The power of emotion in loyalty programs and how it drives customer retention

By: Max Kenkel

What you need to know

Emotional loyalty is created when loyalty programs go beyond transactional rewards to fulfill psychological needs like belonging and validation.
Redemption validates the customer’s effort and triggers emotional satisfaction.
Emotional benefits drive continued engagement, leading to deeper emotional connections with the brand and advocacy.

Part 3 of 4 in our series covering the psychological benefits influencing customer loyalty programs.

Loyalty programs are everywhere, offering discounts, points and perks. A study published in the Journal of Retailing and Consumer Services found that firms in the U.S. spent close to $58 billion annually on loyalty programs, highlighting the significant investment in fostering customer loyalty. But how do some programs keep customers engaged while others barely hold their attention. The secret is in how well a program taps into emotion, which fulfills core psychological needs and creates a deeper connection between the customer and the brand.

In the third part of our series on the psychology of loyalty benefits, we’re exploring how emotional benefits fuel long-term customer loyalty and why getting customers to redeem rewards is key to keeping them emotionally invested and engaged.

The Flywheel Effect: How emotional rewards reinforce customer loyalty and connection

At the heart of any successful loyalty program is a concept called the Flywheel Effect, a concept developed in the book “Good to Great” by author Jim Collins. Here, we’ve shown how it can become a self-reinforcing cycle where emotional satisfaction drives ongoing engagement, which in turn deepens a customer’s emotional loyalty to a brand.

When customers redeem rewards, they’re completing an emotional loop. Redemption triggers a sense of accomplishment and validation, reinforcing their decision to engage with the brand. Without redemption, the cycle stalls and customers lose the emotional connection, leading to disengagement over time.

Why redemption fuels emotional loyalty and customer engagement

As the Flywheel Effect shows, redemption isn’t just the end of a loyalty cycle. It’s a powerful emotional trigger that reinforces positive feelings about the brand, like:

Validation and achievement: Customers feel a sense of accomplishment when they reach a goal, and that positive reinforcement encourages them to stay engaged and pursue more rewards.
Emotional satisfaction: Redemption creates an emotional high that strengthens the customer’s bond to the brand.
Motivation for continued engagement: Once a customer redeems a reward, they’ve created momentum to reinvest in the loyalty program and pursue the next milestone.

Here’s the risk: When customers don’t redeem, the emotional benefits never fully solidify. Without the joy of earning and using rewards, customers may see the program as purely transactional. This can lead to disengagement and higher churn rates.

Where loyalty programs fall short in fostering and maintaining emotional connection

Many loyalty programs rely too heavily on transactional rewards. Discounts and points may encourage initial participation, but they lack the emotional depth needed to sustain long-term engagement. Our research revealed loyalty program members who feel emotionally disconnected from a program are less likely to redeem rewards and more likely to disengage. Without the emotional satisfaction that comes with successful redemption, these members often perceive the program as a burden rather than a benefit.

Benefitted

Customers who identify as advocates of a loyalty program, and generally feel that the program benefits them as a member.

Burdened

Customers who identify as passive or detractors, and generally feel that the program is a burden to them.

What happens when emotional benefits are missing?

Reduced engagement: Customers don't feel compelled to participate.
Minimal advocacy: There's little motivation for customers to spread positive word-of-mouth.
Higher churn rates: Emotionally disconnected members are more likely to switch to a competitor.

Example: The emotional gap in grocery loyalty programs

The importance of emotional benefits and redemption is especially evident in the grocery store industry. Grocery store loyalty programs often focus heavily on transactional rewards, such as discounts or coupons, but these incentives alone rarely create lasting emotional connections.

Our research shows that grocery store loyalty programs often struggle because they emphasize discounts over emotional value. When grocery programs solely focus on price reductions, they create a transactional experience where the emotional connection never fully forms. Redemption in these programs often feels routine rather than rewarding, missing an opportunity to create meaningful moments of emotional satisfaction. Without emotional reinforcement, customers may switch to competitors that offer slightly better discounts, highlighting the delicate nature of transactional loyalty.

Building emotional benefits that keep customers coming back to your loyalty program

To create a loyalty program that resonates emotionally, brands need to go beyond transactional incentives. The goal is to make customers feel valued and appreciated at every stage of their journey—and to ensure they experience the joy of redemption. Here’s how to enhance emotional benefits and keep the Flywheel Effect in motion.

1. Make redemption easy and rewarding

Complex redemption processes can create friction and discourage participation. Simplify the redemption process by offering clear intuitive pathways and ensuring that rewards are easy to access and valuable. The easier it is to redeem the more likely customers are to stay emotionally connected.

2. Recognize and celebrate milestones

Acknowledge customer achievements by celebrating milestones and rewarding progress.

3. Personalized communication and rewards

Personalization shows customers that they're valued as individuals, creating a sense of belonging and reinforcing emotional loyalty.

4. Surprise and delight

Build positive emotions in unexpected ways through small rewards or tailored messages. These thoughtful moments can have a profound impact.

What this means for your loyalty program

If you want to create a loyalty program that drives lasting engagement and advocacy, focus on emotional benefits and prioritize redemption. Customers who find it easy to navigate the program and value the rewards they redeem, build stronger emotional connections to the brand. And that leads to stronger business outcomes. When the emotional benefits and redemption take center stage, loyalty programs don't just create repeat customers, they build lasting advocates who are emotionally invested in the brand.

Ready to strengthen emotional connections and drive lasting customer loyalty? Get our comprehensive and complimentary ebook today and discover how to optimize your program for deeper engagement.