Rewarding behaviour that would have happened anyway is a discount
The test is incrementality: did the programme change what anyone did? Without that, it is a cost with a loyalty label.
Omni Core · Object
Loyalty Programs
Deliberate mechanisms for rewarding continued custom: what the mechanism is, whether it pays for itself, whether it changes behaviour at all, and how it ends.
The term
What it is
A loyalty programme is a commercial mechanism rather than a relationship. It works by changing the economics of a decision, and where it does not change any decision it is a discount given to people who would have bought anyway.
The recurring finding in loyalty research is that most programme members would have remained customers without it. Establishing the incremental effect is the whole question and is rarely attempted.
Programmes are much easier to start than to end. They create an expectation, a liability and a group of customers whose relationship with the organisation is mediated by points.
Why it earns a place
What goes wrong without it
The liability accumulates quietly
Unredeemed points are an obligation that grows with the programme and appears in the accounts long after the marketing decision was made.
Ending a programme is a customer event
Members experience closure as a withdrawal, and the way it is handled is remembered longer than the programme was appreciated.
One level in
The modules within loyalty programs
Four working areas: how the mechanism works, what it costs, whether it changes behaviour, and how it ends.
The mechanism
What the programme actually does — what earns, what is earned, and what it can be exchanged for. The design that determines every downstream question.
LearnThe economics
What the programme costs, including the liability that accumulates, and what it returns. Frequently calculated once at launch and not again.
LearnBehaviour change
Whether members actually behave differently because of the programme, established by comparison rather than by assuming that members buying more is the programme working.
LearnWinding down
How a programme ends or changes without the change being experienced as a betrayal. The part nobody plans and everybody eventually needs.
Learn
Across the framework
What it touches
- Business CoreThe accumulated point liability is a real obligation and belongs in the financial reporting.
- MonetisationA loyalty programme is a pricing decision, and its cost comes out of the same margin.
- Brand CoreLoyalty measured behaviourally is not the same as preference, and a programme can produce one without the other.
- Data CoreEstablishing whether a programme changes behaviour is an incrementality question and needs designing as one.
Beyond the framework
Models worth knowing here
The Omnigoal says where this belongs and what it touches. It does not tell you how to think about it — other people have done that, and done it well. These are theirs.
Behavioural and attitudinal loyalty
Jacob Jacoby & Robert W. Chestnut · 1978Buying repeatedly and being committed are different things, and only one of them survives a better offer.
Repeat purchase can come from habit, convenience or lack of an alternative, and looks identical in the data to genuine commitment. The distinction matters most where it is inconvenient: a loyalty programme that rewards repeat purchase may be paying people who were never going anywhere, while doing nothing about the ones who were.
- Reach for it when
- Before designing or renewing a loyalty scheme, and when repeat-purchase figures are being read as evidence of loyalty.
- Where it stops
- Attitudinal loyalty can only be measured by asking, with all the softness that implies. The distinction is easy to state and difficult to operationalise.
Jacob Jacoby & Robert W. Chestnut, Brand Loyalty: Measurement and Management, Wiley, 1978.
The service–profit chain
Heskett, Jones, Loveman, Sasser & Schlesinger · 1994Internal quality produces satisfied employees, who produce satisfied customers, who produce profit — in that order.
A chain of proposed links, each supported by data from service businesses, ending in the claim that customer loyalty is worth far more than customer satisfaction alone and that employee retention is where it starts. For loyalty work it relocates the problem: the strongest lever on whether customers stay may be several steps upstream of anything a programme can offer.
- Reach for it when
- When loyalty is being pursued entirely through incentives and the service itself is unchanged.
- Where it stops
- The links are correlational, drawn largely from high-contact service businesses. The direction of causation between employee and customer satisfaction is not as settled as the diagram implies.
James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser & Leonard A. Schlesinger, “Putting the Service-Profit Chain to Work”, Harvard Business Review, 1994.
These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.
Every model in the framework, and where each one belongsLoyal customers join loyalty programmes. That is not the same as the programme creating loyalty.
The other objects in the Omni Core
Customer Journey Mapping
Visualises the entire customer journey from initial awareness to post-purchase, providing a comprehensive understanding of the customer’s interactions and experiences. This process identifies key stages, critical moments, and pain points that influence customer satisfaction and loyalty. By mapping out these journeys, businesses can design targeted interventions to enhance each phase of the customer lifecycle, ensuring a cohesive and satisfying experience.
LearnCustomer Feedback
Collects and analyses customer feedback to gain valuable insights into their experiences and areas for improvement, driving continuous enhancements in service and product offerings.
LearnCustomer Support
Provides effective and efficient support to resolve customer issues, emphasising the importance of customer satisfaction and loyalty through responsive and helpful service.
LearnUI and UX Optimization
Ensures that digital interactions are intuitive, engaging, and user-friendly, contributing to a seamless and enjoyable customer experience across all digital platforms.
LearnPersonalization
Tailors interactions and experiences based on individual customer preferences and behaviour, enhancing engagement and satisfaction through customised content and recommendations.
LearnOmnichannel Integration
Ensures a consistent and seamless experience across all channels, integrating personalised interactions and synchronised customer data to provide a unified and cohesive customer journey.
Learn