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There was a time when loyalty meant a punch card, a coupon code, or a points system promising discounts on the next purchase. These programs thrived in an era when competition was limited, consumer choice was narrower, and novelty carried weight. But fast-forward to today’s hyper-connected market: people are drowning in points, apps, and emails urging them to “redeem before expiry.” Transactional loyalty hasn’t just lost its edge—it has lost its meaning.
Discounts don’t make a customer loyal. They make them momentarily interested. Once the incentive dries up, so does the relationship. If the only thing tethering a brand and its customers is a percentage off the next basket, the brand has already conceded that its value lies in price. In a marketplace where consumers expect deeper connections, alignment with values, and active participation, that’s not a game brands can afford to keep playing.
Consider the average consumer: multiple loyalty accounts, often unused. A 2024 KPMG report shows that over 60% of members of points-based loyalty programs rarely redeem them. It’s not because they don’t like rewards—it’s because the system is mechanical, distant, and fundamentally forgettable. Loyalty becomes a numbers game instead of a meaningful relationship.
There’s another factor at play: digital fatigue. Customers already juggle dozens of apps and emails from brands, most offering some version of the same incentive. In a world of endless choice, where products and prices can be compared instantly, transactional loyalty doesn’t differentiate—it commoditizes.
The unintended consequence is brand cannibalization. Retailers offering heavy discounts through loyalty schemes train customers to wait for deals rather than buy when they need or want to. Airlines and hotels have been caught in this trap for decades. Their programs drive bookings, yes, but loyalty is conditional, contingent on the “deal of the day.” When someone else offers a better package, loyalty evaporates.
Recent studies from Deloitte and Accenture point to a critical shift: customers are gravitating toward brands that reflect their identity, values, and sense of belonging. Loyalty isn’t being purchased—it’s being earned through community.
People want to feel part of something that stretches beyond a transaction. This can be cultural, social, or mission-driven. Gen Z, in particular, prioritizes brands that create space for conversation, participation, and co-creation. They’re not just buying into a product; they’re buying into a story and a community they want to be seen in.
Nike Run Club is a textbook case. The app doesn’t simply reward users with discounts on shoes; it builds a community of runners, offering challenges, shared achievements, and peer support. Starbucks Rewards has evolved into something similar—not just stars for free drinks but mobile ordering, personalization, and seasonal engagement that makes members feel part of a club rather than a coupon loop.
Community-based loyalty flips the traditional model on its head. Instead of saying “Buy more, get more,” it says “Join us, participate, belong.” It’s loyalty that grows out of relationships, not rebates.
The mechanics are different. Instead of purely transactional rewards, brands offer status, recognition, shared experiences, and opportunities for customers to contribute. A sportswear brand might host local events where members can meet. A skincare company might create a digital forum where users share routines and feedback, with product development informed by those conversations.
This model has staying power because it taps into identity. A customer who feels part of a community is less likely to abandon it over a minor price difference. Community creates switching costs that money can’t compete with—the sense of belonging, the recognition, the inside access.
Many companies recognize the problem with transactional loyalty, yet they fall short when reimagining what comes next. There are three recurring hurdles:
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Old metrics die hard: Businesses are still wired to measure loyalty by immediate sales lifts or redemption rates. But community-led loyalty thrives on engagement, advocacy, and retention—metrics that play out differently but have longer-term value.
Technology debt: Legacy systems built for points and discounts often lack the flexibility to support communities, gamification, or engagement beyond spend. This creates resistance internally, as retooling requires new investment.
Fear of less control: Community-based loyalty requires letting customers participate and shape the brand experience. Many organizations are still too rigid, worried about losing narrative control. Yet the irony is that customers already co-create the brand through social media and reviews—the shift is about harnessing it intentionally.
The rise of community-based loyalty mirrors broader cultural changes. Consumers expect to be heard, not broadcasted to. They want meaningful interaction, not mass emails. They demand alignment with values, whether that’s sustainability, inclusivity, or transparency.
When a customer feels like a stakeholder in a brand’s journey, loyalty transcends transactions. Patagonia embodies this. Its commitment to environmental activism creates not just customers but advocates—people who wear the brand as a statement of identity. Similarly, gaming brands like Epic Games thrive because their communities don’t just consume but create, collaborate, and influence the culture around the product.
These examples point to a truth that many traditional programs ignore: loyalty today is emotional before it is financial. The financial benefit follows when people are genuinely invested.
For executives considering the leap, here are practical ways to start shifting from transactional loyalty to community-based loyalty:
Redefine loyalty metrics: Move from tracking redemption rates to engagement measures like content sharing, referrals, or event participation. Loyalty is about influence and longevity, not just spend.
Layer identity and belonging: Build loyalty tiers that aren’t about spend thresholds but about contribution and engagement. Recognition often matters more than rewards.
Offer experiences, not discounts: Early access to launches, behind-the-scenes content, or member-only events build emotional attachment more effectively than a 10% coupon.
Enable peer-to-peer connection: Loyalty grows stronger when members connect with each other, not just the brand. Communities thrive when they become self-sustaining.
Leverage technology built for engagement: Platforms like Rediem are moving beyond traditional points systems to help brands create loyalty ecosystems rooted in participation and identity, not just transactions.
The evidence is clear: transactional loyalty is fading fast. Discounts are table stakes, not loyalty drivers. The brands that will win in the years ahead are those that reimagine loyalty as community, belonging, and shared identity. They will measure success not by how many customers redeemed a coupon but by how many customers felt proud to be part of something larger than a purchase.
The shift is already underway. The only question is which brands will recognize that the old way of buying loyalty is gone—and which ones will seize the opportunity to build it for real.
