Do Loyalty Schemes Actually Work?
Loyalty schemes can work brilliantly — but only when they're designed as a two-way deal: a reward genuinely worth the effort, in exchange for first-party data you actually use. Done badly, they just hand margin to customers who'd have bought anyway.
Why everyone wants one again
Loyalty programmes are enjoying a revival, from supermarket member-pricing to drinks brands reviving old schemes. The reason isn't really loyalty — it's data. In a world where third-party tracking is disappearing, a loyalty scheme is one of the cleanest ways to build a direct, consented relationship with your customers and learn who they really are.
That first-party data is the modern prize. It powers better targeting, smarter promotions and, increasingly, retail-media revenue. The points are almost a side effect.
When they work
Good schemes change behaviour. They give people a real reason to choose you over a rival, to consolidate their spending with you, and to come back more often. The reward has to clear a simple bar: is it worth the friction of signing up and the data you're asking for?
The best programmes also use what they learn. They personalise offers, spot lapsing customers before they leave, and make the regular feel recognised. A scheme that collects data and does nothing with it is just an expensive database.
When they fail
The classic failure is discounting disloyalty. If your rewards mostly go to people who'd have bought anyway, you've simply cut your margin. The second failure is complexity — a scheme so fiddly nobody engages. The third is the empty-points trap, where the data is collected and never used.
For a small business, the honest test is this: would this reward make a customer genuinely choose me more often, and will I actually act on what I learn? If the answer to either is no, a simple, generous, human gesture — remembering a regular's order, a handwritten thank-you — often beats a formal scheme.
Our take: loyalty schemes are a first-party data engine wearing a rewards costume. Build one if you'll use the data; skip it if it's just a discount with paperwork.
Quick FAQ
Do loyalty schemes build loyalty?
They can, when the reward genuinely changes behaviour and the data is used to serve customers better. Poorly designed, they just discount to people who'd have bought anyway.
Why are brands really launching them?
Largely for first-party data. As third-party tracking disappears, a loyalty scheme is one of the cleanest ways to build a direct, consented relationship with customers.
Should a small business run one?
Only if the reward would genuinely make customers choose you more often and you'll act on the data. Otherwise a simple, human gesture often beats a formal scheme.
A loyalty scheme is a first-party data engine in a rewards costume. The honest test for any business is simple: would this reward actually make someone choose me more often, and will I really use what I learn? If either answer is no, a genuine human touch — remembering a regular's order — beats a discount with paperwork. — Daniel Nikolla, Founder of Merx Marketing
Takeaway: build a loyalty scheme only if you'll use the data and the reward truly changes behaviour. Otherwise you're just discounting to people who'd have bought anyway.
Does your loyalty offer actually change what customers do — or just give margin away to your regulars?
If you would like to know more about this topic, please contact us on danieln@merxmarketing.co.uk
Sources: Marketing Minute analysis.
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Written by Daniel Nikolla, Founder of Merx Marketing Ltd and Marketing Minute
