Customer loyalty programs are one of the most common tools retailers use to drive repeat business — and for good reason. They work well for building relationships with your most committed customers.

The more important question is whether they’re effective at growing your business.

That depends on what you’re measuring. 

What loyalty programs do effectively

Let's start with what loyalty programs are genuinely good at. When designed well, they create a framework for recognizing and rewarding your best customers. They give you valuable transaction data about purchasing patterns. They create a sense of belonging and appreciation that matters for long-term customer relationships.

Where loyalty programs excel:

• Building relationships with your most committed customers.
• Providing transaction data and insights about shopping behavior.
• Creating a framework for targeted promotions and communications.
• Encouraging repeat visits among customers already inclined to return.
  

Loyalty program members do spend more than non-members. They visit more frequently and engage with promotional offers at higher rates. These benefits justify the investment, but they don’t tell the whole story about growth.

Do loyalty programs increase sales? Learn more on the Upside blog.

The effectiveness gap: Where loyalty programs struggle

Market research analyzing millions of retail transactions reveals a significant gap between loyalty membership and loyal behavior. More than 50% of loyalty members churn within a year of sign-up.

The bigger challenge? The average shopper isn't particularly loyal to any one brand. They belong to multiple loyalty programs across competing retailers and spread their purchases around based on convenience, price, and whatever offers the right value for their money in any given moment.

The uncomfortable reality about loyalty program members:

• Uncommitted customers make up 79% of brick-and-mortar retail customers.
• Two-thirds of consumers decide where to shop or dine less than two hours before they go.
• Across all retail categories, 60% of new customers never come back after their first month.
  

Your loyalty program might have thousands of members, but membership alone doesn't guarantee behavior change. Many of your members are splitting their purchases across your competitors' programs, treating loyalty cards as backup options rather than commitments to specific brands.

Measuring effectiveness: Total sales vs. incremental impact

Most retailers measure loyalty program effectiveness by comparing member spending to non-member spending. Members typically spend 20-40% more than non-members in many programs.

But this measurement approach has a fundamental flaw: it confuses correlation with causation. Your best customers are more likely to join loyalty programs in the first place. The higher spending might reflect their existing commitment rather than prove the program caused behavior change.

An effective loyalty program should drive incremental visits from infrequent customers, win competitive switchers away from other retailers, and expand basket sizes beyond typical purchase patterns. If a program is primarily rewarding frequent shoppers for visits they were already making, it may be funding activity rather than driving new growth.

The most effective loyalty programs are the ones that can prove incrementality, not just correlation.

How Upside makes loyalty programs more effective

Upside is designed to work alongside your existing loyalty program, not replace it. While your loyalty program manages relationships with committed customers, Upside focuses on changing behavior among the uncommitted majority: the 79% of customers who currently split their purchases across multiple retailers.

The platform addresses the core challenge facing loyalty programs: reaching customers before they decide where to shop. By intercepting consumers at the moment of decision, Upside influences behavior that traditional loyalty programs may miss entirely.

How Upside boosts loyalty program effectiveness:

• Reaches 35 million consumers through its marketplace app and network of strategic partnerships with Uber, Lyft, Instacart, and DoorDash.
• Delivers personalized cash back offers that engage customers before they decide where to shop.
• Protects margin through individualized, margin-bound promotions
• Proves which transactions are truly incremental
  

The results demonstrate the effectiveness of this layered approach. When retailers combine their existing loyalty programs with Upside's personalized promotions, they see measurably better outcomes. Loyalty members who also use Upside visit more frequently and spend more per transaction than those who only participate in traditional programs. At the cardholder level, loyalty and Upside together drive significantly higher visit frequency and ongoing engagement, improving retention outcomes by up to 92%.

This complementary strategy solves the challenge of keeping your business top-of-mind when customers are making purchase decisions. Instead of waiting for customers to remember your loyalty program, you're actively engaging them at the moment they're choosing where to shop.

Learn more about how to increase customer lifetime value.

Growing membership and engagement simultaneously

One challenge with loyalty programs is the cost and effort required to grow membership. Upside invests heavily in consumer demand — more than $100 million annually — to bring shoppers into the marketplace. Retailers benefit from that reach without taking on additional cost or risk.

This creates a virtuous cycle. As consumers engage with the marketplace more frequently across everyday categories like food, fuel, and groceries, they're more likely to see your business when making purchase decisions. The addition of grocery stores in fuel-dense markets has contributed to a 31% increase in incremental revenue for existing fuel retailers on the platform.

Protecting margin while boosting effectiveness

Upside's approach addresses the risk of cannibalization by personalizing offers based on individual customer behavior and binding promotions to your available margin. A frequent customer who visits regularly receives a smaller cash back offer, while an infrequent customer needs a larger promotion to change their behavior.

This margin-bound personalization ensures every transaction remains profitable. And because Upside only charges when proven incremental profit is delivered, there's no risk of paying for effectiveness you're not getting. Nearly 30% of fuel and convenience retailers nationwide, along with thousands of grocery stores and tens of thousands of restaurants, use Upside specifically because the economics align with growth.

Building a more effective growth strategy

Your loyalty program isn't ineffective; it's just not designed to do everything you need for growth. It excels at relationship management with committed customers but may struggle with the uncommitted majority who drive most retail transactions.

What a more effective growth strategy looks like:

• Traditional loyalty program for relationship management and baseline retention.
• Personalized promotions that engage uncommitted customers before they decide where to shop.
• Proactive outreach between purchases, not just rewards at checkout.
• Rigorous measurement that proves incremental impact rather than just total member spending.
• Profit-share economics that align program costs with actual business growth.
  

Market research consistently shows that retailers who layer these strategies see better results than those who rely on loyalty alone. Earning just one additional visit per month from uncommitted customers could increase your total revenue by as much as 209%, depending on the category.

The most effective growth strategies don’t replace loyalty programs, they extend them. By layering decision-moment engagement and incrementality measurement on top of what you already do well, you can turn loyalty into a true growth engine. 

Request a demo to see how retailers like you are boosting loyalty program effectiveness.

Frequently asked questions

What makes an effective loyalty program?

An effective loyalty program combines relationship management with personalized engagement that reaches customers before they decide where to shop. The most effective programs prove incrementality rather than just measuring total member spending, use personalized offers instead of one-size-fits-all discounts, and engage customers proactively between purchases.

How do you measure loyalty program effectiveness?

True loyalty program effectiveness should be measured by incremental impact, not just total member vs. non-member spending. This requires comparing actual customer behavior to what would have happened without the program, typically using test vs. control analysis to isolate transactions the program actually influenced.

Why do so many loyalty program members still shop at competitors?

The average shopper belongs to multiple loyalty programs and spreads purchases across competing retailers based on convenience and value. Two-thirds of consumers decide where to shop less than two hours before they go, so loyalty program membership alone doesn't guarantee they'll choose your business over competitors at the moment of decision.