There was a time when loyalty meant a punch card, a coupon code, or a points system promising discounts on the next purchase. These programs thrived in an era when competition was limited, consumer choice was narrower, and novelty carried weight. But fast-forward to today’s hyper-connected market: people are drowning in points, apps, and emails urging them to “redeem before expiry.” Transactional loyalty hasn’t just lost its edge—it has lost its meaning.
Discounts don’t make a customer loyal. They make them momentarily interested. Once the incentive dries up, so does the relationship. If the only thing tethering a brand and its customers is a percentage off the next basket, the brand has already conceded that its value lies in price. In a marketplace where consumers expect deeper connections, alignment with values, and active participation, that’s not a game brands can afford to keep playing.
Consider the average consumer: multiple loyalty accounts, often unused. A 2024 KPMG report shows that over 60% of members of points-based loyalty programs rarely redeem them. It’s not because they don’t like rewards—it’s because the system is mechanical, distant, and fundamentally forgettable. Loyalty becomes a numbers game instead of a meaningful relationship.
There’s another factor at play: digital fatigue. Customers already juggle dozens of apps and emails from brands, most offering some version of the same incentive. In a world of endless choice, where products and prices can be compared instantly, transactional loyalty doesn’t differentiate—it commoditizes.
The unintended consequence is brand cannibalization. Retailers offering heavy discounts through loyalty schemes train customers to wait for deals rather than buy when they need or want to. Airlines and hotels have been caught in this trap for decades. Their programs drive bookings, yes, but loyalty is conditional, contingent on the “deal of the day.” When someone else offers a better package, loyalty evaporates.
Recent studies from Deloitte and Accenture point to a critical shift: customers are gravitating toward brands that reflect their identity, values, and sense of belonging. Loyalty isn’t being purchased—it’s being earned through community.
People want to feel part of something that stretches beyond a transaction. This can be cultural, social, or mission-driven. Gen Z, in particular, prioritizes brands that create space for conversation, participation, and co-creation. They’re not just buying into a product; they’re buying into a story and a community they want to be seen in.
Nike Run Club is a textbook case. The app doesn’t simply reward users with discounts on shoes; it builds a community of runners, offering challenges, shared achievements, and peer support. Starbucks Rewards has evolved into something similar—not just stars for free drinks but mobile ordering, personalization, and seasonal engagement that makes members feel part of a club rather than a coupon loop.
Community-based loyalty flips the traditional model on its head. Instead of saying “Buy more, get more,” it says “Join us, participate, belong.” It’s loyalty that grows out of relationships, not rebates.
The mechanics are different. Instead of purely transactional rewards, brands offer status, recognition, shared experiences, and opportunities for customers to contribute. A sportswear brand might host local events where members can meet. A skincare company might create a digital forum where users share routines and feedback, with product development informed by those conversations.
This model has staying power because it taps into identity. A customer who feels part of a community is less likely to abandon it over a minor price difference. Community creates switching costs that money can’t compete with—the sense of belonging, the recognition, the inside access.
Many companies recognize the problem with transactional loyalty, yet they fall short when reimagining what comes next. There are three recurring hurdles:
Old metrics die hard: Businesses are still wired to measure loyalty by immediate sales lifts or redemption rates. But community-led loyalty thrives on engagement, advocacy, and retention—metrics that play out differently but have longer-term value.
Technology debt: Legacy systems built for points and discounts often lack the flexibility to support communities, gamification, or engagement beyond spend. This creates resistance internally, as retooling requires new investment.
Fear of less control: Community-based loyalty requires letting customers participate and shape the brand experience. Many organizations are still too rigid, worried about losing narrative control. Yet the irony is that customers already co-create the brand through social media and reviews—the shift is about harnessing it intentionally.
The rise of community-based loyalty mirrors broader cultural changes. Consumers expect to be heard, not broadcasted to. They want meaningful interaction, not mass emails. They demand alignment with values, whether that’s sustainability, inclusivity, or transparency.
When a customer feels like a stakeholder in a brand’s journey, loyalty transcends transactions. Patagonia embodies this. Its commitment to environmental activism creates not just customers but advocates—people who wear the brand as a statement of identity. Similarly, gaming brands like Epic Games thrive because their communities don’t just consume but create, collaborate, and influence the culture around the product.
These examples point to a truth that many traditional programs ignore: loyalty today is emotional before it is financial. The financial benefit follows when people are genuinely invested.
For executives considering the leap, here are practical ways to start shifting from transactional loyalty to community-based loyalty:
Redefine loyalty metrics: Move from tracking redemption rates to engagement measures like content sharing, referrals, or event participation. Loyalty is about influence and longevity, not just spend.
Layer identity and belonging: Build loyalty tiers that aren’t about spend thresholds but about contribution and engagement. Recognition often matters more than rewards.
Offer experiences, not discounts: Early access to launches, behind-the-scenes content, or member-only events build emotional attachment more effectively than a 10% coupon.
Enable peer-to-peer connection: Loyalty grows stronger when members connect with each other, not just the brand. Communities thrive when they become self-sustaining.
Leverage technology built for engagement: Platforms like Rediem are moving beyond traditional points systems to help brands create loyalty ecosystems rooted in participation and identity, not just transactions.
The evidence is clear: transactional loyalty is fading fast. Discounts are table stakes, not loyalty drivers. The brands that will win in the years ahead are those that reimagine loyalty as community, belonging, and shared identity. They will measure success not by how many customers redeemed a coupon but by how many customers felt proud to be part of something larger than a purchase.
The shift is already underway. The only question is which brands will recognize that the old way of buying loyalty is gone—and which ones will seize the opportunity to build it for real.
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