Most loyalty schemes are discounts by another name

Pull up the numbers on almost any loyalty scheme and the same thing is hiding under the branding. The people earning the most points are the people who already shop with you most. You are paying your best customers to keep doing exactly what they were doing before you handed them a card. That is not loyalty. It is a discount that has learned to dress well.

The question that never makes it into the board pack is what share of those rewards actually changed a decision. Strip out the redemptions from customers who would have bought anyway and most programmes are a straight rebate on revenue you had already won. Worse, you have taught those customers to pause at the till and wait for the double-points weekend. You take full-margin buyers and gently train them to buy on promotion.

Real loyalty is not a points balance. It is whether a customer would notice if you closed tomorrow. The card in someone's wallet is usually habit and proximity doing the work, not affection. Plenty of people carry three coffee cards and feel nothing for any of them. If your scheme would collapse the moment a competitor opened next door with a slightly better offer, you never had loyalty. You had a lease on someone's indifference.

The schemes worth running change behaviour you do not already own. They pull a customer into a category they never used to buy from you, or move a busy-weekend visit to a dead Tuesday afternoon. They trade in what a rival cannot instantly match: status and early access for the people who spend the most with you. Reward the behaviour you want more of, not the behaviour you already have.

So test it the way you would test anything that costs you margin. Hold back a control group, measure the incremental spend and margin against it, and cut every reward that cannot prove it moved a decision. Where a scheme genuinely changes what people buy or how often they come back, invest harder. Where it cannot, stop flattering it. Call it a discount, run it as a discount, and stop paying a marketing premium for the privilege.