Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Abandoning Traditional Loyalty Programs
Transcript
- Lucas: Welcome to Episode Two Hundred. I am Lucas, and this is Luna. Luna: And we are finally here. Two hundred episodes of trying to make sense of the modern business landscape. Lucas: It feels like just yesterday we were talking about brand silos, and now we are navigating a market where traditional loyalty programs are effectively dead. If you have been following the headlines, you know that engagement with points-based rewards has plummeted across the board. Luna: Right, and it is not just a blip. We are seeing double-digit drops in active participation among younger demographics who simply do not care about earning miles for a flight they might never take. Lucas: The data supports what many of us suspected: the transactional model is broken. Consumers view these programs as low-value friction rather than genuine benefits. So today, we are going to drill into one specific shift. How top-tier CMOs are abandoning points entirely in favor of what we call value-aligned community membership. Luna: That is a heavy pivot. Because if you stop giving people points, what are you actually giving them? Lucas: You are giving them identity and access. Think about Patagonia or Nike Run Club. They do not ask you to scan a receipt to get a discount. They ask you to join a movement. The engagement comes from shared values, not a ledger of accumulated credits. Luna: But does that scale? It works for outdoor gear or running shoes, but what about a bank or an airline? Lucas: That is the million-dollar question. And it brings me to our support mechanism. A couple of dollars a month is genuinely what keeps these going. You can buy me a coffee dot com slash fexingo if you have gotten something out of them. Luna: We appreciate that. It helps us keep the lights on and the research sharp without compromising our editorial integrity. Lucas: Exactly. Now, back to the airlines. Delta and American Airlines have tried to inject more lifestyle elements into their programs, but the core mechanic remains transactional. Customers still feel like they are working for their rewards. Luna: It feels like labor. You spend money, you work, you get paid in points. That is exhausting. Lucas: Precisely. And that exhaustion is why churn is so high. When you switch credit cards or airlines, those points often feel locked away or devalued. It creates resentment rather than loyalty. Luna: So the alternative is building a community where the barrier to entry is belief, not spending? Lucas: Yes, but it requires a different metric for success. You cannot measure it solely by repeat purchase rate. You have to look at advocacy, content creation, and emotional connection. Luna: That is harder to quantify for the boardroom. Executives love hard numbers. Lucas: They do. But the new hard number is customer acquisition cost versus lifetime value when you remove the cost of rewards. If you stop paying people to stay, your margins improve dramatically. Luna: I see that. So you trade margin share for margin efficiency. That is a compelling argument for CFOs. Lucas: It is. Let us look at a concrete example. Sephora used to rely heavily on points. They shifted toward tiered experiences and early access to products for their top members. The result was a significant increase in average order value because customers felt special, not just compensated. Luna: So it is about exclusivity over accumulation. Being part of the inner circle instead of just collecting tokens. Lucas: Exactly. And this ties back to zero-party data. When you build a community, customers voluntarily share preferences because they want better recommendations, not because they want ten percent off. Luna: Which makes that data much higher quality. It is consent-based and intent-driven. Lucas: Right. In contrast, points data is often noisy. People chase rewards they do not need, skewing your inventory and marketing signals. Luna: That noise costs money too. It leads to inefficient ad spend and misaligned product development. Lucas: So the strategic move is to prune the loyalty fund. Kill the points program. Replace it with a membership layer that offers utility, education, or community. Luna: But how do you communicate that to existing customers who are attached to their points balance? Lucas: You have to be transparent. Offer a grace period. Let them cash out or convert points to experience credits. It is a painful short-term hit, but it clears the slate for long-term health. Luna: It is a bold move. Most companies are afraid to lose any perceived asset. Lucas: Fear is expensive. Stagnation is worse. The brands winning right now are the ones treating loyalty as a relationship, not a transaction. Luna: So the CMO's job shifts from managing a rewards ledger to curating a community experience. Lucas: Exactly. It requires empathy, storytelling, and consistent value delivery. No more scanning receipts. Luna: I think consumers are ready for that relief. They are tired of being tracked and taxed. Lucas: Agreed. The future of loyalty is invisible. It is embedded in the product and the service, not tacked on as an afterthought. Luna: So what is the first step for a CMO listening to this who wants to make this shift? Lucas: Audit your current loyalty spend. Identify the top five percent of customers who drive eighty percent of your profit. Then interview them. Ask them what they value most. Luna: Direct feedback. That is always the best starting point. Lucas: It is. You will likely find they care more about convenience and respect than extra points. Build from there. Luna: Respect and convenience. Simple, but powerful drivers of retention. Lucas: Very. And it aligns with the broader trend of brands taking a stand on values. Customers want to belong to something meaningful. Luna: So loyalty becomes a byproduct of alignment, not a goal in itself. Lucas: Exactly. When you serve a community well, they stay. Not because they have points, but because they are home. Luna: That is a refreshing perspective for our two hundredth episode. Lucas: Thanks for joining us, Luna. And thanks to everyone who listens. Luna: Let us see where this conversation takes us next quarter.