Loyalty Programs in 2025: What Makes Customers Keep Coming Back

Students are always looking for a good deal. I guess we all are right? This one should get their attention.

Loyalty programs have become a fundamental strategy for brands seeking to retain customers and increase long-term profitability. According to Newsweek and Statista, the global loyalty market is expected to grow from $13 billion in 2024 to $41 billion by 2032, signaling the increasing importance of rewards programs in consumer decision-making.

The 2025 ranking of America’s Best Loyalty Programs highlights 275 companies across 39 industries, evaluating them based on customer satisfaction, perceived value, trust, ease of use, and overall benefits. Brands like Nike, Target, Starbucks, and Amazon have been recognized for their successful loyalty strategies, which focus on enhancing the customer experience rather than just offering discounts.

What makes a great loyalty program? The best programs:

• Make rewards easy to understand and use (e.g., Starbucks Rewards’ free drink system)
• Offer real, tangible benefits that matter to customers (e.g., airline miles, gas station savings)
• Incorporate personalization using AI and data analytics to tailor offers
• Enhance brand engagement beyond just discounts, through experiences and exclusivity

By integrating these elements, brands can drive customer retention, increase lifetime value, and build long-term relationships with consumers.

ChatGPT was used to create a first draft of this blog post.

Class Discussion Ideas: In-Class Activities

1. Loyalty Program Breakdown: Assign students a real-world loyalty program (e.g., Starbucks, Nike, Delta SkyMiles) and have them analyze its strengths, weaknesses, and customer benefits.
2. Create Your Own Loyalty Program: Have students design a new loyalty program for a brand of their choice, focusing on rewards structure, customer incentives, and engagement strategies.

Discussion Questions & Answer Ideas

All of these questions could be discussed in conjunction with your coverage of Chapter 15 (sales promotion). Be aware that many of the questions go beyond what we cover in this chapter, so you might use some of the bullet points as lessons for your students.

1. Why are loyalty programs an important part of a company’s promotional strategy?
   • They increase customer retention and repeat purchases.
   • They help collect valuable customer data for personalized marketing.
2. What are the key elements of a successful loyalty program?
   • Easy-to-understand rewards, personalization, exclusivity, and convenience.
   • Programs like Amazon Prime succeed because they offer valuable perks (free shipping, streaming, exclusive deals).
3. How do brands balance offering valuable rewards while maintaining profitability?
   • Using tiered rewards to encourage higher spending.
   • Offering non-monetary incentives like exclusive events or early access.
4. What role does AI play in modern loyalty programs?
   • AI analyzes customer behavior to deliver personalized offers.
   • Programs like Sephora’s Beauty Insider use AI to recommend products based on past purchases.
5. How do brands measure the effectiveness of their loyalty programs?
   • Metrics include customer retention rates, repeat purchase frequency, and net promoter score (NPS).
   • Companies track redemption rates to see if customers actually use rewards.
6. How do loyalty programs impact customer psychology?
   • Loss aversion: Customers feel they are losing out if they don’t take advantage of rewards.
   • Habit formation: Programs like Starbucks Rewards condition customers to buy repeatedly to maintain status.