The Economics of Loyalty Programmes
When Loyalty Programmes Fail
Programmes fail when rewards are too small, too complicated or too hard to redeem, or when firms change terms without notice.
Not every scheme works.
Weak incentives
Rewards that are too small don’t change behaviour.
Complexity
Confusing rules frustrate users.
Broken promises
Sudden devaluations erode trust.
Cost
A programme that gives away too much can be unprofitable.
A confusing scheme
Customers can't work out how many points they have earned.
Assuming a programme guarantees loyalty
Value and service matter more.
Key takeaways
- Small rewards don't change behaviour.
- Complexity frustrates.
- Devaluation erodes trust.
- Cost can outweigh benefit.
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