The Rewards App Knows Me. The Corner Shop Gets Me.

My beverage app. Is good in notifying me when to buy. One week it’s 1-for-1 after 2pm. Next week, it’s 30% off on Tuesday. I don’t wait for a craving. I wait for the push notification. It is by modern definition, personalized. Down the street, there’s also the coffee shop, where Uncle Bro starts making my order the moment he sees me walk in. No app. No loyalty points. Just a good memory. 

I redeem the drink voucher because it is available. I go back to the coffee shop because I want to. Both are called “loyalty”. They are not the same. 

I find myself agreeing more with the loyalty leaders who start to share out loud. As one put in a recent industry roundtable: modern customers are not loyal to brands in the traditional sense. They are loyal to value. Customers engage with an offer which offers clear benefits, brand affinity or not and disengage once the value disappears. Convenience alone is not loyalty if the customer is going to transact anyway. In fact, a poor design reward program eats up your margin. This is a misconception in calling AI-driven 1:1 personalization a loyalty strategy. Often, it’s more suited as a value strategy. One should not also assume offering precision earns the loyalty where more could have been credited to consistency and genuine recognition. 

Gallup’s research places around 70% of brand preference decisions on emotional, rather than rational factors. A well designed campaign, coupled with targeting and pricing wins over the rational 30% but may not convert the 70%. 

Gartner found the same thing. Personalization is not failing. It’s mistaking it as trust and relationship. Passive personalization is where a brand guesses what you want and pushes you an offer and leaves customers more likely to regret the purchase. What works, per their research, is inviting customers in. What actually works, per their own research, is inviting the customer in rather than modelling them from behind the scenes. Create participation in the process to build loyalty. 

I’m not indicating that loyalty programmes are not effective. For mass coverage, highly competitive categories like the airline industry, a loyalty programme acts as a pricing and value tool that works because it leans on broad cohort-based behavior rather than emotional connection. 

Delta, United and American each securitized their programmes in the year 2021-2021 at $9B, $6.8B and $10B respectively. Krisflyer and Asia Miles are independently valued at roughly A$8 billion and A$7.7 billion. These are  well-run points-based programmes in a commoditized, high-frequency category: a pricing mechanism, packaged as a rewards app.

In a different context such as winning affection, this will not work well. Effective loyalty programmes, therefore, require understanding the context first. 

Know the category and job to be done. In commoditized, high-frequency, low-differentiation categories, treat loyalty as a pricing and retention tool, cohort-based, redemption-driven and honest about what it is.

Value loyalty and emotional loyalty are different currencies. One focus more towards transaction. The other works towards accumulating desires and wants. 

Participation beats prediction. Gartner's own data shows customers who co-create the experience are 2.3 times more likely to complete a purchase with confidence. 

Key takeaways

1. Don't sell personalization as loyalty. Use it to win the transaction but do so, moderately.

2. Match the loyalty model to the category. In commoditized, high-frequency categories, build a cohort-based, redemption-driven programme and price it like the financial asset it is.

3. Budget for the 70%. If most preference decisions are emotional, protect brand-building spend even when performance metrics are easier to defend during budget meetings. 

4. Design personalization to be participated. Give customers a way to shape the offer, a preference, a choice, a "tell us what you want"  instead of only inferring it from their data.

5. Treat your loyalty programme's valuation as a real number. If you're in a mass-coverage category, know what your programme would be worth as a standalone asset, it changes how you justify investment in it.

Sources:

1. Gallup, "Customer Brand Preference and Decisions: Gallup's 70/30 Principle" 

2. Gartner, "Gartner Survey Reveals Personalization Can Triple the Likelihood of Customer Regret" 

3. U.S. Securities and Exchange Commission, Delta Air Lines Form 8-K (SkyMiles Financing, Sept 2020) 

4. B&T, "How APAC Loyalty Leaders Are Responding To Change In 2026" bandt.com.au/how-apac-loyalty-leaders-are-responding-to-change-in-2026

5. https://dwuconsulting.com/dwu-ai/airline-loyalty-program-securitization