Guide
Do loyalty cards work? What the research says
Loyalty cards work, but not for every business and not in every form. Studies of stamp cards find that customers visit more often as a reward gets close, and that a head start makes them more likely to finish a card. Studies of large points schemes find much weaker effects, because those schemes rarely change where people shop.
For a small business with regulars, the evidence favours a simple card with a reward that feels within reach, handed over by people who know the customer.
What the studies found
Five published studies are worth knowing. They don’t all agree, and the disagreement is useful.
Customers speed up near the reward
Kivetz, Urminsky and Zheng (2006) followed a café’s “buy ten coffees, get one free” card. Customers bought coffee more often as the free one got closer, slowed down after earning it, and sped up again as the next reward came into view.
A head start gets cards finished
Nunes and Drèze (2006) gave car wash customers either an eight-stamp card or a ten-stamp card with two stamps already filled. Both needed eight visits, yet 34% finished the head-start card against 19% for the plain one.
Occasional customers change the most
Liu (2007) tracked a convenience store programme over time. Customers who started as light or moderate buyers gradually bought more and became more loyal, while the heaviest buyers claimed the most rewards without changing how they shopped.
Big multi-brand schemes change little
Sharp and Sharp (1997) studied a large Australian scheme that covered many brands and found only a small amount of extra loyalty compared with what each brand’s market share predicted.
The value behind the card matters most
Dowling and Uncles (1997) reviewed loyalty schemes and argued that most don’t change the market. The ones that work add to what the business already offers and give loyal buyers a reason for the next visit.
What this means for a café, salon or shop
A small business is closer to the café in the first study than to the national scheme in the fourth. The customer knows the staff, the reward is something they want, and progress is visible on every visit. That is the setting where the evidence for loyalty cards is strongest.
The studies also point to where cards fail. A card that takes too long to fill loses people before the reward starts pulling them in. A card that mostly rewards regulars who would come anyway costs money without changing much. And a card left at home in a coat pocket can’t remind anyone of anything, which is the practical case for keeping it on the phone.
Read the studies as a guide to how cards tend to behave, not a forecast for yours. Each looked at one kind of business or scheme at one point in time, some of them more than twenty years ago, and a result from one café or car wash won’t carry over exactly to your counter. If you’re starting out, how to start a loyalty programme turns these findings into steps.
When a loyalty card tends to work, and when it doesn’t
| What matters | Tends to work | Tends not to |
|---|---|---|
| The reward | Something customers want, close enough to picture | A small saving far in the future |
| Progress | Visible on every visit | Hidden in a balance nobody checks |
| Who it moves | Occasional customers who could become regulars | Regulars who were coming anyway |
| What it adds | A thank-you on top of good service | A discount standing in for it |
Designing a card with the evidence in mind
Start people part of the way
Welcome stamps put the head-start effect to work from the first visit.
Keep the finish line in sight
Fewer stamps and a reward people want beat a long card with a bigger prize.
Expect a pause after each reward
Customers slow down once they’ve been rewarded. A gift after time away, such as a “we miss you” campaign, catches the ones who don’t come back.
Aim at the occasional customer
Your most loyal regulars will come anyway. The card earns its keep by turning the monthly visitor into a weekly one.
Questions, answered
Do loyalty cards increase sales?
They can increase how often customers come back, especially customers who visit only now and then. Published studies find the effect strongest for simple rewards that feel close and weakest for big schemes covering many shops.
Are digital loyalty cards better than paper ones?
They rely on the same psychology. The practical differences are that a digital card can’t be left at home, shows progress on the phone, and can’t be filled with a copied stamp.
What is the goal-gradient effect?
The finding that people put in more effort as they get closer to a goal. On a loyalty card it shows up as customers visiting more often when the reward is a few stamps away.
What is the endowed progress effect?
The finding that a head start toward a goal makes people more likely to finish it, even when the remaining effort is the same. Welcome stamps use it.
Why do some loyalty programmes fail?
The reward is too far away or too small, the rules are hard to follow, staff stop mentioning the card, or it only rewards customers who were coming anyway.
Give them a little something
to come back for.
Make a card that feels like your business and put the poster up by the till.
Create your card