More than points and discounts: What makes loyalty programs effective

It is undisputed that loyalty programs must do more than just distribute points and discounts. They should create value, strengthen relationships, be personalized, and function across channels. That's obvious, right?

Customer loyalty beyond points and discounts

The real challenge lies not in the level of knowledge, but in the consistency of implementation. Data, technology, and methodological expertise are available in many organizations today. Nevertheless, numerous programs fall well short of their potential.

The reason is rarely a lack of knowledge, but rather insufficient execution. Loyalty is often described in abstract terms, but not shaped where it actually arises: in specific usage situations, for real needs, and in direct comparison to available alternatives.

Not louder, not more complex — but more fitting.

Loyalty arises from perceived value

Loyalty is not the result of individual actions, but rather the result of repeated experiences over time. It arises when customers experience that a relationship is worthwhile: both functionally and emotionally. Discounts and points can generate attention. However, lasting loyalty is created through relevance, reliability, and the feeling of being understood. Exclusive benefits, services, or experiences that go beyond the individual purchase are crucial for this. It is less important to be objectively better than others. What matters is being perceived as the best available option in the respective context of use. Loyalty arises from a relative advantage—compared to the alternatives that a customer is considering at that moment.

Why transactional loyalty has its limits

Many programs continue to focus on what is easily measurable: transactions, sales, frequency. Past behavior is rewarded. This is understandable, as the effects are visible in the short term and easy to control operationally.

But this is precisely where the limitation lies. In markets with a wide range of choices and comparable services, price-based loyalty remains fragile. It rarely lasts beyond the moment and can be quickly replaced.

The more interchangeable offers become, the more relevant other factors become: relationship, context, and perceived added value. This is precisely where the focus shifts from pure repetition to genuine preference.

Data and technology: The prerequisites are in place

Many companies have the necessary prerequisites in place. Extensive customer data, powerful technologies, and proven methods are available.

In practice, however, the desired effect often fails to materialize due to implementation issues. Data is fragmented, inconsistent, or not consolidated into a reliable customer profile. Technologies are introduced without clearly defined use cases. Instead of relevant experiences, rule-based campaigns, interchangeable recommendations, or over-personalization that seems arbitrary from the customer's perspective are created.

In addition, personalization is often thought of in isolation—as a marketing or IT issue. Without clear objectives, prioritization, and governance, complexity increases while the perceived benefits remain low.

Consistent principles applied in every context

Loyalty does not arise at individual touchpoints, but rather through the interplay of many interactions. Customers naturally move across channels and expect not a perfect, but a consistent overall picture.

Inconsistencies are noticed more quickly and have a direct impact on trust and loyalty.

That is why the fundamental mechanisms of loyalty must be harmonized in terms of relevance, reliability, and relationship. What differs for users is the respective form this takes.

Depending on the context, convenience, inspiration, advice, or belonging may be the main focus. Programs that take these differences into account are more compatible than those that rely on a uniform model.

A look at the retail sector

In the food retail sector, loyalty is built on an everyday basis. Relevance is demonstrated less by exclusive experiences and more by being there at the right moment: helpful tips, personalized offers based on actual shopping habits, or a consistent link between shopping, apps, and benefits. A one-size-fits-all program falls short when needs vary greatly between routine weekly shopping and spontaneous purchases.

In drugstores, the focus is shifting. In addition to frequency, orientation, trust, and inspiration play a greater role. Loyalty arises where programs not only reward but also support—for example, through relevant content, services, or benefits that go beyond the individual purchase.

In fashion retail, loyalty is more strongly linked to identification. Price incentives are important, but they alone are rarely enough to build preference. Relevance is more likely to be created through exclusive access, early information, or experiences that convey a sense of belonging.

In the DIY sector, on the other hand, purchasing decisions are often project-related. Loyalty is created less by individual transactions than by support over a longer period of time – for example, through advice, planning aids, or services that facilitate a project.

A similar pattern emerges across all formats: loyalty arises where offers and benefits are perceived as helpful and relevant in the respective context. This is precisely why standardized programs are reaching their limits – and precisely why differentiated, testable, and adaptable approaches are gaining in importance.

Ready to develop your loyalty program in a targeted manner?

Our H&C Loyalty Value Assessment provides you with clarity on where your loyalty program actually creates value today—and where simplification or realignment makes sense. In an initial consultation, we analyze your current situation, sharpen your focus on relevant customer segments, and derive concrete next steps.