So much time is spent talking about loyalty and loyalty programs that you might be confused and think they're the same thing. They are not.
Actual loyalty is when your customers choose you because they really have a strong preference for your products or services. Loyalty points that they may earn as a result of that choice are just extra bonus.
Let me give you an example. There are two airlines that I am on most often -- Air Canada and WestJet. I love WestJet for their efficiency, their ability to move the line, their wonderful staff who are always friendly and cheerful, and their leather seats. Until fairly recently WestJet did not have a points program. In addition, you couldn't book seat assignments well in advance of a trip, a problem when flying on business IMHO. There never was any food on WestJet flights. [I guess they were a leader on this trend ...] These factors tended to make me choose Air Canada when I had the option, even though I loved the WestJet service and value.
Now that WestJet does have a loyalty program, I still don't fly them that often because I have so many more points invested in Air Canada. Air Canada may well think of me as a loyal customer. I don't generally think of myself as loyal to them.
On a recent flight I was thinking about this and surprised myself to realize there are some things I really do like about Air Canada. There is definitely more legroom on their standard flight configuration, even in cattle-class. I love their seat-back entertainment system that lets me choose if, what and when I want to watch. And of course there are the points. [Although it's become quite difficult to get upgrades because every flight is now stuffed to bursting. And the points required to go anywhere seem to keep rising.] Still, the possibility exists of that free trip to Europe someday, so I carry on accumulating.
My take
If you need loyalty points to get repeat purchase you may have a great loyalty program, but you might not have much true loyalty. Loyalty programs work best when it's difficult to actually build and maintain a real competitive advantage. Or, when you can shift purchasing at the margin, the way a grocery store or drugstore might try to do with their loyalty program.
It's a mistake to confuse consumer commitment to your loyalty program with the true preference for your service offering. We just love the points.
