3 Ways to Fine-Tune and Improve Retail Loyalty Programs

As retailers refine their 2025 marketing strategies against signs of softening demand, one key priority should be improving shopper engagement and loyalty program return on investment. According to Deloitte’s 2025 U.S. Retail Industry Outlook, six in 10 retail executives anticipate consumers will value price over loyalty this year. This makes it even more critical that brands ensure their loyalty programs are worth it to customers by eliminating friction while enhancing the customer experience to maximize consumer participation and long-term profitability.

Here are three ways retailers can improve their loyalty programs:

1. Personalization: Make Every Interaction Relevant Through Data

More than ever, personalizing loyalty programs should be a top priority. Today’s customers simply expect personalized shopping experiences. To drive meaningful engagement, brands must leverage data analytics to understand individual buying patterns, preferences and behaviors. By doing so, retailers can offer customers more targeted and relevant promotions such as personalized discounts or rewards based on past purchases or custom product recommendations that align with preferences.

Retailers that use artificial intelligence-driven insights at scale to personalize their loyalty programs for individual members are likely to see higher redemption rates and improved customer satisfaction. McKinsey reports that businesses implementing personalization can see as much as a 15 percent revenue lift.

A word of caution: The holy grail of well-executed personalization depends on the quality of data (from all sources). AI-driven personalization only works when the data going into your tool is reliable and accessible. As Deloitte notes, “Many retailers are saddled with outdated systems and siloed data that might take days to produce usable insights, impacting their ability to react quickly to changing consumer preferences. Addressing data quality is essential.”

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2. Omnichannel Experience: Seamless Engagement Across Touchpoints

Customers interact with brands across multiple channels: online, in-store, and through mobile apps. A fragmented experience reduces customer engagement and contributes to weaker loyalty. To counter this, retailers should ensure their loyalty programs are effective and easy to access both online and in stores. This includes allowing customers to earn and redeem rewards across all channels.

Those tactics are simply table stakes. As more retailers look to strengthen the in-store experience, they can extend loyalty program benefits such as priority “buy online, pick up in-store” accessibility for members. Other examples of such benefits include enhancing home delivery services or simply making it easier for the member to redeem loyalty benefits from any channel while in-store. For example, Foot Locker has enabled its FLX loyalty program members to redeem FLX points in-store as cash towards purchases, removing a source of friction, keeping members engaged, and helping them more easily redeem rewards. After all, over 80 percent of retail sales still happen in-store.

3. Tiered Loyalty Programs: Encouraging Long-Term Engagement

According to the Deloitte survey, over half of the respondents expected to invest in improving their loyalty programs to create more profitable results through tactics including tiering. Unlike traditional, one-size-fits-all loyalty programs, tiered structures naturally introduce segmentation among customers, further enabling personalized offers and experiences to different customer levels.

Key benefits of tiered loyalty programs include:

• Motivation Through Progression: With this “buy more, get more” model, customers are incentivized to increase engagement and spending to move up tiers and unlock better rewards.
• Transparent Structure: Because tiered programs are straightforward, customers can easily see their progress and get benefits at each level.
• Optimized Profitability: Premium benefits can be reserved for higher-tier customers, ensuring that discounts are aligned with those customers’ value to the business.
• Help With Personalization: Tiers contribute to brands’ ability to tailor rewards and communications to different customer segments, enabling a more personalized experience.

For maximum effectiveness, retailers should carefully define tier thresholds, ensure rewards are desirable at every level, and use clear messaging to communicate benefits and progression criteria. A well-executed tiered program not only fosters loyalty but also enhances customer lifetime value by creating a goal-oriented experience.

Final Thoughts

As retailers continue executing their 2025 strategies, now is the time to rethink and revitalize their approach to loyalty. By making strategic improvements, brands can turn their loyalty programs into a competitive advantage, driving higher conversions, deeper customer relationships, and sustainable revenue growth.

Michelle Wood is senior vice president, merchant development at Wildfire Systems, which helps companies monetize their users with white-label cashback and coupon services.