Loyalty Schemes Based On Reward Points Do Not Work

When I’m shopping online and someone tries to entice me with rewards points, this is what goes through my head:


Why do I channel my inner Bruce Lee I hear you ask…well it’s simply because points based rewards do not work for the consumer. There is always one more thing I have to do before I ever receive any real world benefit. You never quite have enough points to do anything useful.

At this point you will all be clammering and pointing to airmiles, super market point schemes like Nectar card or Tesco Clubcard etc. If they do them they must work…right? Well Yes and No. They work just great for the supermarkets as they build up a really rich data picture on you the user (which they can then use to optimise what they sell you), but what do you really get out of them…the answer is not nearly as much as them.

As a business you should be doing everything you can to engender customer loyalty and a positive experience. You need to create “true brand loyalty” not bean counters looking for a way to game the points system.


Some of you sharp eyed eagle scouts will have seen the word “game” above and with a resounding huzzah shouted we must use gamification…the latest buzzword. Gamification can be very powerful, but that does not mean you should just hand out cute badges….or reward points. If you want to see how gamification can really work then check out this article on how clash of clans grew to a $5m per day business.

What do you need to do then?

You need to make the customer really feel a tangible benefit and nothing does this better than providing it gratification (for further reading check out my post on instant gratification, loss aversion and reciprocity).

Instant gratification does not have to mean expensive. Pret A Manger made the news a few months ago by allowing their employees to give out free coffees to people they liked or fancied. This is incredibly powerful on two levels. On one level it empowers and gives the employee autonomy (a topic for another day, but check out Dan Pink’s great Ted talk) and on another it makes the customer receiving the free coffee feel incredibly special and rewarded, as it was such a surprise (it also happens to cost Pret next to nothing). No points based scheme can ever achieve this and yet its is one of the most powerful aspects of human pyschology needed to encourage customer loyalty: reciprocity!

I can see how that works in the real world, but how do you do that online?

In the online world gratification can be given instantaneously through email, messaging, SMS, push notifications and more.


The key is to give the customer something they actually want. At Loyalty Bay we have an API that can give personalised rewards to people based on their demographic details and other data points. However that is enough about us.

What the customer actually wants very much depends on the journey they are taking through your website. It could be a discount or it could be as simple as special treatment such as priority access to a blog post you have written.

When it comes to incentives that encourage customer loyalty and smash rewards points out of the park, e gifts or e gift cards can work incredibly well. They can be personalised to the individual user, fit in with the customer journey (i.e. if a customer is buying a flight to Brazil, why not offer the lonely planet guide to Brazil as a reward) and delivered instantaneously.

In summary don’t base your loyalty scheme on a points based system. Use instant gratification, data, personalisation and keep the customer at the heart of whatever you decide to do.

Learn what else you can do

Author: William Roberts

Founder and CEO of Loyalty Bay

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