The Gist
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Loyalty is a habit. Most repeat behavior comes from habit or convenience, not brand attachment.
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Programs mask problems. Points-based loyalty programs often cover for weak experiences or lack of differentiation.
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Fix the core. Improving products and service is more effective than layering on rewards.
Editor’s Note: Brands love to talk about loyalty — but what if most of it is just repetition in disguise? In Part 1 of this two-part series, we take a hard look at the points-based programs marketers rely on to signal success. From inflated engagement metrics to misplaced emotional assumptions, the loyalty conversation needs a reset. This piece opens the case against conventional loyalty models — and why they may be doing more harm than good. In Part 2, we will cover what loyalty really looks like when it’s based on customer behavior, not brand mythology — and offer a roadmap for building something better.
I don’t believe customers are loyal to brands. One of my industry heroes, Bob Hoffman, once said, “People are loyal to what’s convenient, familiar and easy, not to your brand.” Another hero of mine, Professor Mark Ritson, similarly said that loyalty is a post-rationalized explanation for habitual behavior, not a reflection of emotional attachment.
I say that dogs are loyal to their owners. People are loyal to their families. I am not loyal to Pepsi Zero just because I love it. If it went away tomorrow, I’d survive.
In this context, the very term “customer loyalty” is misleading. However, because the term “loyalty program” is widely used and understood, I will use it throughout this article as shorthand for brand-operated incentive systems that seek to encourage repeat engagement.
Table of Contents
The False Promise of Points-Based Loyalty
Across nearly every consumer sector, brand-specific, points-based loyalty programs are regarded as foundational. Major brands deploy them with confidence, and their popularity shows no sign of slowing. Whether in retail, hospitality, travel or quick-service restaurants, these programs are treated as essential for driving repeat purchases. But their perceived value masks a deeper problem. Brands believe they are engineering loyalty. In reality, they are funding temporary engagement.
There is anecdotal evidence that those who are automatically signed up for loyalty programs never engage with it. Further, we know that more than 54% of memberships are inactive. In industries such as travel and hospitality, over 70% of earned points go unredeemed. Among loyalty customers under age 35, 35% say they plan to cancel at least one program within the next year. Another 28% abandon programs entirely due to confusing rules, low-value rewards or lack of personalization. For all their ubiquity, points-based systems show consistent patterns of disengagement, breakage and attrition.
Why the Loyalty Model Needs a Redefinition
The central flaw is structural. Points systems offer transactional incentives for repeated behavior, but they do not create emotional commitment. As Ritson once said, loyalty is often mistaken for repeated convenience. Brands believe they are cultivating allegiance, but what they are really doing is subsidizing patterns that already exist. Many programs reward activity that would have occurred without incentives. Marketers interpret enrollment and redemption data as evidence of success, yet the actual impact on brand preference is negligible. The result is a high-cost, low-return system that inflates loyalty optics while masking value erosion.
For that reason, this article does not attempt to salvage the current model. It challenges the validity of its premise. Points are not a stand-in for trust, and programs are not proof of preference. The term “loyalty” persists, but its definition must change. What brands require is not a more elaborate reward structure. They need a more honest one, one that reflects real customer behavior and aligns with how people actually make choices.
Related Article: The Loyalty Program Boomerang: When Rewards Drive Customers Away
Points Programs Don’t Build Real Connection
Points-based loyalty programs are closed-loop systems where customers earn points from qualifying purchases and redeem them for rewards such as discounts, merchandise or exclusive access. The structure appears objective and scalable. But what it reinforces, most consistently, is repeat behavior, not brand commitment.
Reward Systems Reinforce Use, Not Brand Affinity
Credit card rewards and cashback programs are often misidentified as loyalty programs, but they serve a different objective. Loyalty programs are brand-owned systems designed to increase preference for the brand itself. Credit card rewards are platform-owned ecosystems structured to increase usage of the card. The rewards (i.e., airline miles, hotel discounts and third-party perks) are intended to make the card feel more valuable.
But what they reinforce is continued usage of the payment method, not attachment to any specific brand. Even when retailers or service providers offer perks through these programs, the benefit is attributed to the card, not to the brand extending the discount. The result is functional retention, not emotional connection.
