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October 6, 2025
Is Consumer Loyalty Shifting From Discounts to Belonging?
In a recent deep-dive into the evolving realm of shopper loyalty, Forbes contributor Catherine Erdly made a nuanced case for a changed understanding of what loyalty means in the retail realm.
“Loyalty has moved from ‘points and percentage-off’ to a broader promise of recognition, access, and community,” Erdly wrote.
“The programs that win in 2025 are purpose-driven—designed to reflect what a brand stands for—and they work because they connect moments, not just transactions,” she added.
One thing to note is that Erdly isn’t making the case that discounts no longer matter — they remain a foundational part of the retail loyalty program strategy — but moreso that price cuts aren’t the end-all, be-all of what the best loyalty programs have to offer in the contemporary market.
The Forbes contributor cited LoyaltyLion CEO Charlie Casey on this score:
“Our research shows that almost 90% of consumers want a financial reward… [but] 85% say the same about free shipping now and free product rewards, and around 70% want early access to sales and early access to new products,” Casey indicated, with Erdly noting that exclusive experiential cues, such as invitations to events or early-access drops, could foster something beyond a merely transactional relationship with each and every shopper.
“Really what brands need to do is… develop deep, meaningful relationships with their shoppers… only through using the loyalty program and weaving in those experiences do they actually get to talk to the customer as a person and appeal to them on the emotional side,” Casey continued.
The author then pivoted to mention two data clusters which reinforced this evolution: a 2025 Deloitte study on U.S. retail which placed loyalty and omnichannel improvements as the most evident growth opportunities, and a Forbes analysis which saw fast-moving retail brands leveraging AI in tandem with emotional cues “to turn loyalty into an ongoing relationship rather than a points ledger.”
Examples provided include VIP tiers which provide exclusive and early access to product (from streetwear brand Represent), and an Insiders Week from The INKEY wherein prizes, promotional offers, and (again) early access to buys. This all ads up to a sentiment of reinforcing “why being on the inside matters,” and that “exclusivity gets attention.”
Friction As the Enemy of Loyalty, Both Then and Now
One thing all of the data points gathered by Erdly coalesced around: Friction is the enemy of loyalty, and that’s perhaps even more relevant as customers become more savvy and discerning in terms of where to park their spend.
“My advice is… make it as friction-free as possible,” Casey said. “The ideal would be that… the person behind the till knows you… ‘How did you get on with the jumper that you purchased?’ That’s what you want.”
A lot of lift is being attributed to the introduction of smarter, more personable AI assistants as well. Not only can more advanced AI models make conversations around the shopping experience more comprehensive, but they’re also capable of noting individual shoppers and marking specific opportunities pertinent to said customers on the fly.
In a similar vein, “loyalty programs are also becoming permission engines for first-party data,” Erdly underscored.
“Customers will share more—preferences, sizes, categories—when the payoff is obvious and the process is smooth,” she added.
With brand loyalists willfully (and in some cases, excitedly) sharing data with retailers, there’s an obvious logic in connecting the dots from there — it’s a great deal easier to make each shopper feel valued, seen, and a part of an exclusive and enjoyable club when an ongoing dialogue is created.
Discussion Questions
While it’s understood that loyalty programs hinge around discounts, how important is it for retail loyalty platforms to evolve into experiences, exclusivity, and belonging?
Which retail loyalty programs immediately spring to mind as being effective? Conversely, which programs stand out as being mediocre or less than compelling? Why?
Does tech, perhaps ironically, have a major role to play in fostering an “ongoing relationship” with customers? When is this most appropriate, and when might this trend lead to an overstepping?
Poll
Loading …BrainTrust
Neil Saunders
Managing Director, GlobalData
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
Chuck Ehredt
CEO, Currency Alliance
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Most loyalty programs aren’t really about genuine loyalty. They’re primarily designed to nudge consumer behavior. That’s why discounts are so often part of the mix; they’re almost a bribe to influence spending. There’s nothing wrong with this per se, but discount-driven ‘loyalty’ is extremely fleeting and doesn’t always create attachment towards a brand. To build a more embedded relationship, brands need to build emotion into the mix. That can be making people feel valued through events, exclusives and rewards. But it also means delivering on the basic things people value so that a brand resonates with them.
That “member of the club” feeling enhances loyalty programs, but the bottom line is still discounts. That’s particularly true in grocery, where prices are suddenly eye-popping due to tariffs. (Looked at beef recently?) Make me feel special, but save me money too.
Traditional loyalty programs aren’t about creating true loyalty. They are about discounts. When you recognize a customer for true loyalty, it creates an emotional connection. I’ve asked my clients if they provide an experience so strong that if they discontinued their “loyalty program” (which includes points, discounts, etc.), would the customer remain loyal. Some answered yes, but most answered no. But if the competition hasn’t dropped its points/discount program, there’s a risk of losing price-sensitive shoppers. However, our customer experience research (https://www.CustomerExperienceResearch.com) finds that 50% of customers are willing to pay more for a company or brand with a good loyalty program, and 58% of customers would choose or switch to a brand with a loyalty program if the other brand did not. But the loyalty program doesn’t always have to be about points and discounts. Creating a connection based on experiential awards and levels of exclusivity works well. Or a combination of all of these can be considered. Points earn you discounts. They can also be redeemed for experiences. And frequent shoppers can be recognized in a tiered program that offers exclusivity and recognition for truly being a frequent shopper. All of that has to have a good customer experience in the background.
I’m going long here, but this is a topic I’m passionate about. Let me close by saying that don’t confuse a repeat customer with a loyal customer. If your program is driving repeat business, the customer may be more loyal to your program than they are to your company/brand.
