I recently read Sex at Dawn. Its central claim is provocative: monogamy may not be humanity’s natural state, but a fairly recent social arrangement. The book is scientifically contested, but one thought hit me anyway. If exclusivity isn’t a given for people, why do we treat it as natural in customers?
Look at the loyalty programmes companies build today, and you often see the opposite of their intent. They don’t reward loyalty. They punish it.
Most loyalty programmes are a pricing mechanic with a nicer name. Points, discounts, tiers. All of it assumes a customer you have to bribe to arrive and punish to leave. Real loyalty runs elsewhere. Customers stay with brands that reduce risk. The risk of being disappointed, of overpaying, of getting burned. That’s a different person from the one most companies build for. A discount attracts a price-hunter. Loyalty is built by the feeling that here, I won’t get burned.
And here’s a conflict almost nobody says out loud.
Plenty of companies invest in keeping customers and profit from their inertia at the same time. With one hand they pay for a loyalty programme. With the other they monetise the fact that a loyal customer can’t be bothered to leave. It’s a contradiction built into the balance sheet. Marketing celebrates retention; finance quietly counts on the loyal customer not checking the price. Often the second line item funds the first.
Consider a number that should make any marketer uncomfortable. In 2018 Citizens Advice filed a super-complaint in the UK, and the regulator, the CMA, took it up. Long-standing customers across five essential markets, from mobile to insurance to mortgages, pay around £4 billion a year more than new ones. On average £877 per household. Eight in ten people were paying a loyalty penalty. And 89% think it’s wrong.
Someone pays for that first-year discount. Usually the person who has been with you five years and doesn’t complain. And when they realise their loyalty costs them, they don’t cancel rationally. A loss hurts more than an equivalent gain pleases. They cancel emotionally, and for good.
Here is the part I have to admit about ourselves too. Companies find it far easier to invest in top-tier loyalty technology than to change the reward logic underneath it. You stand up a platform in three months. The logic that decides who you reward and who you quietly overcharge - nobody dares open that. Prices, margins and internal deals hang off it. So we often end up with a first-rate system running a wrong assumption at high speed.
Let me put it this way: technology is the engine, the reward logic is the direction. A stronger engine heading in the wrong direction only takes you further away from the customer.
To show this isn’t theory, look at the ones who get it right. Costco doesn’t lock customers in with points. It runs on thin mark-ups, and the core of its profit logic is the membership fee, not a fat margin on a loyal buyer. The result: in fiscal 2025, 92.3% of members in the US and Canada renewed, and 89.8% worldwide. The membership isn’t a penalty; it’s a ticket into a club that pays off. That’s the loyalty of a fair model, not a points trap.
Patagonia reaches the same point from another direction. It repairs your gear for free, and through Worn Wear it buys back and resells used kit. At its Reno service centre, the largest of its kind in North America, it makes tens of thousands of repairs a year. A repair extends the life of the product and lowers the risk of the purchase. A customer who knows you’ll mend an item rather than let it die stays for a different reason than a discount. That binds harder than ten percent off.
Nationwide, the world’s largest building society, is owned by its members, not shareholders. It shares profit with them. For the fourth year running it pays loyal members a £100 Fairer Share reward, over £1.5 billion since 2023. A bank that rewards the loyal instead of quietly overcharging them.
Chewy, the online retailer for pet supplies and food, shows the same logic in numbers. More than 80% of its sales run through Autoship subscriptions, and net spend per customer keeps rising. Only then comes what it’s famous for: an agent who remembers your pet by name, a handwritten card when a pet dies, sometimes a painted portrait. What keeps the owner loyal isn’t a discount. It’s the feeling that you’re caring for the animal together.
Four very different businesses, one pattern. None of them chases loyalty with a penalty. Each earns it by lowering the customer’s risk, by knowing them, and by treating them fairly.
Before you buy new technology, make your loyalty programme answer three questions. What actually lowers the customer’s risk? Which behaviour do you want to reward? And the uncomfortable one: does your pricing punish your existing customers? If a loyal customer pays more than a new one, you don’t have a loyalty programme. You have a loyalty penalty with a nicer name, and no platform fixes that. And if you’d be embarrassed to answer the last question out loud, you’ve just found your real project. It isn’t the choice of platform; it’s the logic behind it.
If you’re building or rebuilding a loyalty programme, write to me at igor.pauletic@frodx.com. Before you invest in the technology, let’s look at the assumption about your customer the programme rests on.
The book led me to a fairly mundane business truth. Loyalty isn’t a transaction you buy with points. It’s a fair deal that reduces risk. And it falls apart faster than you can build it if you punish the loyal customer.
The tribe had no app, no points, no status tiers. It had the sense that they wouldn’t leave you behind. That may still be the best loyalty programme there is.