and service providers, and brands pay to participate in exchange for access to a highly valuable shared data asset.
The data angle is underappreciated. Steph is currently spending $35,000 with Flybuys for a promotional campaign, because the access to that coalition data is genuinely valuable. Redemption rates on points offers are low, but the targeting and reach are compelling. Both sides of the marketplace get something: brands get data and distribution, customers get a reason to consolidate their spending within the network.
Where coalition programs struggle is complexity and consumer fatigue. When Flybuys wound down its New Zealand operations, there was not exactly a national day of mourning.
Experience and Access-Based Loyalty
Instead of discounts or points, the reward here is an experience or exclusive access. VIP events, early product drops, members-only content, priority access, concierge services.
This is harder to commoditise than a points program. A competitor might be able to match your double-points offer, but they cannot replicate the feeling of being escorted into a lounge while everyone else queues. They cannot give your customer front row at a concert. Experiences create memories, and memories create emotional bonds.
Westpac’s music presale access is a recent example doing the rounds. There is genuine power in giving a cardholder the ability to get their friends into a sold-out gig. It converts a functional financial product into a social currency.
The challenge is cost and scale. Experiences are expensive to deliver, and they work best for premium brands with smaller, high-value customer bases. Scaling them to millions of customers is genuinely difficult, though brands like Spark have made it work by carving out front-row sections at major concerts for status customers.
Subscription Models
Amazon Prime is the defining case study. Customers pay for membership and receive benefits, primarily speed and convenience. Once inside, every interaction reinforces the next. The Kindle, the Prime Video, the delivery are all part of a flywheel that makes leaving feel like a downgrade rather than a rational financial decision.
The interesting psychological mechanic here is sunk cost. Customers who have paid for membership feel compelled to use it. The Costco and Sam’s Club model operates on the same principle. Jetstar Club does something similar in the aviation space, which is genuinely a category stretch for a budget carrier.
When Loyalty Programs Go Wrong
The failure modes are predictable, but brands keep hitting them.
The most common is launching a program without asking customers what they actually want. Rolling out a points mechanic because competitors have one, or because the Shopify plugin makes it easy, or because someone in leadership got excited about it, without testing whether the target customer gives any weight to it. Some customers want cash back. Some want status. Some want access. Some want nothing except a better product. Research first.
The second is using a loyalty program to solve a P&L problem. It is not a quick fix. If your product or customer experience is broken, no points program will paper over it. A loyalty program is icing. You need a cake first.
Mecca ran into this directly. After years of building genuine equity in their Beauty Loop program, they sent members a tote bag in place of the usual free product reward. The backlash was significant. There were also reports of expired product in gift boxes. When you have built customer expectations around a program, you have created an obligation. Failing to deliver on it is not just a logistics problem. It is a brand trust problem.
The third failure mode is building loyalty entirely through lock-in without building genuine brand equity underneath. If the only reason customers stay is that leaving is painful, you are one competitive disruption away from a very bad quarter.
As Steph puts it: “You want to avoid building a company that only builds loyalty through trapping people. You need to build brand equity and deliver value so customers want to stay with you.”
What Genuine Loyalty Actually Looks Like
Steph nominates Les Mills as her example of true, unprompted loyalty. No points program. No status tiers. No anniversary email. Just a product that delivers enough value, at a price that is genuinely competitive with alternatives, that she has never seriously considered leaving. The experience is the retention mechanism.
Ben’s is Apple, which he acknowledges sits in complicated territory. Apple has genuine product love at its core, but it is also a walled garden of intentional design. iMessage and the green text shame. The Apple Watch that only pairs with an iPhone. The interoperability that makes switching feel like a project. True loyalty and designed switching costs exist simultaneously, and it is not always easy to tell where one ends and the other begins.
That ambiguity is part of what makes Apple interesting as a case study. Their customer experience is genuinely excellent in many areas. Their ecosystem is genuinely useful. But the walls are also real, and they know it.
The honest question any brand should ask is: if we made it as easy as possible for customers to leave, would they still stay?
What Is Coming Next for Loyalty Marketing
A few directions worth paying attention to.
Personalisation at scale is accelerating. AI is enabling brands to move from segment-level loyalty mechanics to genuinely individual treatment. The concerning application is dynamic pricing: charging customers the maximum they are likely to pay based on behavioural signals. The compelling application is the inverse: offering customers the maximum value you can based on what you know about them. The technology is the same. The choice of how to use it is not.
Community is increasingly a loyalty mechanism in its own right. Red Bull does not run a traditional loyalty program, but it has built communities around extreme sports, music, and gaming that create genuine brand identification. When customers see themselves in a brand’s community, they are not doing the calculation about points value. They have already decided.
The death of the physical loyalty card is accelerating, and everything is moving into the phone. The practical implication is that the tactile wallet reminder disappears with it. That small physical cue, the card in your wallet that surfaces every time you open it, was doing more work than we gave it credit for. Apple Wallet is the obvious replacement, and it is already becoming an advertising surface in its own right.
Loyalty is earned, not bought.
You can build programs that manufacture the appearance of it, and some of them are genuinely effective at changing behaviour. But if you strip away the points and the tiers and the free boxes, and customers would not choose you without them, you have not built loyalty. You have built a subscription to retention.
The brands that get it right use programs as amplifiers for genuine brand value, not substitutes for it. They understand which customers they are actually trying to retain and why. They do the research. They treat the program as a long-term commitment rather than a quarterly activation. And they never mistake a scan at the checkout for customer love.
Do not do loyalty just because you can. Bake it into your strategy. Ask your customers what they want and what they value. Do the work. Because a badly designed loyalty program does not just fail quietly. It trains customers to expect discounts you cannot sustain, creates liabilities on your balance sheet, and erodes the brand equity you spent years building.
If you want the full conversation, including the Amex deep dive, the Mecca post-mortem, and a genuinely candid argument about whether Flybuys ever really worked, this episode is worth your time.
Listen to Episode 33 wherever you get your podcasts, or watch the full episode on YouTube. And if someone in your organisation is about to launch a loyalty program without reading this first, forward it to them. Consider it a public service.
New episodes of Canned; the Marketing Podcast drop every week at cannedmarketing.com
Connect with Ben van Rooy on LinkedIn at linkedin.com/in/benvanrooy/
Connect with Steph Quantrill on LinkedIn at linkedin.com/in/stephanie-quantrill/
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