Do loyalty programs really pay off? Value depends on the shopper

Loyalty cards tucked into wallets, key tags dangling from keychains, and apps brimming with accumulated points have become such an ingrained feature of modern shopping that most consumers barely think about them anymore. Yet a growing body of evidence suggests that these programs, which retailers spend billions of dollars to design and maintain, are failing to deliver the loyalty they promise, and new research from Australia is helping to explain why. The loyalty management market, valued at 17.38 billion US dollars in 2026, is projected to swell to 51.65 billion US dollars by 2034, a trajectory driven largely by cost-of-living pressures that push households to hunt for discounts, coupons, gifts and vouchers to shrink their grocery bills. But whether those billions are being spent wisely by retailers remains an open and increasingly urgent question.

A study led by researchers at Edith Cowan University, published in the European Journal of Marketing, has analysed survey data from more than 800 Australian supermarket customers to understand what actually drives engagement with loyalty programs and how effectively those programs translate into genuine loyalty toward retailers. The findings paint a picture of consumer behaviour that is far more conditional, and far more skeptical, than the loyalty industry’s growth figures might suggest. Rather than a single factor determining whether shoppers embrace a loyalty program, the research identifies a convergence of psychological and practical conditions that must all be present before customers commit: trust in the retailer, mutual commitment between customer and retailer, perceived benefits, the temporal flexibility to wait for discounts, and the capacity to search for deals across multiple competing stores.

Professor Sanjit Roy, Professor of Marketing and Service Science at ECU’s School of Business and Law, argues that most consumers simply lack the time or inclination to perform the mental cost-benefit analysis that loyalty programs implicitly demand. When standing at a checkout, whether self-serve or staffed, the shopper is asked a deceptively simple question: do you want to scan your rewards card? Retailers understand this moment of friction and actively exploit it, prompting customers at the point of sale to reinforce the scanning habit until it becomes automatic. The problem, according to Roy, is that the arithmetic behind the habit rarely favors the customer. Under a typical scheme where one point is earned per dollar spent and 2,000 points yield a ten-dollar voucher, the return works out to a fraction of a percent of expenditure, a reward so modest that it invites a pointed question: is it worth surrendering detailed personal purchasing data when the resulting discounts and promotions are not even personalised to reflect that data?

This tension between what customers give and what they receive sits at the heart of the study’s conclusions. Loyalty programs are, in essence, data-exchange mechanisms. Customers provide retailers with an exhaustive record of their buying habits, brand preferences, spending patterns and household composition, and in return they receive modest discounts and occasional vouchers. The research suggests that customers have become increasingly aware of this asymmetry. They know they are a data point in a vast analytical machine, and unless the rewards feel meaningfully tailored to their individual circumstances, the perceived benefit of participation collapses, along with their engagement.

The study also reveals how economic circumstances shape whether loyalty programs can deliver their benefits at all. Dr Saalem Sadeque, Course Coordinator and Lecturer in Marketing at ECU, highlights the role of what the researchers describe as temporal price search strategy, the customer’s capability to wait for a predicted discount. A shopper who anticipates a future price reduction on a frequently purchased item may simply delay the purchase for a week or two and then buy in larger quantities, maximising the benefit of their accumulated loyalty. But this strategy requires a buffer of both time and money that many households do not possess. A parent who urgently needs nappies, or a family whose budget is too tight to purchase in bulk, cannot wait for the discount to arrive, and therefore misses out on the program’s benefits despite being genuinely loyal to the retailer. The program, in other words, rewards the financially flexible while leaving the most loyal yet constrained customers behind.

A parallel dynamic, the spatial price search strategy, further complicates the picture. Customers who have the ability and inclination to compare prices across multiple retailers engage with loyalty programs differently from those who shop out of convenience or habit. The research demonstrates that neither waiting capacity nor cross-store deal hunting alone determines engagement; rather, it is the combination of these practical strategies with the emotional and relational factors of trust, commitment and perceived benefit that produces sustained participation. Remove any one element from the equation and engagement falters.

The implications for retailers, particularly the major Australian supermarket chains like Coles and Woolworths, are substantial. Despite the ubiquity of their loyalty schemes, many customers simply do not engage with them, and the success or failure of any given program depends largely on that delicate combination of trust, commitment and perceived value. The stakes extend beyond marketing metrics. When customers fail to engage with loyalty programs, retailers lose visibility into purchasing patterns, which in turn creates uncertainty in cash flow projections. A program that generates lukewarm participation is thus not merely a missed marketing opportunity but a genuine operational liability, undermining the forecasting on which supply chains and pricing strategies depend.

The research lands at a politically sensitive moment for Australian grocery retail. The Australian Competition and Consumer Commission has recently advised supermarkets to be more transparent about their pricing, and the study’s authors echo and extend that call. Professor Roy contends that transparency about prices and business practices, exceptional customer service, and consistent brand messaging form the foundation on which loyalty must be built. A retailer that promises fresh fruit and vegetables, he notes, must actually deliver on that promise, because loyalty programs cannot compensate for a broken brand commitment. Perceived authenticity of the underlying relationship, in other words, precedes any loyalty scheme built on top of it.

Where the research offers its most constructive guidance is in the use of the data that loyalty programs collect. Rather than treating customer information as a resource for broad-brush promotional targeting, Roy argues that supermarkets should deploy it to establish a personalised dialogue with individual shoppers and to make loyalty benefits genuinely human-centric. This personalisation, he suggests, is not merely a feature enhancement but a precondition for trust. Customers already know their data is being harvested; what they lack is evidence that the harvest works in their favor. Demonstrating that a program remembers their preferences, anticipates their needs, and rewards them in ways that reflect their actual lives could transform the perceived exchange from extractive to reciprocal.

Dr Sadeque frames the ultimate recipe for success as a tailored, integrated strategy that aligns a loyalty program’s value proposition with trust building and relationship development. Retailers can cultivate customer commitment by conducting market research to ensure their values align with those of their customers, and by creating personalised offerings that improve perceived benefits, thereby increasing the likelihood of engagement. In an era of sophisticated digital marketing algorithms and ubiquitous discount codes, the study’s central message is paradoxically low-tech: loyalty is an emotional relationship before it is a points balance. Retailers that treat loyalty programs as data-collection instruments with discounts attached will continue to see lackluster engagement, while those that design programs delivering clear, consistent value and authentic emotional connection stand to convert transactional habit into durable, long-term customer relationships. In the end, as the study’s title suggests, the benefits of loyalty programs really are in the eye of the cardholder, and convincing cardholders that the benefits are real may be the hardest task the loyalty industry faces.