Do Loyalty Programs Drive Any Loyalty Today?

Saurabh Agrawal
5 days ago
5 min read

I’ve always had a strong personal interest in loyalty programs—probably because my journey into the world of analytics began with them.

One of my earliest projects at American Express involved designing and executing loyalty campaigns, and since then, I’ve developed a lasting fascination with how these programs work, how they influence customer behavior, and how brands can use them as powerful tools for growth.

Over time, that curiosity turned into a habit—I’ve constantly explored different loyalty strategies, tested out programs across industries, and, I’ll admit, become a bit of a points junkie myself.

But have you ever wondered how loyalty programs even started?

They go way back—to the days of Diners Club and early credit cards. At that time, brands had no idea who their customers were. Especially before the internet, a customer could walk into a store, make a purchase, and walk out without leaving a trace.

Loyalty programs changed that. The primary objective of a loyalty program is to build loyalty, which helps increase Customer Lifetime Value (CLV). Initially, the goal was to help brands identify their customers and track their purchase behavior over time. Once that data was in place, they would run targeted retention campaigns and encourage repeat purchases.

Today, loyalty programs are everywhere—from retail stores to large ecommerce groups. But many brands still struggle with a basic question: How do we know when we actually need a loyalty program?

This uncertainty often leads to poorly designed programs that don’t drive the intended outcomes. And that’s where strategy matters.

Evolution of Loyalty Programs in the Post-Internet and Mobile Age

After the internet and mobile phones became common, loyalty programs changed a lot. In the beginning, most programs gave customers a loyalty ID or card to track points and purchases. Later, many brands switched from loyalty cards to using phone numbers as an easier way to identify customers. It helped the brand to know who the customer is and differentiate between new, returning, and loyal customers for better targeting and personalized engagement.

With the rise of smartphones and apps, brands moved even further—ditching physical cards and loyalty IDs altogether. Today, digital identities power loyalty programs. Customers use apps, email IDs, or mobile numbers to earn and redeem rewards seamlessly. This shift makes it easier for brands to connect with customers in real time, personalize offers, and keep loyalty programs simple and convenient.

Let’s look at how this transformation happened in three key stages:

Stage 1: Loyalty IDs and Cards: When loyalty programs first went digital, most brands gave customers a loyalty ID or physical card to track points and purchases. This helped brands identify shoppers and reward them, but carrying cards was not always convenient.

Stage 2: Phone Numbers Replaced Cards: Later, many brands switched from loyalty cards to using phone numbers as a simpler way to recognize customers. This made it easier for customers to participate without needing a card, and brands could link purchases more directly.

Stage 3: Digital Identities and AI-Driven Loyalty: With the rise of smartphones and apps, loyalty programs moved beyond physical cards and phone numbers. Today, customers use apps, email IDs, or mobile numbers as digital identities to earn and redeem rewards seamlessly. Brands now use AI and data to personalize offers in real time, creating richer, more convenient loyalty experiences.

How Did Loyalty Programs Evolve Across Industries?

Different industries adopted them at different times—based on how well they knew their customers and how much they needed retention.

Restaurants and Hotels: These were among the first to try loyalty tactics. The goal was simple: reward repeat rates and create habits. For example, Marriott Bonvoy offers points and exclusive member benefits across its global hotels, encouraging frequent stays. Taj InnerCircle rewards loyal guests with points, early check-ins, room upgrades, and special experiences, helping build lasting customer relationships.
Airlines: Airlines took things a step further with frequent flyer programs. Air India’s Club Maharaja rewards frequent flyers with tiered benefits like lounge access, priority check-in, and bonus miles, making loyal customers feel valued.
Credit Cards and Banking: This is where loyalty programs really scaled. Diners Club, launched in 1950, was one of the first charge cards—and it pioneered the idea of rewarding customers for their spending. Later, American Express and others followed with programs like Membership Rewards, using loyalty to drive card usage, retention, and brand preference.
Fashion and Retail: These industries joined later. As competition and customer acquisition costs rose, they realized the value of keeping customers loyal. Loyalty programs helped them gather data, personalize experiences, and bring customers back—both in-store and online.

5 Loyalty Program Evolution Trends You Should Know

Loyalty programs have come a long way from their early days. Here are 5 big shifts that changed how brands think about loyalty:

From Unnamed to Known Customers: In the early days, brands had no clue who their customers were. Loyalty programs helped solve that—giving brands a way to capture customer identity and track behavior.
Rise of Group Loyalty: Loyalty moved beyond just one brand. Programs like Reliance One let customers earn and redeem points across multiple brands under the same group—creating more value and increasing usage.
Loyalty in Fashion & Retail: In fashion and retail, a major issue is low frequency. Many customers visit only once or twice a year. That makes it hard to build loyalty the traditional way.
Coalition Models: When three or more brands work together in a shared program, customers come back more often. It increases the number of touchpoints and boosts the chance of repeat purchases.
From Points to Relationships: The focus is no longer just on earning points. It’s about building deeper relationships with customers—through personalization, exclusive access, and better experiences.

Is Your Loyalty Program Actually Driving Loyalty?

It’s easy to launch a loyalty program—but harder to measure its impact.

Ask these three key questions to evaluate if your program is working:

● Are your best customers truly engaged, or are they just chasing discounts?

● Is loyalty impacting customer lifetime value (CLV) in a measurable way?

● Are repeat customers behaving differently because of the program?

Many brands confuse signups with success. But loyalty is more than enrollment—it’s about driving habit, frequency, and preference.

In fact while teaching on this subject, I asked tell me which loyalty programs you love and created memorable experiences.

The answer was - Free Business Class Air travel, Free Stay at a 5 Star hotel, A fine dining dinner experience.

Conclusion

Loyalty programs today don’t automatically create loyalty—they only work when they go beyond points and discounts.

And create EXPERIENCES.

So instead of asking “Do loyalty programs work?”, the real question is—“Is your loyalty program designed for memorable experiences ?”

Loyalty programs are evolving fast—and their success now depends on how personalized, convenient, and data-driven they are.

In the future, we’ll see:

More real-time rewards tied to behavior (not just transactions)
Gamified loyalty experiences that keep users engaged
Integration with messaging platforms like WhatsApp for point updates and offers
AI-driven segmentation that adapts rewards to each customer profile