Common Myths About Loyalty Programs – And Why Brands Hold Back on Launching One

From global retail giants to local grocery stores, more and more companies are choosing to introduce a loyalty program as a tool to attract and retain customers. The prevalence of loyalty programs attests to their effectiveness and popularity among consumers. Some companies – due to the nature of their industry, or fear of losing profits and only incurring more costs associated with the implementation of promotions, are afraid to introduce a loyalty program. There is no denying that in this way myths are growing, which can unnecessarily discourage people from reaching for this solution, while it could brilliantly help achieve business goals. With this article we will try to disenchant them.

Today, these myths persist even as loyalty has become one of the most strategic tools for customer retention, data acquisition, and long‑term brand value. The rise of AI‑driven personalization, the decline of third‑party data, and shifting consumer expectations make loyalty more relevant than ever. At the same time, many fears brands cite in internal discussions no longer align with how loyalty programs function, leading to decisions based on outdated assumptions rather than current market realities.

Loyalty Programs Don’t Work for Every Industry (Myth 1)

There are some industries where the frequency of purchases is simply low. And this will not be changed by the most favorable promotion or the best offer in a loyalty program, because a given product category is replaced once every few years. In such a situation, a loyalty program can be a challenge, but this does not necessarily mean that it cannot be developed.

An example of such an industry could be a brand selling corrective eyeglasses. Poles replace eyeglasses on average once every three years, and yet there are loyalty programs on the market related to this product category. It is important to offer an extended program, which is used not only during purchases. It is imperative to get the customer in contact with the brand as often as possible.

Through a loyalty program, a brand can stay in touch with its customers, reminding them of regular eye examinations, offering complementary products like sunglasses, educating on eye care and product innovations, or serving club members on more preferential terms, offering service, cleaning, replacement of broken items at any dealership. Another similar case is car dealers. A car is usually replaced once every few years, but a good relationship needs to be nurtured all the time. This makes the customer become attached to the brand. Reminders to service the car, change the oil, change the tires, build a relationship, the value of which from the dealer’s perspective can prove invaluable when replacing the car.

What has changed, however, is the role these programs now play in maintaining relevance between purchases. Loyalty is no longer dependent on transaction frequency; instead, brands create value through continuous interactions that support the customer’s lifestyle and needs. Zero‑party data collected through membership interactions has become one of the most valuable assets a company can own, especially as third‑party cookies disappear. In low‑frequency categories, loyalty programs now act as a structured framework for relationship‑building, education, service, and consultation.

‍Loyalty Program In a Low-frequency Industry Can Make Perfect Sense

As you can see, a loyalty program can be built around other touchpoints, not just those related to value and number of transactions. Simply keeping the customer in touch with the brand, offering services complementary to the purchased product builds customer attachment to the brand. In this way – even if the clubber does not increase the number of transactions made – he or she will become fond of the brand for good and is very likely to choose it at the next possible opportunity, and perhaps recommend it to a friend.

Once acquired, a customer is very valuable to a company. A customer may not buy more than one product per year, there is nothing wrong with that. However, there is a high probability that after a long time he will have to replace the purchased product. And without a loyalty program and offering complementary benefits, this potential sales opportunity can be lost.

The long‑term nature of customer value has become a central focus for contemporary loyalty strategy. Brands increasingly recognize that loyalty is not determined by the number of transactions but by the quality and consistency of interactions over time. Modern programs make it possible to maintain visibility and emotional connection across long purchase cycles, using content, personalized reminders, and service‑driven experiences to keep the brand at the top of mind until the moment of repurchase arrives.

Loyalty Program Is All About Discounting (Myth 2)

Discounts are, of course, one of the most visible and popular forms of rewarding customer loyalty. As a result, some brands considering introducing a loyalty program are concerned about the risk of losing some of their profits. This is especially true for companies that sell products on low margins, since in their situation it is difficult to offer products at an even better price as rewards. However, the value of a loyalty program does not have to be based solely on price reductions. First of all, a loyalty program must be attractive enough to change customer behavior in favor of the organizer, but at the same time it should not be so generous as to constantly reduce the margin. It is important to understand that customer loyalty does not always have to be measured only in the number of transactions or money spent, but also in club members’ engagement, recommendations and long-term relationship with the brand.

