Who’s funding your loyalty program?


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Loyalty programs are great initiatives – when done well.

We see many that simply don’t add value to the customer, and certainly not the brand. In fact, 25% of customers have stopped buying from a brand due to their loyalty program being of little value (source: Customology’s The Unspoken Customer Report). We define loyalty programs as “a structured customer strategy, designed to help build a stronger relationship between the customer and the brand. Providing a value exchange between the brand and customer, beyond the product and services paid for.”

Note the phrase ‘value exchange’. Loyalty programs are supposed to reward customers for their behaviour (i.e. repeat purchases), helping to drive long-term customer loyalty – a win, win for both parties!

But what about the cost of the loyalty program itself? After all, they do cost money, there’s the maintenance and management, associated technology/platforms, communications to customers, not to mention the customer rewards. Who’s funding all of this? There should only be one answer to this – the customer.

Who’s funding your loyalty program?

Yes – the customer funds the loyalty program, and only the customer! So if this isn’t the case for your brand’s loyalty program, then you may be in trouble. A good way to understand how profitable your loyalty program is, is to determine if the program is driving incremental revenue, and how much.

Loyalty programs are not just a ‘nice to have’, there’s no point in offering one just because your competitor has one. You need to have a clear strategy of why it’s beneficial to your customers, but also to your brand. We discussed this in one of our previous articles ‘Growing customer loyalty without a loyalty program’.

It’s really important to be regularly capturing the Voice of the Customer in relation to your existing loyalty program. You need to determine its value and relevance. Find out if your customers are actually happy with the program and if they are being rewarded the way they want to be rewarded? What would they change if they could? There’s a lot to assess, and this needs to be done fairly regularly, not just annually. We’ve compiled a self-assessment for you to determine the value of your program.

Loyalty program value self-assessment:

1. Can you easily measure how your customers feel about the program?
2. Can you determine how much incremental value your program is creating?
3. If you switched off your program, do you know how many of your customers would return anyway and if you are simply giving away free products?
4. Is the program rewarding the right behaviours to help you drive profit?
5. Are you receiving as many sign-ups as you had projected?
6. Do you know how many referrals to the program are you receiving from existing members?
7. Do you understand how your franchise partners really feel about the program, and if it’s helping them grow their business (if relevant)?
8. Can you easily measure the impact your loyalty program has had on increasing customer frequency and customer lifetime value?
9. Do you know how the loyalty program has helped you to decrease customer churn?
10. Are leveraging your most loyal customers to find even more loyal customers?

So, how easily are you able to answer these questions?

Leveraging your loyalty program data

One of the most beneficial aspects of having a loyalty program is the consistent invaluable data you are able to capture. Customers reveal a lot about themselves every time they transact with your brand, so what are you doing with the data you are collecting in your POS? You should be maximising and analysing this data to help you create hyper-personalised experiences for your customers. To learn more about how your customers are behaving, so you know the right behaviours to reward.


Loyalty programs are great initiatives – when done well. We’ve said it before, and we’ll say it again. If you’re unsure how valuable your loyalty program is to your brand, then hopefully the above self-assessment will help you find the gaps which require your attention. But remember, there’s only one party that should be funding the loyalty program – always the customer. So if your program is costing your brand more money than it’s making, then it’s time to evolve the program.

Customology are lifecycle management specialists, if you need any support assessing the value of your existing loyalty (or customer engagement) program, then we’re happy to help. Feel free to contact one of our Customologists on [email protected].

Michael Barnard
Michael oversees a team of Customologists with combined talent across strategy, data science, and technology, who help brands understand and influence customer behaviours. Michael’s experience in human centred design is foundational in our principles of design thinking and starting with the customer, focusing on how brands engage, keep, and grow customers.


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