Loyalty Myth: Loyalty programs are good at customer retention, not new customer acquisition

The myth: Programs keep your existing customers. They don't bring in new ones.

By Tim Tyler, published 11th November 2026

This one has more intuitive appeal than most. A loyalty program rewards repeat purchases; the clue is in the name. How would it attract people who've never bought from you?

Tesco Clubcard launched in 1995. Within two years, Tesco had overtaken Sainsbury's as the UK's largest grocer,  a position Sainsbury's had held for decades. The Clubcard wasn't the only factor, but the academic literature (notably Humby, Hunt & Phillips, Scoring Points) is clear that it was a meaningful one. The program was a genuine product differentiator at a time when UK grocery was undifferentiated on almost everything else. People switched to Tesco partly because the Clubcard was a better offer than the competitors' offers.

Boots Advantage Card, launched in 1997, produced similar results. Market share moved 4%. New customers came in.

A compelling loyalty proposition gives a non-member a reason to try the brand that they didn't have before. The program functions as an acquisition tool when membership itself is genuinely valuable, visible, and easy to join.

The caveat is that this effect was much stronger in the 1990s, when loyalty programs were novel and being a Clubcard member felt like something. In categories where every competitor runs a program, membership in any single one is table stakes, not a differentiator. There is strong evidence that Australian consumers are consolidating their loyalty engagement, reducing the number of programs they actively use to less than four on average1. Recruiting into your program is getting more difficult. The acquisition effect is real but context dependent. Assuming it doesn't exist at all is as wrong as assuming it always applies.

Worth checking whether your program is differentiated enough to matter to someone who hasn't joined yet.

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References:

  1. Posner, A. (2026). For Love or Money™ 2026: 14th ed.