In recent years, loyalty has shifted decisively away from discount‑driven mechanics. Customers increasingly seek relevance, personalization, faster service, early access, unique experiences, and added convenience – benefits that do not erode margin. AI‑driven programs now tailor value to individual customers, allowing brands to offer meaningful benefits without applying broad, costly discounts. As a result, discounting has become just one of many tools, no longer the foundation of loyalty strategy.

A Loyalty Program Only Reduces the Value of Sales That Would Have Happened Anyway (Myth 3)

One common view is that loyalty programs lead to excessive transaction discounting, as they attract customers who would have made a purchase anyway. It is worth remembering in such a situation that a loyalty program is not just a one-time transaction, but an entire ecosystem of customer relationships. The question brands often ask themselves is whether the program will encourage additional customer activity, or whether it will only cover transactions that would have happened anyway. In either case, the brand will still be a winner. Why? Despite concerns about the potential cannibalization of sales, it is important to remember that the value of a loyalty program is not only the direct impact on revenue, but also the data that customers leave behind, and thus the opportunity to better understand their needs and preferences.

The multi-faceted nature of a loyalty program includes the collection of data that can be used to further improve marketing strategy. This allows brands to target and personalize their offers, focusing on those individuals who need an extra boost to close the deal. This simultaneously reduces the cost of both the communication itself, as we cover a slice of the base, and the promotion, as we selectively tailor the offer to the customer.

All that is still needed for full success is board approval. So how do you prove that the program is making money? Conducting an analysis before and after joining a loyalty program can help you understand the real impact of the program on customer buying behavior. By comparing the behavior of customers who joined the program with those who did not, we will gain valuable insights into the effectiveness of the program and its impact on revenue, which will certainly convince management of the validity of the loyalty program’s efforts. An additional element that will help us prove the effectiveness of the program are control groups, which are always worth using to show differences in consumer behavior.

‍As customer acquisition costs rise globally and privacy laws restrict access to third‑party data, loyalty programs have become one of the few reliable sources of actionable customer insights. The data collected through loyalty interactions not only guides promotions but also fuels predictive AI models that help brands anticipate churn, optimize campaigns, and proactively manage customer value. Because of this, even transactions that would have occurred anyway carry strategic value, as they enrich the dataset used to drive long‑term commercial outcomes.

What Can We Offer in Return? Our Brand Do’t Offer Unique Rewards (Myth 4)

Instead of over-discounting, focus on other elements that can attract and retain customers. Receipt history or customizing offers to suit individual customer preferences improve the customer experience. Inspirations, exclusive offers, amenities such as an extended return process or a price invariability guarantee can also be attractive rewards for being loyal. Alternative forms of value build a long-term relationship with customers without the need to constantly lower prices and lose margins.

‍Loyalty programs now prioritize experiential and service‑based value. Brands increasingly use personalized content, curated recommendations, priority access, friction‑reducing services, and lifestyle‑aligned benefits to strengthen emotional connection. These elements create a deeper brand affinity and often deliver more impact than traditional monetary rewards. The shift toward personalized, non‑price value reflects broader customer expectations, where convenience, relevance, and recognition weigh more heavily than simple savings.

Loyalty Program Is so Complex Project That an In-house Team Cannot Handle (Myth 5)

While implementing a loyalty program may seem complicated, with the right planning, support and commitment it is an achievable task for any company. However, some brands may fear the challenges involved. Unfortunately, not every company has the right forces on board, and not every independent effort can pay off. Using outside consulting services or partnering with technology providers that have experience with loyalty programs for many companies may be the only right solution. Such collaboration can bring valuable guidance and support in program design, implementation and management.