Shep, your distinction between repeat and loyal customers becomes even more critical as we enter the age of agentic commerce. Shopping agents will ruthlessly arbitrage loyalty programs, treating them as pure optimization targets. The customer may appear “loyal” in frequency, but their AI agent is actually loyal only to extracting maximum value.
Yes! We are no longer trying to earn the loyalty of a human. We’re going to have to learn how to earn loyalty to the AI agent. (Fun times in retail are ahead!)
Many of us have insisted for many years that loyalty programs should be much more than ‘member discounts’ which only erode gross margin, such as member exclusive events, special member only events (exclusivity), entry into special giveaways, and other events that promote special standing. Discounts are not the only reward.
The shift from loyalty-based discounts to one of belonging is a result of the reduced effectiveness and fragility of loyalty programs that focus solely on transactions, which lack sustained differentiation. However, in the age of algorithmic agentic commerce, belonging-type loyalty programs will shift to purchases where the human touch remains essential, while also creating defensible brand moats. However, brands and retailers will also need to prepare for AI-driven purchases of utilitarian items, including basic grocery products.
To clarify what “defensible brand moats” look like in practice: belonging works when it creates identity value that algorithms can’t price-compare.
Think Patagonia’s environmental community, Peloton’s fitness tribes, or Supreme’s scarcity-driven culture. These aren’t about points, but who you are or aspire to be. When a platform’s AI agent suggests a cheaper alternative, they override it because switching would mean abandoning part of their identity.
Most retailers confuse personalization with belonging. Knowing my purchase history isn’t community, it’s just better targeting. Real belonging requires shared values, exclusive access, or cultural currency that transcends transactions.
Can we puhleeeaaase finally make a distinction between loyalty programs and bribery programs? I didn’t think loyalty was supposed to be for sale quite so easily. Sure, discounts can be great customer acquisition tools, even nudging “loyal” customers to try new brands. But are first time buyers ‘loyal’ already? Third time buyers? Seventh time? What frequency over what time frame constitutes true loyalty, the kind that has withstood other bribes to move away from the brand?
The point about there being a connection between loyalty and belonging makes perfect sense. Belonging is the key element in loyalty. I can’t be bribed away from a brand or retailer where I really feel like I belong. And if I don’t feel like I belong, it will be very easy to bribe me away to try other brands.
Come on, does anyone really feel that connected to a big brand? Maybe if you spend a lot with a particular sales person who knows you, but the average Joe who frequents a particular store? Nope. Stick with points and discounts, that’s why people join loyalty clubs.
Wonder how many consumers belong to loyalty clubs of which they have no awareness. Think its far more than realized in which case that membership benefit is almost accidental.
This all seems silly to me. Does “loyalty” really exist? Would a customer go out of their way to be loyal to a retailer when a closer retailer can offer what they want and it is on sale?
Loyalty programs? Who belongs to just one? Don’t we belong to every loyalty program where we shop?
Isn’t “loyalty” really convenience, with the only challenge to convenience being some type of financial reward?
I see a lot of skepticism in the comments by other BrainTrust members about the impact “loyalty marketing” has, and I think this is fair because the majority of retail programs in North America look very similar and depend too much on discounts.
However, brands that really understand loyalty marketing have been building meaningful relationships with customers for many years, and their revenue is 50% to 70% from members of their programs.
Loyalty is fundamentally a value exchange where the brand makes promises in exchange for patronage – but that value can be a sense of belonging, access to special opportunities, points over time that can be redeemed for rewards. Any brand that wants to become less dependent on discounting needs to benchmark the top loyalty programs in North America as well as Europe, South Africa, and Australia to see what is working – and what makes a program underperform.
They will find that removing friction from the relationship and providing emotional appeal will be at the top of this list in priorities, while points/discounts and exclusive access round out the top five elements.I also believe that most consumers cannot spend enough with a single brand to ever get to interesting rewards, so brands should collaborate with loyalty program partners to issue, redeem, or exchange points in a larger ecosystem of partners.
A good example would be an airline who knows exactly who is flying into a US city for 3-10 days and could be incentivized to shop at Gap or Nordstrom if they issue the airline’s loyalty currency (because visitors are unlikely to join the retailer’s loyalty program for a one-time shopping spree).
Programs need to be designed friction free. Make it simple and easy to join, participate and get value. None of that is new. What is intriguing is how the brand itself supports the program. Not with funding or sharing the spotlight in media advertising or in-store or online digital awareness. But rather how and/or if the brand goes all in to fully integrate the program into its customer touchpoint strategies and tactics. A program that is built on credit card relationships alone is only as successful as the team working together to give value (not discounts) to cardholders. Cash back or rewards or incremental discounts does move the card “up” in the wallet but you only need to see what AMEX, Capital One, Chase and other issuers are employing to see that affinity is achieved through differentiated experiences and so much more
Loyalty is shifting from discounts to a focus on belonging and meaningful engagement. Programs that combine rewards with exclusive experiences, early access, or personalized recognition create stronger connections with customers.
Friction reduces loyalty, as shoppers want convenience but also to feel recognized and valued, and technology can help anticipate their needs while keeping interactions smooth and unobtrusive.
The most effective loyalty programs balance rewards with experiences that reinforce connection and relevance, showing that lasting loyalty comes from making customers feel part of something special. Discounts remain important, but the true advantage comes from creating moments that build engagement and trust over time.
In China, global brands create private digital communities to share exclusive access to deals, events, product launches and samples. For instance, beauty brands target avid beauty enthusiasts.
By targeting heavy users, and relevant influencers and media, brands attract an army of socially-active brand ambassadors and reduce customer acquisition costs. Looking ahead, expect to see more of this type of community growth model due to its high engagement rate and network effects.