Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Abandoning Traditional Loyalty Programs
Transcript
- Lucas: Let’s talk about the death of the punch card, or at least its modern digital equivalent: the points-based loyalty program. For decades, the standard playbook was simple. You buy something, you get a point. Ten thousand points gets you a free coffee or a discount on your next flight. It worked because friction was low and the reward was tangible. Luna: But now, everyone has a loyalty app. When every brand offers points, no one feels special, right? Lucas: Exactly. That’s the commoditization problem. By September twenty-twenty-six, we’re seeing a sharp divergence in C-suite strategy. Top-performing marketers are actively dismantling their tiered points systems because the cost per acquisition through those channels is skyrocketing, while engagement remains flat. They’re realizing that points are just another form of price discount, disguised as generosity. Luna: So they’re trading discounts for something else? What’s the alternative if not saving money? Lucas: Status and access. The new currency isn’t points; it’s exclusivity. Look at how luxury brands and even mass-market retailers are shifting toward experiential rewards. Instead of ten percent off, they offer early access to product drops, invitations to private events, or direct lines to customer service teams that actually solve problems without a script. It’s less about the transaction and more about the relationship. Luna: That sounds expensive to manage. How do you scale personal access without blowing the budget? Lucas: You don’t scale it linearly; you gate it. The key is using zero-party data to identify the top five percent of customers who drive eighty percent of profit, and then directing the bulk of your loyalty spend there. The other ninety-five percent? They stay engaged through community content and consistent value, not gimmicks. It’s a radical shift from broad-net fishing to precision targeting. Luna: It reminds me of how tech companies handle software updates versus hardware sales. One is maintenance, the other is experience. Lucas: That’s a great analogy. Think of it this way: traditional loyalty is maintenance. You keep the lights on. Experiential loyalty is upgrading the house. And right now, consumers are tired of paying full price for maintenance. They want to feel like they’re part of an inner circle, not just a ledger entry in a database. Luna: I’ve noticed that with some brands I follow. If they send me a coupon, I scroll past. But if they invite me to a virtual workshop, I click. Lucas: And that’s the behavioral shift. Coupon fatigue is real. When you receive a discount code, your brain registers it as a reduction in quality or a clearance event. But when you receive an invitation, your brain registers it as social capital. That’s why brands are pivoting so hard toward community-led growth. It’s cheaper than discounts in the long run, and it builds deeper emotional ties. Luna: Does this mean smaller businesses can’t compete? They can’t afford exclusive events. Lucas: Actually, it favors smaller players. A boutique skincare brand can offer a direct Q&A with the founder or a custom formulation session. A national chain can only offer a free mask. The specificity is what creates the value. It’s not about the dollar amount of the reward; it’s about the relevance of the interaction. Luna: So relevance over reciprocity. That changes the whole metric for measuring success. Lucas: Precisely. You stop tracking points issued and start tracking active community participation. You measure net promoter score, but more importantly, you measure repeat purchase rate among your top-tier members versus your base members. The gap should widen, not narrow. Luna: What happens to the customers who aren’t in the top tier? Do they feel alienated? Lucas: That’s the risk. If you make it too exclusive, you create resentment. The trick is transparency. You have to clearly communicate the benefits of each tier so lower-tier customers see a clear path to advancement. It’s gamification, but without the cheap points. It’s about showing them what they’re missing out on, not just what they’ve earned. Luna: It’s basically FOMO applied to customer service. Which is powerful, but risky if the promise isn’t kept. Lucas: Absolutely. If you promise exclusive access and then give them a generic email blast, you’ve lost trust. The operational side of this is harder. Customer service teams need training to handle these high-value interactions differently. It’s not just a marketing change; it’s a company-wide cultural shift. Luna: I bet most companies aren’t ready for that kind of internal alignment. Lucas: Most aren’t. And that’s why the ones who do it well are pulling ahead. They’re treating loyalty as a product, not a promotional tactic. They’re iterating on the experience based on feedback loops, just like any other feature release. Luna: So instead of a quarterly campaign, it’s continuous improvement? Lucas: Continuous improvement. Exactly. And that requires data integration between marketing, sales, and support. Silos kill this model. If marketing promises an exclusive event but operations doesn’t know how to host it, the whole thing collapses. Luna: It sounds like the barrier to entry is actually higher now, which is good for quality. Lucas: It raises the bar. Low-effort copycats will fail. Brands that genuinely invest in understanding their customer’s lifestyle and values will thrive. It’s moving from transactional to relational, and that’s a much longer game, but a more durable one. Luna: Do you think this trend will accelerate after the holidays? Everyone spends big on gift cards and discounts then. Lucas: The holiday season is still going to be heavy on discounts because of consumer psychology around gifting. But the post-holiday retention phase is where the real battle is happening. That’s when brands try to lock in the new customers they acquired through promo codes. And that’s where the experiential models are winning. Luna: So the hook is the discount, but the retention is the experience? Lucas: Exactly. Use the discount to get them in the door, but use the experience to keep them in the room. Once they feel valued beyond the price tag, they become advocates. And advocates are the cheapest form of marketing you can have. Luna: I love that. Advocacy over acquisition. Lucas: Right. And it flips the funnel. Instead of pushing out messages, you’re empowering your best customers to pull others in. It’s organic, scalable, and infinitely more resilient than any algorithmic ad buy. Luna: It makes me wonder if our own loyalty to this podcast could be modeled that way. Lucas: Well, we certainly don’t have points. But we do have a community of listeners who engage deeply. If we ever offered exclusive behind the scenes content or early access to topics, would that change your engagement? Luna: Honestly, yes. I’d probably pay a small fee for that kind of direct access to the hosts. Lucas: See? Even we’re susceptible to the model. It’s human nature. We all want to feel like insiders. Luna: So maybe we should launch a Patreon soon. Lucas: Maybe. But let’s focus on the value first. If we earn that trust, the monetization follows naturally. Speaking of natural transitions... Luna: Yeah, I’m glad we shifted gears to something actionable rather than theoretical. Lucas: If these conversations about marketing strategy and customer psychology have helped you rethink your own approach, consider supporting the show directly. Listener contributions are what keep us independent and able to dig into these deeper topics without sponsor interference. You can find us at buy me a coffee dot com slash fexingo. Every bit helps us keep producing this content. Luna: It really does make a difference. Thanks for being part of the conversation. Lucas: Back to the topic. Let’s look at one final example of this working in practice. Consider how a major beverage brand recently replaced its points system with a membership club focused on sustainability education. Luna: Education as a perk? That’s unexpected. Lucas: It was. Members got access to webinars on water conservation, behind the scenes tours of their bottling plants, and early votes on new eco-friendly packaging designs. Engagement went up forty percent, and churn dropped significantly. It wasn’t about the drink; it was about the mission. Luna: Mission-driven loyalty. That’s the future. Lucas: For many brands, it is. The question for you, the listener, is whether your current loyalty program reflects your customers’ values or just their wallets. And that’s something worth pondering as you head into the rest of your week.