Strategies to Make Loyalty Programs Profitable
Every year brings new challenges for consumer-facing businesses. In 2024, inflation, interest rate uncertainty, and evolving customer expectations have made growth harder to achieve. Consumers are budgeting carefully, seeking value, and demanding more from their favourite brands.
Yet many companies approach loyalty and pricing in isolation, creating fragmented experiences that fail to maximise impact. According to McKinsey, the lack of an integrated value proposition often results in wasted margin investments and non-incremental loyalty tactics.
The opportunity? Combine loyalty programs with pricing strategies to create a unified, data-driven approach that drives retention, improves profitability, and delivers genuine customer value. In this article, we share two essential resources to help you design loyalty programs that work as strategic growth engines—not cost centres.
1.Maximising Loyalty Program Profitability
Loyalty programs excel when they act as profit drivers—boosting margins by reducing discounts, increasing visit frequency, and amplifying average order value. With 75% of consumers more likely to repurchase after receiving rewards, Leat recommends measuring loyalty ROI by comparing revenue uplift against program costs (rewards, tech, operations). Programs should be designed to build brand advocates, lower acquisition costs, and enhance customer lifetime value. Critical to success are segment-focused deployment, data-driven optimisation, and shifting from promotions to strategic incentives that generate long-term financial results.
2. How Do Loyalty Programs Make Money?
This article breaks down how loyalty programs generate revenue through both direct and indirect means. Core drivers include repeat purchases driven by point-based incentives, enhanced customer engagement via personalised interactions, and valuable behaviour data that brands can leverage for optimised marketing and partnerships. Effective programs strategically convert loyalty into measurable value.
