Published July 29, 2026
Loyalty programmes: what they are, the types, and what to measure
A loyalty programme does not create new customers. It exists so the people who already know you come back sooner and come back more often, and so you have a reason to contact them that is not advertising. Framed that way, the decision stops being whether to have one and becomes which one, and how to tell whether it is working.
What it actually solves
A returning customer costs far less than a new one: they already know where you are, what you sell, and whether they like it. A loyalty programme puts that in writing and makes it visible to the customer, who goes from choosing between your shop and the one next door to choosing between your shop and losing what they have built up. That is the whole mechanism. The second thing it solves, and the one that matters more over time, is that it gives you a list of people who decided to come back, so you stop depending on who happens to walk past the window.
The types that exist
By accumulation format there are stamps per visit, points per spend, tiers, and cashback held as credit. By medium there is cardboard, your own app, and a pass in the phone's wallet. The medium matters more than it looks: cardboard gets lost and lets you contact nobody, your own app asks a customer to install something for a coffee and almost nobody does, and a pass in Apple or Google Wallet is added without installing anything and lets you send a message when someone is one stamp short. In practice most small shops end up on stamps per visit with a digital medium.
The three metrics that matter
The first is visit frequency: the average number of days between two purchases by the same customer, before and after launching. If it does not fall, the programme is not doing its job. The second is the share of customers who reach the reward: if it is very low, the threshold is too high and the promise is not credible. The third is how many people sign up relative to how many pass through the till, which measures whether the moment and the pitch are working. Everything else, including the total number of stamps handed out, is a number that only goes up and tells you nothing.
The mistakes that sink it
Setting the threshold too high is the most common and is covered above. The second is not explaining the programme at the moment of payment, which is the one moment the customer has their phone or wallet in hand. The third is changing the rules midway: someone who accumulated under one set of conditions and finds another does not get slightly annoyed, they leave. The fourth is treating the customer list as an advertising mailing list and writing every week. The message that works is the one carrying something concrete, like a reminder that one stamp is left.