Co-written by Lukasz Sloniewski From Omnivy and Hunter Murray from Loyalty and Reward Co.

State of Loyalty Programs Today

Loyalty programs are now table stakes – expected by consumers, yet often underwhelming in delivery. Across most industries, it’s now standard for brands to offer some form of loyalty construct, whether it be points, tiers, stamps or something else encouraging engagement to receive benefit/s. For many businesses, this set up is as far as they will go. However, in today’s saturated market, simply having a loyalty program is no longer enough to stand out.

Recent data from BCG’s 2024 loyalty program survey highlights a key challenge – while membership numbers are high, engagement and true loyalty are slipping. In the US, consumers belong to an average of 15 loyalty programs yet only half of them report being extremely or very engaged. More strikingly, the number of consumers (22%) who say they “never consider other brands,” is down 20% from 2022. In Europe, the survey yielded similar results, however, consumers are members of fewer programs on average (9.1).

Part of the problem lies in attention fragmentation. Consumers are increasingly distracted by the demands of a busy modern life, with time for brand engagement shared between streaming services like Netflix, social platforms such as TikTok, games like Wordle, and countless other digital stimuli. In this landscape, brands must compete not just with competitors, but with everything vying for a consumer’s time and mindshare.

To lather it on further, loyalty programs are not immune to rising consumer expectations. Consumers now demand seamless, personalised, and rewarding experiences across all touchpoints. The loyalty program is no longer a side offering it must be a key part of the brand experience. Consumers seek immediacy, relevance, and genuine value.

Looking ahead, AI will compound these dynamics. While it offers tremendous opportunities for personalisation, it also threatens to flood customer inboxes with marketing messages, making it harder than ever to cut through. Smart, considered communication strategies will be essential to avoid getting filtered out. Only those brands that deliver timely, relevant content will earn a place in the consumer’s preferred communications set.

Additionally, AI will change the path to purchase. As intelligent systems guide consumers directly to products or services, bypassing traditional search and brand discovery, brands will have to work smarter to engage with customers. A loyalty program strategy that goes beyond the basics and offers distinctive, emotionally resonant experiences will be better positioned to retain attention and foster meaningful customer relationships in this new era.

Evolving Loyalty: Overcoming Today’s Challenges

In an increasingly competitive and cluttered market, traditional loyalty models are no longer enough. Simply having a program in market is no longer a differentiator. To remain relevant and effective, brands must evolve their approach and rethink what loyalty means to the modern consumer. If your loyalty program feels underwhelming, ask yourself why? Chances are, it’s falling short in one or more of Loyalty & Reward Co’s Essential Eight™ loyalty principles.

The top two most common shortcomings we see are:

1. Lack of meaningful value
2. Lack of simplicity in how members join, engage with and understand the program

So how do you know if your program is suffering from one of these issues?

Start with a basic sense check; use the program yourself. Ask colleagues, friends, and family to do the same and provide honest feedback. It’s surprisingly effective. Extend the market research to members and customers using neutral, open-ended questions to avoid biased responses. Examples include:

• How does this program compare to others you’ve used?
• What do you like most about it?
• What frustrates or disappoints you?
• If you could change one thing, what would it be?

From this feedback, it becomes easier to pinpoint which of the Essential Eight™ are lacking. Once you identify a problem, the next step is to act.

If value is lacking, focus on rewards. Start within the business and look for rewards that are low cost to deliver but are high in perceived value for members. Examples include surplus stock, service upgrades, or exclusive experiences. If there isn’t much within the business, explore external partnerships. Many brands are eager to access engaged audiences. Strategic partnerships can unlock highly desirable benefits for members at little or no cost, a win-win.

If simplicity is lacking, focus on the member journey. Scrutinise every step from sign-up to earning, redeeming, and referring. Is it frictionless? Enjoyable? Too many steps make even valuable rewards feel not worth the effort. Many people will jump through hoops for high-value rewards (think concert tickets to your favourite artist) but will not sign up to a program for a 5% discount on your products if it requires them to jump through the same hoops. By systematically diagnosing and addressing the root cause of underperformance, brands can breathe new life into their loyalty programs and create experiences that truly cut through.

To enhance the value provided to members even further, it’s essential to deliver a simple, smart and relevant experience across all touchpoints. One of the most effective ways to do this is through personalisation, which has the ability to build an emotional connection with members. 

Every customer has different needs, preferences, and expectations. A one-size-fits-all approach simply won’t cut through. Programs must be designed to adapt to the individual, which requires a deeper understanding of members beyond demographics to uncover their motivations, interests, habits, and value drivers. Much of this can be inferred from customer behaviour itself.

For example, consider a member who regularly shops for groceries with a basket full of healthy food products. Sending them an offer for sweet baked goods is unlikely to resonate. Their purchase history clearly indicates a preference for healthier options, so the offer probably feels irrelevant from the member’s perspective. And irrelevant offers do more harm than good, eroding trust and reducing engagement over time. True personalisation means tailoring the experience, communications, and rewards so they are genuinely relevant to each individual.

Even the most compelling value can fall flat if delivered at the wrong moment. Timing is critical. Returning to our healthy shopper example, even if the brand sends an offer aligned with their preferences (say, a discount on organic snacks), timing still matters. Our healthy shopper typically shops after 6pm on Wednesdays. Sending the offer early in the morning, when they’re commuting or busy with their day, increases the risk it’s overlooked. But deliver that same offer closer to their usual shopping time, late Wednesday afternoon, and it’s far more likely to drive the intended behaviour.

