Do Loyalty Schemes Create Loyal Customers?

Back in the day before digitalisation but at the naissance of CRM, loyalty schemes came of age as a means to an end. Kotler, Peppers & Rogers, the old masters of CRM, describe how CRM wasn’t a new concept but the ability to capture data had now been taken to new heights. Shopping used to be an altogether different experience – perishables were bought in small quantities, daily usually, from the corner grocery store or butcher’s. Nothing was prepared and packed in plastic. My how far we have foolishly come! But it’s the change in service that is relevant to this message. The shopkeeper knew their customers by name, engaging in a conversation over the counter. They knew where they lived, worked, family details – not in a big brother way, more polite social caring. And they knew from these interactions, each customer’s shopping behaviours – what they bought and when, what they liked and disliked, which offers were most effective and who could be tempted to buy a treat for the weekend – all logged in the shopkeeper’s head – the original CRM database.

But then supermarkets appeared on our high streets and the way we shop changed dramatically, filling our trolley once a week and passing anonymously through the check out.

The personalisation revolution

All personalisation was lost until Clive Dunn and Edwina Humby stepped in with the Tesco Club Card in 1994 and the loyalty scheme revolution began. That’s not to say other similar schemes weren’t already in existence, but what DunnHumby did so wonderfully was to monetise the data. Tesco was sending vouchers that were so relevant to the customer, that were welcomed and used. The level of the intelligence captured and gleaned from the sophisticated data analysis was on a whole new level. Coupled with a customer-led strategy, connection to the customer was remade. And from there it snowballed. The market was flooded with cards and schemes and vouchers. To the point that the purpose is again, somewhat lost. According to Amercian Express’ Rewards Report 2026, the average Brit is signed up to 12 loyalty schemes. But only one third of these are actually used and many sign-ups become dormant very quickly. From this, we know that a scheme has to engage them, and cut above the competition, be worth it and influence behaviour. If your loyalty scheme doesn’t reward loyalty, it’s not working. Dormant subscriptions are wasted potential and if the initial engagement wasn’t good, clear, or tapped into them, it will be almost impossible to reignite the interest. Have you ever seen loyalty scheme relaunches? Immediate value is essential – schemes lacking this initial information are the ones languishing in the dormant zone. Have these schemes created a more loyal customer? Or has this just created a new base level? You have to offer your 10th coffee for free because …. you just do….

In reality, it’s highly unlikely that many, if any, of the cards in our wallet / apps on our phones cause us to consciously change our behaviour to be more loyal. We live in a world saturated with options. But what hasn’t changed, the constant throughout all this digital and now AI revolution, is the absolute knowledge that connecting well with a customer, treating them at an individual level – just like the shopkeeper of days gone by, is paramount to optimising the customer value.

Don’t just hold the customer information – use it!

Back to Dunnhumby, what’s been lost is the intelligent use of all that rich, glorious customer behavioural data. What does the customer now typically get from signing up to a loyalty scheme – just money off! And sometimes, money off something they just wouldn’t buy – the shop keeper wouldn’t have made this mistake and nor should you.

One size fits all comms will never work as effectively as targeted communications.

A blanket, or tiered scheme at best, allocates discounts in the form of points earned more or less generically across the whole customer base. So, what’s the real benefit to the company of that point? Do you know the ROI of your loyalty program?

This is not a huge criticism – it’s intended to be a light bulb moment. Dunnhumby employed big brains, data specialists ahead of their time. Of course, the average company cannot afford to do that. And it certainly doesn’t need as much because so much knowledge and expertise has been accrued over the years.

No one expects 100% loyalty. But what if you could stretch a customer’s spend with you by just a fraction? Steal one of their coffees from a competitor?

What does improved loyalty then actually mean? ROI value? What dives incremental value to your business? In its purist terms it means to retain the highest share of wallet possible over the longest period of time in the most cost-efficient way. But that doesn’t happen on its own – it happens because, like the shopkeeper, you know your customers, their likes, dislikes and what they might try, buy more or come back for…