Building a loyalty programme that drives retention, not discounts

The business already had an established loyalty programme with points, tiers and benefits, but in practice it behaved more like a passive discount scheme than a retention programme.

Customers were automatically enrolled, points were largely earned through purchases, and there was very little communication encouraging members to engage with the programme after joining. The programme existed, but it wasn't doing enough to actively change customer behaviour.

I wanted to understand whether loyalty was genuinely encouraging our best customers to shop more often — or simply making purchases cheaper for customers who would have bought anyway.

The biggest issue wasn't the loyalty mechanics themselves. It was who we were rewarding and what behaviour we were encouraging.

This created an uncomfortable commercial dynamic: some of the customers receiving the greatest loyalty investment were also among the most expensive customers to serve.

There were other structural problems. Customers were automatically enrolled into loyalty, which meant a large proportion of the membership base had made only one lifetime purchase. Movement between tiers was slow, benefits were relatively similar and heavily purchase-led, and there were few reasons to interact with the programme between transactions.

CRM wasn't helping enough either. There were only a small number of automated loyalty journeys and almost no regular broadcast activity reminding customers about their points, status or benefits.

The programme was rewarding transactions, but wasn't doing enough to create loyalty.

The easy response would have been to make the programme more generous. More points. Bigger discounts. Better tier rewards. I felt that would make the underlying problem worse.

The opportunity was to move loyalty away from "spend money, receive discount" and towards a programme that encouraged a broader set of valuable behaviours: making a second purchase, progressing through tiers, engaging with the brand and ultimately building a more profitable customer relationship.

Not every high-spending customer should automatically be considered a high-value customer.

Returns, markdown dependency and the cost of benefits needed to sit alongside revenue when determining customer value. I therefore structured the redesign around three questions:

• How do we make loyalty something customers actively want to participate in?
• How do we use it to create more reasons to return without relying on discounts?
• How do we make sure the economics still work for the business?

The objective wasn't to remove financial rewards completely. Discounts still had a role. The difference was making them one part of the proposition rather than the proposition itself.

The work fundamentally changed how we thought about the role of loyalty.

Instead of asking "What benefits should each tier receive?", the conversation became "What customer behaviour are we trying to create, and what is that behaviour worth to the business?" That led to a proposition built around repeat purchase, engagement and customer value rather than points accumulation alone.

It also gave CRM a much larger role in loyalty. The redesigned lifecycle introduced touchpoints across onboarding, progression and reactivation, while the monthly CRM calendar gave members regular reasons to understand and use their benefits.

Importantly, profitability became part of the programme design from the beginning rather than something reviewed after rewards had already been issued.

At the point of redesign, the next measurement phase was therefore deliberately focused on:

— rather than simply programme membership or points issued.