Right message, right moment. Brands must leverage real-time data to understand context such as location, behaviour, frequency, or past purchases and use it to determine when a member is most likely to engage. The more accurately a brand can deliver timely, relevant value, the more effective the program will be in influencing behaviour and building lasting affinity. Unlocking this level of responsiveness requires creativity in data capture and ongoing investment in data infrastructure and decisioning tools (more on this in our second article of the series (Why Your Loyalty Program Can’t Evolve – Until Your Tech Stack Does).

State of the Loyalty Team Today

While loyalty programs have become foundational to the customer strategy, the teams responsible for running them are often stretched thin. The modern loyalty team operates in a complex environment where cross-functional alignment is difficult, operational demands are high, and strategic thinking is too often deprioritised.

In many organisations, loyalty remains a subset of the marketing function often under-resourced and reliant on other departments for approvals and execution. This structure creates bottlenecks. Stakeholders from legal, finance, technology, product, and customer service all have input, which means even small updates to a loyalty program can be delayed by layers of approvals and competing priorities.

Simultaneously, loyalty teams are bogged down in operational tasks. Member retro claims, responding to enquiries and complaints, producing regular management reports, supporting marketing campaigns, and constantly justifying program ROI are a handful of the tasks that consume majority of these often-depleted teams time and energy. As a result, there is little bandwidth left for innovation, experimentation, or strategic improvements that move the program beyond its basic foundations.

Loyalty Team Uprising: Overcoming Today’s Challenges

Businesses need to rethink the structure and role of loyalty teams. Loyalty is not just a marketing initiative, it’s a cross-functional value driver with broad organisational relevance:

• It provides an opt-in and consent mechanism, creating a compliant and high-quality data source that’s invaluable to marketing, analytics, and legal teams
• It drives behaviour change, influencing both short-term revenue and long-term customer retention, much to the commercial teams delight as well as marketing
• It helps move away from broad, margin-eroding discounting by selectively rewarding loyal customers, something finance teams value for its impact on profitability
• It provides a profile on a customer, enabling front of line staff and customer service to build a relationship with customers

One of the most common challenges we see in loyalty programs that have stagnated is a lack of cross-departmental buy-in. While the loyalty team may be enthusiastic and committed, the success of any program ultimately depends on the broader organisation being aligned and supportive. Start by asking, where is the disconnect?

• Partner opportunities: Does your business have partnerships or sponsorships that could be tapped into for rewards or experiences? Loyalty teams often overlook this untapped value because the sponsorship function is often siloed. Building a bridge here can unlock high-perceived value rewards with minimal cost.
• Product sales collaboration: Are product teams open to using inventory, bundles, or custom packs to support loyalty? If not, value innovation is limited. Aligning product and loyalty priorities can create unique reward experiences while managing costs efficiently.
• Marketing integration: Is the loyalty marketing strategy fully aligned with the broader marketing calendar? If they operate on separate tracks, the result is often conflicting or duplicative messages that confuse or fatigue members. From the customer’s perspective, it’s one brand. It needs to feel that way in execution.
• Technology support: Loyalty teams frequently rely on tech teams to make key updates to UX flows, data capture processes, reward logic, and much more. If technology teams don’t have the bandwidth or shared priorities, innovation stalls. Cross-functional road mapping and prioritisation are essential.
• Finance and commercial buy-In: Lastly, loyalty needs the backing of finance. Whether it’s justifying existing spend or making the case for change, commercial teams play a vital role in quantifying the value of loyalty, both realised and potential. Without their support, strategic improvements often stall at the approval stage.

Reviving a loyalty program isn’t just about updating mechanics or messaging. It’s about uniting the business around a shared customer strategy. To do this, businesses need to rethink how their loyalty capability is structured.

One highly effective approach is to select loyalty champions from each key department including marketing, product, finance, technology, operations, and beyond. By involving these individuals from the outset and taking them along the journey, they become genuine advocates for the program. They understand how it connects to their area, can represent loyalty priorities within their teams, and help drive coordinated action.

This model not only embeds loyalty into everyday decision-making but also naturally forms a multi-disciplinary team with several advantages: stronger alignment, broader perspective, faster execution, and clearer accountability. Rather than requiring a full structural overhaul, the approach builds momentum and shared ownership where it matters most, across the business.

When a program is up and running loyalty teams can often get stuck in the day-to-day delivery, neglecting the future strategy and evolution of the program. Teams should be regularly reviewing their processes and asking critical questions, such as:

• Can manual tasks like retro claims be automated, simplified, or eliminated altogether if the data shows minimal impact?
• Are all reports driving decisions, or are some legacy outputs that can be retired?

By cutting back on low-value activity and embracing automation, loyalty teams can free up the capacity to focus on what really matters, which is elevating the program, innovating member experiences, and driving measurable impact for the business.

References

Crouch, E., Eppler, B., Taylor, L., Mühlenbein, C., & Hearne, E. (2024). Loyalty programs are growing – So are customer expectations. Boston Consulting Group. https://www.bcg.com/publications/2024/loyalty-programs-customer-expectations-growing

Ready to revamp your loyalty program?

Looking to revamp your loyalty program? Loyalty & Reward Co have a global team of expert loyalty consultants that are ready to help. Contact us today to learn how we can work together to set up your program for success.