Understanding Customer Loyalty Preferences

Ask members what they actually appreciate from a loyalty program, and the answers are almost embarrassingly practical. Gas station discounts: 88%. Cashback offers: 84%. Free food: 84%. Instant discounts at retail locations: 78%. Those are the top benefits in The Points Guy's first State of Loyalty report (https://third-news.com/article/369a5754-cee4-11f1-9ee2-9ca3ba08e13f), published in October 2026. Now the uncomfortable half of the same report. Nearly half of the people enrolled in retail loyalty programs (46%) and dining programs (47%) say those programs typically do not influence where they shop or eat. Millions of members, and the program does not change behavior. The gap between those two facts is the whole story. Members are not ungrateful. They are unimpressed. They joined for value they can use, and too many programs hand them value they cannot reach. The report's ranking is a rebuke to how most programs are designed. The most appreciated benefits are immediate and easy to use: money off fuel, cash back, a free item, a discount right now at the register. The benefits that rank lower are the aspirational ones: elite status, experiential perks, the velvet rope. Those still matter to a slice of members. But for most people, a reward they might enjoy someday loses to a reward they can use today. Brian Kelly, the founder of The Points Guy, put it in economic terms. The data mirrors a K-shaped economy, he said: everyday consumers want instant value during their transactions, while higher-end consumers look for smoother travel benefits. The gap between the two groups is widening. What both groups share is a desire for tangible value from loyalty programs. People keep rewarding brands that meet that expectation. In other words, the program does not need to be more exciting. It needs to be more useful, sooner. The reason is not mysterious. A reward you can use today is worth more to a member than a larger reward you might reach someday. A program that asks members to wait months for the first payoff is asking for faith, and faith is in short supply when every brand is running a program. Distance between earning and using kills redemption in three quiet ways. Members forget what they have earned. They misunderstand the rules for earning more. And by the time the reward finally arrives, it feels smaller than the effort it took to get there. Every step between earning and using is another chance for the member to drop out. Flip that around and the design brief writes itself: shorten the distance. Make the first reward arrive fast, make the balance visible, and make spending it as easy as earning it. The report also separates popularity from value, and the two are not the same thing. Starbucks has the most popular dining loyalty program, with 35% popularity, yet it does not offer the best redemption value. Domino's and MyMcDonald's give higher returns to new customers. Target Circle leads retail with a 28% user base, while other retailers offer better base returns. Enrollment is a vanity metric. A program can be the most joined in its category and still be a weak deal for its members. Members figure that out eventually, and when they do, the program stops influencing their choices. That is exactly what the 46% and 47% figures are saying. If your program's main achievement is a large membership count, you have built an audience, not loyalty. The brands moving fastest on this are making rewards smaller, sooner, and easier to spend. Airlines are the clearest example. In October 2026, American Airlines (https://www.pymnts.com/news/loyalty-and-rewards-news/2026/american-airlines-says-loyalty-program-drives-revenues-margins/) began rolling out a feature that lets AAdvantage members combine cash and miles when booking, choosing how many miles to apply at checkout with a slider and paying the rest in cash. United already offers Money + Miles. Delta offers Miles + Cash on eligible tickets and Pay with Miles for eligible cardholders. Southwest's Cash + Points starts at just 1,000 points. The logic is simple. A traveler with 5,000 miles no longer has to leave them untouched until the balance is large enough for an award ticket. The miles enter a purchase today. PYMNTS Intelligence (https://www.pymnts.com/news/loyalty-and-rewards-news/2026/7-billion-dollars-airline-rewards-gets-more-flexible/) found that 26% of cardholders who had redemption problems said they lacked enough rewards for what they wanted to buy. Divisible rewards fix exactly that problem. Across the four big US carriers, roughly $7.8 billion was associated with loyalty travel or point redemptions in the first half of 2026 alone. Grocery tells the same story from a different aisle. Tesco has built Clubcard Prices (https://Www.globenewswire.com/news-release/2026/10/05/3374291/28124/en/united-kingdom-loyalty-market-size-spend-forecast-and-100-kpi-databook-2026-2030-market-to-reach-us-6-47-billion-as-ai-personalisation-and-app-wallet-rewards-reshape-growth.html) into a headline value proposition, with around 10,000 offers in its 2025/26 reporting. Sainsbury's has extended Nectar Prices across supermarket checkouts. The savings land at the register, during an ordinary shop, not months later in a voucher the customer forgot. Notice what both industries did. They did not add a new tier. They removed the distance between earning and using. Airlines and grocers can rebuild their checkout. A med spa, salon, or cafe cannot rebuild anything, but they do not need to. The same instant-value logic now fits in the phone the customer already carries: a digital pass, updated with stamps, points, or a reward, and scanned at the counter in seconds. No app to download, no account to remember, no plastic card to lose. This is where wallet-based loyalty passes (https://www.loyaltypass.co/how-it-works) change the math for small businesses. A salon can put a stamp card in Apple Wallet or Google Wallet. A med spa can send a membership reward straight to the pass after each visit. A fitness studio can reward the tenth class the moment it happens. The member sees the value on the phone they already carry, at the counter where they already pay. That is the same lesson as the airlines and grocers, at a scale a small business can actually run. The principle transfers to any business: the reward must be visible where the customer pays, and spendable before enthusiasm fades. There is a cynical way to read unredeemed rewards. Points that never get spent cost the business nothing, and breakage quietly flatters a program's margins. Some programs are designed, deliberately or not, to make redemption hard: thresholds set just out of reach, rewards that expire quietly, catalogs full of things nobody wants. It works until it does not. A member who never redeems is a member who never feels rewarded, and the TPG numbers show where that ends: nearly half of retail and dining members say the program does not influence their choices. Breakage buys a quarter's margin and loses the customer's next visit. The programs winning now treat redemption as the product, not the cost. Every reward spent is proof the program works, and proof is what brings the member back. If you run a loyalty program, or you are building one, the report points to four practical moves. First, let members redeem early and often. If the first reward requires months of spending, most members will never get there. A small reward on the second visit beats a large reward on the twentieth visit that nobody reaches. Second, show the value at checkout, not in a monthly statement. The moment a member pays is the moment the program proves itself. A discount applied at the register is felt. Points quietly accumulating in an account are not. Third, keep everything in one account. Referral credit, membership points, store credit, upgrades, and access should sit in one familiar place. When members have to hunt across emails and apps to find what they have earned, you have built an obstacle course, not a reward. Fourth, measure influence, not enrollment. Ask members whether the program changes where they shop. If a large share says no, the program is decoration, and no amount of new members will fix it. If enrollment is the wrong scoreboard, what replaces it? Three numbers tell the truth. First, influence: what share of members say the program changes where they shop, the same question TPG asked, put to your own members. Second, redemption velocity: how quickly does a new member reach a first reward, and what share ever reach one at all. Third, the second-visit test: can a new member get something real by their second visit. Track those three and the program stops being decoration. A rising share of members who redeem early, and who say the program changes where they shop, is loyalty you can see. A falling share is an early warning, months before it shows up in churn. Here is the simplest test for any loyalty program. Can a new member get something real by their second visit? Not a promise, not progress toward a distant reward, but something they can feel: money off, something free, a price only members get. If the answer is yes, you have a program members will defend. If the answer is no, you have a database of people who signed up once and stopped caring. The Points Guy's report suggests nearly half of retail and dining members are already in that second group. Loyalty was never about points. It is about whether the customer feels the brand is on their side at the moment they pay. Make that feeling immediate, and the rest of the program starts working.