Why Your Best Customers Don't Want Another Rewards Program
Your best customers aren't looking for another points program. They're seeking a reason to stop shopping around.
Here's the uncomfortable truth: companies launching traditional loyalty programs often see customer churn rates spike by 10-15% within the first 18 months.
Meanwhile, those focusing on delivering real value without relying on rewards tend to keep customers longer and spend less to do so.
Approximately 84% of consumers remain loyal to brands that offer loyalty programs. If you're running reward programs, this number might seem impressive, but on the flip side, 75% of those same customers will switch brands for a better loyalty program. In my opinion, this doesn't truly create loyalty at all.
If you're interested in this topic, here's what you'll discover in this article:
Why traditional rewards programs actually train customers to be disloyal
The psychology behind why points and discounts can backfire
A practical framework for cultivating genuine loyalty rather than just superficial trust or fleeting interest.
So, let's dive in.
Why Is Your Rewards Program Training Customers the Wrong Way?
Imagine this customer journey:
Month 1: Sarah joins for the 20% welcome discount.
Month 3: She times her purchases to coincide with double-point days.
Month 6: She compares your rewards with those of three competitors.
Month 9: She stops buying at full price altogether.
Month 12: She leaves for a competitor offering a 25% discount
Does this sound familiar?
When you lead with discounts, you teach customers to value the deal over the product itself. Controlling reward mechanisms can weaken intrinsic motivation; the more you emphasize rewards, the less customers are willing to buy without them.
The Psychology Nobody Talks About
Your brain processes emotional connections differently from transactions.
When you feel connected to a brand, your brain's reward centers activate the same way they do when you see a close friend. Dopamine floods your system. You feel good before you even make a purchase.
But rewards programs?
They activate your prefrontal cortex, also known as the "calculation center". Every purchase becomes math homework. "Is 2x points better than 15% off?" "Should I wait for the bonus period?" "What's my points-to-dollar conversion rate?" and so on.
These customers aren't calculating points. They're not comparing discounts. They're buying because they can't imagine using anything else.
Three Ways Rewards Programs Destroy Value
1. The Escalation Trap
What delights customers today becomes the minimum expectation tomorrow. That 10% discount that drove sign-ups? Now it's considered baseline. You're compelled to offer 15%, then 20%, just to keep the same level of interest.
2. The Comparison Mindset
Every rewards program teaches customers to compare options.
A Recurly study of over 1,200 subscription businesses found that 71% of customers cited price comparisons as their main reason for switching. Loyalty members weren't truly loyal - they were professional shoppers, holding an average of 16.7 program memberships but actively using only 7.4.
They'd mastered the art of extracting maximum value from minimum commitment.
3. The Value Erosion
When customers factor rewards into every purchase, the actual value of your product disappears.
A streaming service found that 67% of their "loyal" subscribers couldn't justify the base price without promotional offers. Monthly churn increased from 3.3% to 6.5% when they reduced the frequency of discounts. The subscription remained the same, but customer perception shifted entirely to the discount, not the content.
What Actually Builds Loyalty (Spoiler: Not Points)
Spotify's Algorithm Advantage
No rewards program.
46% market share.
Under 2% monthly churn.
Their secret? Personalization that improves with time. Every playlist, every recommendation makes switching feel like starting over. The "Discover Weekly" playlist alone has 40 million active users who wouldn't dream of losing their perfectly curated music.
The cost of leaving isn't points - it's losing years of algorithmic learning.
Netflix's Content Moat
2% monthly churn without a single loyalty point.
While competitors offer discounts, Netflix invests $17 billion annually in content. Subscribers don't stay for rewards; they stay for "Stranger Things" and "Wednesday." When asked why they don't switch, subscribers cite exclusive content, not price.
They've made themselves irreplaceable, not cheaper.
Peloton's Community Lock-In
No points program. 92% annual retention rate.
Members pay $44/month, not for discounts but for belonging. The leaderboard, live classes, and instructor shoutouts - these create emotional bonds that transcend transaction. Members report feeling "guilty" about missing classes, not because of wasted money, but because they feel they are abandoning their instructors.
That's loyalty you can't buy with points.
Where Should Your Focus Be:
The short answer is Value-First Retention.
Forget rewards and focus on these four pillars:
1. Predictive Problem-Solving
Companies using AI to identify at-risk customers 60-90 days before churn are achieving nearly 90% accuracy in retention.
They're not offering discounts. They're solving problems before customers realize they exist.
Example: Netflix adjusts recommendations when viewing patterns indicate boredom - before you cancel.
2. Education as Retention
Digital companies with the lowest churn rates don't rely on rewards; instead, they offer mastery.
Notion's template gallery.
Canva's design school.
Adobe's extensive tutorials.
These aren't rewards programs. They're investment initiatives - investing in customer capability.
3. Community Over Coupons
Peloton members don't stay for discounts. They stay for the leaderboard, the community, the shared struggle.
The "reward" is belonging, not rebates.
When customers connect with each other, leaving means abandoning relationships, not just points.
4. Transparent Value Demonstration
Instead of hiding value behind point calculations, show real impact:
Time saved: "You've reclaimed 47 hours this month."
Money earned: "Your campaigns generated $12,847."
Problems avoided: "We prevented 3 potential outages."
Make the value so clear that rewards become unnecessary.
Not everything about rewards programs is negative, and not all rewards programs are bad. Don`t get me wrong. When handled properly and offering genuine value as part of the production extension or usage, they can lead to fantastic long-term results.
That’s why I always audit the value of my reward program and explore what else we can do as a business.
Here is how to get started:
Your 30-Day Value Audit
Week 1: Reality Check
Calculate the true cost of your rewards program (including management time).
Survey customers: "Would you stay without rewards?"
Identify where your value truly comes from.
Week 2: Find Your Hook
What problem do you solve that no one else does?
What would customers lose by leaving (besides points)?
Where are you creating habits rather than transactions?
Week 3: Test Your Value Messaging
Remove reward mentions from marketing for one segment.
Lead with outcomes instead of discounts.
Measure engagement changes.
Week 4: Design Your First Value Moment
Create one "wow" experience that isn't a discount.
It could be speed, surprise, personalization, or impact.
Test it with your most reward-dependent customers.
With your team, carefully review the monthly audit and make sure you genuinely answer each question and point. You might be surprised at the end.
When customers stay for rewards, they'll leave for better rewards.
When they stay for value, they'll only leave when you stop delivering it.