This distinction matters. Repeat transactions are often misinterpreted as brand allegiance. But consistent purchasing may reflect convenience, habit or lack of better options, not preference. Customers return when it is easier, faster or cheaper, not necessarily because they care about the brand. Some go out of their way to recommend a product. Others stay through service issues. But these are exceptions, not proof of emotional commitment. Most loyalty programs incentivize surface-level behavior. They rarely influence why someone returns, only that they do.
This creates a reporting problem. Many brands rely on enrollment and redemption volume to demonstrate success. But enrollment is not engagement. In many cases, customers are auto-enrolled when they sign up for a service, open an account or complete a transaction. The average consumer appears to participate in more than a dozen programs, but only engages with a few, and breakage is common. This is not cost efficiency. It is friction, disinterest or undervalued incentives. Unused rewards reflect failure, not savings.
Enrollment Isn’t Engagement — And Points Aren’t Loyalty
It’s also critical to distinguish loyalty programs from other transactional ecosystems. Amazon Prime is not a loyalty program. It is a paid subscription with immediate, functional benefits. Rakuten and Capital One Shopping are affiliate networks for discount seekers. These models build customer retention through utility, not through brand affinity.
When rewards become currency, programs stop reinforcing preference. They train customers to pursue incentives, not experiences. Points do not deepen connection; they delay it. The goal isn’t to eliminate loyalty structures entirely. It’s to reframe them by shifting focus from point accumulation to providing relevance, recognition and unique incentives that cannot be copied by a competitor.
Related Article: What Brand Perception Is and Why It Matters
Traditional vs. Behaviorally Aligned Loyalty Programs
A comparison of outdated loyalty models and approaches that reflect real customer behavior.
| Traditional Loyalty Programs | Behaviorally Aligned Loyalty Strategies |
|---|---|
| Reward point accumulation for purchases | Reward relevance, recognition and real participation |
| Enrollment as a success metric | Active engagement and incremental behavior as success metrics |
| Surface-level personalization (e.g., birthday emails) | Contextual personalization based on habits and lifecycle |
| High breakage and unredeemed rewards | Functional value and emotional resonance with every interaction |
| Confusion, friction or gamified complexity | Simplicity, ease of use and embedded in preferred customer workflows |
| Assumes frequency = loyalty | Recognizes convenience and habit as distinct from true preference |
| Attempts to manufacture loyalty with perks | Builds retention through better experiences and stronger identity alignment |
Brands Mistake Usage for Loyalty
Loyalty programs fail not because they are unpopular, but because their design is flawed. Marketers often confuse frequency with preference. A repeat customer is not necessarily a loyal one. In many cases, that repeat behavior is subsidized through points and perks that deliver little to no incremental value. The illusion of loyalty is reinforced by metrics that measure usage but not impact.
Redemption, for example, is frequently cited as a sign of program health. But redemption rates are often driven by promotions, urgency triggers,or automatic redemptions, not sustained engagement. According to McKinsey, 77% of transactional loyalty programs fail within two years due to weak differentiation, high cost and low member activity. Companies continue to invest in them because they confuse participation with profitability.
Participation Isn’t Profitability — And ROI Claims Don’t Hold Up
Self-selection bias compounds the problem. High-value customers are more likely to enroll in loyalty programs. As a result, spend lift attributed to the program is often overstated. Without control groups or counterfactual testing, most ROI claims are speculative. Only 41% of loyalty program owners say they can confidently measure program impact.
Program structure also works against long-term engagement. In one study, 43% of customers stopped participating because the rewards felt meaningless or took too long to earn. Another survey found that 44% of members dropped off due to lack of personalization. These are not cosmetic issues. They reflect a system built on extrinsic motivators that fail to reinforce brand value.
The structural cost of points-based programs is routinely underestimated. Technology platforms, reward fulfillment, fraud mitigation, promotional campaigns and service infrastructure all require sustained investment. On paper, high breakage and low redemption can make the economics appear favorable. In reality, that spend rarely produces incremental behavior. It simply subsidizes actions customers were already inclined to take.
Worse, these programs train customers to treat brand interaction as a transaction. They shift the question from “Why this brand?” to “What do I get?” That mindset is inherently unstable. A marginally better offer from a competitor is all it takes to trigger defection. The result is not loyalty but dependency on incentive.
The failure is conceptual, not tactical. Programs that attempt to manufacture loyalty through rewards misinterpret the problem. People do not develop brand preference because of rebates. They return when the experience is consistent, the product is superior or the brand aligns with their identity.
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