Customer loyalty and the double-edged sword of innovation.

Technology has transformed the industry – but putting it first can push loyalty back to the transactional dynamics it’s supposed to transcend.

Like some other areas of marketing, customer loyalty has benefited dramatically from innovation. Advances in technology have transformed what is possible: programs can now be launched faster, scaled globally, hyper-personalised, and measured with precision. From a capability perspective, loyalty has never been more powerful.

And yet, in other ways, loyalty has rarely felt more fragile.

As loyalty programs proliferate, differentiation becomes harder to create and sustain. Customers are members of multiple schemes, earning points across countless brands, and exposed to an endless stream of offers and communications. The very innovations that have expanded loyalty’s potential have also made it easier to copy – and to get wrong.

This is the double-edged sword of innovation in customer loyalty.

A genuine leap forward.

There’s no question that technology platforms represent a significant advance. Software-as-a-service solutions have democratised loyalty, making sophisticated programs accessible to organisations of all sizes. Complex rule engines, real-time tracking, automated communications and integrated reporting (where transactional, behavioural and engagement data are brought together into a single view) have removed much of the operational friction and obstacles that once limited loyalty initiatives.

For large organisations, platforms have enabled consistency across markets, brands and channels. For growing brands, they have lowered barriers to entry by removing the need to build complex infrastructure from scratch, often reducing upfront investment and accelerating time to market. They can capture data at every interaction, creating the potential for continuous learning and optimisation.

These are real gains. Any serious discussion of loyalty innovation must acknowledge them.

However, challenges emerge when technology is the starting point rather than the enabler.

When forward goes backward.  

Increasingly, loyalty programs begin with a platform selection, followed by a configuration process shaped by what the system makes easy or possible. Strategy is then retrofitted to the tool.

The result is that programs may be technically impressive, but conceptually shallow. They may have lots of features, but little meaning. And even if things look innovative, they may feel the same, with familiar earn-and-burn mechanics or tier structures, or frequent but uncompelling communication.

Of course, this is not a failure of technology. It’s a failure of sequencing. To use a distinctly un-innovative analogy, it’s putting the cart before the horse.

And the horse, in this case, is a deep understanding of the business and its customers.

At its core, loyalty is not a mechanical system. It’s a behavioural one. Points, tiers and rewards only matter if they shape customers’ emotions and choices. When programs are designed without a clear understanding of why customers behave as they do – and what would meaningfully change that behaviour – innovation stalls.

When organisations start with tech and fail to ask important questions about their customers, the effect for those customers is that they struggle to answer a fundamental question: why should I care about this program? Most of us have had conversations about a loyalty program where earning feels complicated or laborious, rewards feel distant or generic, or the perceived effort outweighs the perceived benefit.

This happens when programs rely heavily on rational assumptions while underestimating emotional drivers like recognition, progress and relevance. So customers may participate, but don’t feel attached. Nothing in the program deepens the relationship beyond the transaction itself.

Take these examples:

Personalisation

Advances in data and automation have made it possible to tailor communications, offers and rewards with remarkable granularity. In theory, loyalty can now be deeply individual. But in practice, personalisation often feels generic.

Customers may get messages that reference their last purchase but ignore their relationship with the brand. Offers are tailored by product category rather than by the customer’s motivation or life context. And automation often adds volume rather than value, for example with more communication – but not better understanding. And personalisation without understanding is just noise at scale.

Data

Modern loyalty programs generate vast quantities of data about transactions, redemptions, engagement metrics, behavioural patterns. Dashboards are more sophisticated. Reports are more detailed.

But insight doesn’t automatically follow. Data is often used to describe what has happened rather than to understand why. For example, redemption behaviour is recorded without interpreting meaning. Reporting becomes an end in itself, rather than a tool for learning and adaptation.

When loyalty programs are poorly designed, without sufficient thought given to how they support a business’s strategy or its customers’ desires, the consequences go beyond underperformance. Customers become fatigued. They ignore communication. Their behaviour is driven by short-term gain rather than long-term relationship. Their trust erodes as programs feel manipulative rather than mutually valuable.

Ironically, loyalty innovation can push programs back toward the very transactional dynamics they were meant to transcend.

Starting with what really matters.

The strongest loyalty programs follow a different path. They begin not with technology, but with intent.

A human-centred, design-led approach starts by deeply understanding the business itself: its strategy, its commercial goals and challenges, its category dynamics, the gaps between current performance and desired outcomes, and crucially, of course, its customers. It seeks to understand not just what customers do, but why they do it – and what would genuinely shift behaviour in a way that creates value for both sides.

From this foundation, more meaningful questions emerge:

• Which behaviours truly matter to the business?
• Where are customers disengaged, indifferent or conflicted?
• What would make loyalty feel valuable and relevant from their perspective?

Only then does technology enter the conversation, selected and configured to serve a clear behavioural design. Platforms should be enablers rather than architects.

When you start in the right place, with the right questions, technology helps you find answers. Personalisation becomes meaningful rather than mechanical. Data becomes a source of learning rather than reporting.

Loyalty innovation that works, and lasts.

Sustainable loyalty innovation requires more than software. It blends multiple disciplines: behavioural science, creative strategy, technology, and operational rigour.

In a crowded loyalty landscape, the real advantage is not the newest feature or the most advanced platform. It’s the ability to design loyalty experiences that are relevant (both to the brand and to the customer) and that feel human – all supported by technology, not overshadowed by it.

Innovation will continue to reshape customer loyalty. Tools will improve and capabilities will expand. But differentiation will remain elusive for those who treat innovation as a technological exercise alone.

The most effective loyalty programs will be those that remember what innovation is ultimately for: changing behaviour by understanding people.

Loyalty programs are easier to launch than ever — and harder to differentiate.
If you’re questioning whether your loyalty strategy is truly changing behaviour, let’s unpack it together. Email riazg@awards.co.za