Any program should provide convenience to customers at a reasonable cost on the part of the organizer. Finding a partner who will not wonder if it is possible to implement a loyalty program or propose a solution that is unattainable from the company’s perspective, but will tell how to do it most effectively, taking into account the capabilities and limitations of a given company, is a game changer in implementing loyalty. The basis of a good loyalty program, is to consider what opportunities a particular business has, and at the same time, what barriers it may face. The selection of the optimal solution should be based on an analysis of the company’s characteristics, customer profiles and the constraints it faces Recognizing the prospects and identifying the barriers is the first step to building a well-thought-out loyalty program strategy.

‍The perception of loyalty as a “heavy IT project” is increasingly outdated. Modern loyalty platforms rely on low‑code and no‑code solutions that dramatically simplify implementation and allow marketing teams to manage mechanics, personalization, segmentation, and communication without deep technical support. At the same time, onboarding tools and training modules built directly into platforms help permanently engage frontline teams, who play a decisive role in program success. As a result, launching a loyalty program is less about technological struggle and more about strategic clarity and organizational readiness.

How Loyalty Has Evolved in the New Era of Customer Expectations

AI as the New Personalization Engine

Artificial intelligence has become the central force shaping modern loyalty programs. Rather than operating on fixed rules or broad customer groups, today’s programs rely on AI to build dynamic, real‑time segmentation and deeply personalized experiences. AI identifies customers most at risk of churning, recommends the most effective benefit structures for individual members, and continually adjusts the rhythm and style of communication to reflect changes in customer behavior. As a result, loyalty programs function as adaptive systems – constantly learning, predicting, and evolving. This shift allows brands to strengthen long‑term customer value, while significantly reducing operational inefficiencies and ensuring that loyalty interventions happen with the right intensity, at the right moment, for the right person.)

Membership‑First Brands

The concept of a “membership‑first brand” has become one of the defining trends shaping strategic loyalty thinking. Instead of treating loyalty as an add‑on campaign or a promotional layer, brands increasingly position membership at the very center of their customer strategy. The guiding question is no longer “What rewards should we offer?” but “Why would customers genuinely want to belong to us?” This shift places loyalty at the intersection of communication, data, customer experience, and partner collaboration. Membership becomes the entry point to a cohesive omnichannel journey – one that integrates digital and physical touchpoints, amplifies brand identity, and allows customers to feel part of something greater than the transaction itself. Through this lens, loyalty becomes a framework for creating community, advocacy, and long‑term affinity.

Loyalty Beyond Transactions: Values, Sustainability, and Community

Loyalty programs increasingly reflect the values and expectations of contemporary consumers, who want their relationships with brands to resonate with their beliefs and social priorities. Sustainability, community involvement, and ethical impact have become integral components of loyalty design. Many programs now reward environmentally responsible behaviors, support local initiatives, or contribute to social causes that matter to their members. Transparency and trust are no longer optional – they shape how customers perceive the fairness, purpose, and authenticity of the program itself. As loyalty broadens beyond transactional incentives, it evolves into a shared journey between brands and their audiences, strengthening emotional bonds and cultivating a sense of collective impact that extends far beyond purchases.)

Summary

At a time when loyalty is conjugated by all cases and Artificial Intelligence is fed with consumer data, the lack of a loyalty program can cost companies dearly. In addition, the rising cost of reaching customers through external media makes in-house channels both the cheapest and most effective communication option. Having a baseline of knowledge about customers, coming directly from them, and systematizing it is crucial in today’s world, where every different customer behavior translates into business value. With the dynamic changes in the market, quickly understanding customer behavior, such as less frequent visits or fewer purchases, becomes a priority. A loyalty program is no longer just a tool to reward customers, but also a key to understanding and responding quickly to changing market needs.

As the industry evolves, the myths preventing brands from launching loyalty programs stand in sharper contrast to market reality. Loyalty has become easier to implement, more profitable, and more strategically essential than ever. The brands that recognize this shift and embrace loyalty as a core business capability will be the ones best equipped to compete in an environment shaped by data, personalization, and rapid changes in customer expectations.

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