Loyalty programs have long been a staple in Australian and global retail, with brands using points, discounts, and rewards to encourage repeat purchases. But customer expectations of loyalty programs have shifted and driving engagement and cut through is harder than it has ever been.
According to a report released by global data and insights company PureProfile in 2024, there was an 18% lift in Australians using loyalty programs over the prior 12-month period, which in part was driven by customers seeking greater value in a cost-of-living crunch.
According to the For Love or Money, 2024 report, Australians are now on average enrolled in 4.4 loyalty programs, and the percentage of those enrolled in 10 or more is declining. The study highlighted 88 key programs in the Australian market, and whilst an exhaustive list, it is anticipated that there are more than this operating today within the Australian market.
All of this data illustrates that the loyalty landscape is more competitive than ever, and brands are vying for loyalty program attention in a sea of offerings. In today’s market, consumers aren’t just looking for a way to accumulate points – they want meaningful, personalised, and frictionless experiences that align with their lifestyles.
As a result, brands are moving beyond the traditional "earn and burn" model to create deeper engagement, leveraging data, technology, and new value-driven approaches.
So, how is the loyalty landscape evolving, and what should brands be doing to keep up?
The shift towards experience-led loyalty
One of the biggest shifts in loyalty today is the move towards experience-led engagement. Rather than simply rewarding transactions, brands are using loyalty programs to create emotional connections with customers. This could be through exclusive access to events or content, or experiential rewards that drive deeper brand affinity.
Mecca, Australasia's leading beauty retailer, is a prime example of how brands are innovating in the loyalty space through experiences. Rather than relying solely on discounts, Mecca has built a cult following through high-touch experiences, exclusive events, and educational opportunities.
Despite the retailer being infamous for having next to no sales or discounts, every purchase at Mecca will go towards your Beauty Loop Level (when signed into your Beauty Loop account). Higher tier levels unlock an array of valuable experiences including complimentary make up applications, invitations to exclusive and sought after events and more. Even lower levels of members, experience a touch of beauty with curated rewards, creating surprise and delight moments for their members.
To embed greater loyalty through experience, MECCA is also investing outside of their core program to give its community more reasons to engage. The brand’s upcoming 4,000 sqm Melbourne flagship store will include the "MECCA-versity" auditorium, a space dedicated to beauty education and masterclasses. This approach transforms shopping into an immersive experience, making Mecca a destination rather than just a retailer.
For brands, this highlights a key lesson: loyalty today is about more than discounts – experience matters.
The rise of subscription-based loyalty
While traditional points-based systems are losing impact, subscription models and paid memberships are gaining traction. These programs provide ongoing benefits in exchange for a recurring fee, creating predictable revenue streams for the retailer or brand while ensuring customers remain engaged.
According to the PureProfile study, 30% of Australian consumers pay for loyalty programs such as Amazon Prime or One Pass. One in four would also consider signing up for a paid program but expect benefits such as free delivery, special rewards, member tailored pricing and free gifts in return.
Online retailer Kogan.com has turned its loyalty program into a key revenue driver. For an annual fee (which recently increased from $99 to $129), Kogan First members receive perks like free shipping, exclusive discounts, and priority customer service.
Despite the price increase, the program grew by over 100,000 members in 2023, reaching 502,000 subscribers. This highlights the value of a well-executed subscription model – when the benefits are clear and there is high perceived value, customers are willing to pay for ongoing perks. And for the brand, it creates a flywheel effect to secure future sales.
Another provider offering a subscription-based loyalty program is travel provider eDreams. Claiming to be the ‘worlds largest travel membership’, members have access to exclusive savings on flights, hotels and cars for a yearly fee. For regular travellers, the savings far outweigh the cost of the program, making it well worth the small investment.
However, the subscription model isn’t all flowers and roses and can deliver the opposite effect to driving brand loyalty if poorly executed. One of the key customer complaints coming from subscription-based offerings, is that customers are not always aware of what they are signing up for and are stung by unexpected fees. This reinforces how important it is to deliver a clear and effective sign-up process to set expectations and ensure customers know what they are subscribing to and the ongoing commitment.
Subscription-based loyalty models thrive when they provide ongoing, tangible value, as retention hinges on customers perceiving the benefits as worth the cost. Since many programs require monthly or yearly payments, it's essential that brands deliver value within each billing cycle. For instance, monthly subscribers should see clear benefits each month, while annual members should experience consistent value throughout the year. A poorly structured subscription program - where the cost outweighs the perceived value - can lead to dissatisfaction and cancellations. Striking the right balance is key to long-term success.
Instant gratification gives rise to instant cash back
Traditional loyalty programs often rely on delayed rewards, such as points or discounts that take time to accumulate and redeem. However, the rise of real-time payments has transformed the loyalty landscape, enabling consumers to receive instant rewards, cashback, or discounts.
Younger consumers, particularly Millennials and Gen Z, prefer straightforward, immediate benefits over long-term accumulation. This shift in expectations is driving brands to rethink their loyalty strategies, prioritizing instant gratification and seamless experiences to keep customers engaged. These consumers expect instant gratification, and cashback provides that unparalleled level of immediacy that other loyalty mechanics can’t often match.
Shopping apps including Cashrewards & Shopback have built a whole business model around the concept of instant cash back offerings, which serve as loyalty-esque programs for those addicted to shopping. Users simply join for free, shop as usual with their favourite retailers through the platform, and receive their cashback, paid back into their account. They can then save up their cash rewards and choose to receive this directly to their bank or Paypal account or spend it through the apps themselves – who doesn’t love ‘free money’!
And in recent times these apps have introduced subscription offerings to provide extra value back to their core audiences.
Retailers are also getting in on the act, particularly those in the US and UK. Brands like Walgreens have integrated Cashback rewards into their loyalty proposition enabling consumers to gain cash back on storewide purchases, as well as bigger cashback incentives on certain products across the year. myWalgreens members earn Walgreens Cash on everyday purchases, which can be redeemed directly at checkout for discounts on future buys. The program also offers exclusive deals, personalised savings, and bonus cashback incentives on select products throughout the year. By integrating cashback into its loyalty ecosystem, Walgreens ensures customers see immediate value, making it easier to stay engaged and keep coming back.
Integrating technology for seamless loyalty
Whilst not a shift in the model itself, we are seeing customer expectations around how the loyalty program experience is executed rising. Customers expect rewards and perks to be seamlessly integrated into their shopping experience, whether online or in-store.
Woolworths’ Everyday Rewards program is a prime example of seamless loyalty integration, with over 14.5 million members earning points across Woolworths, Big W, and other partners. Members can redeem points for $10 discounts at checkout or convert them into Qantas Frequent Flyer points, making rewards flexible, valuable and instantaneous. As a fully integrated digital experience, customers can easily link accounts, access personalised offers via the app, and apply discounts automatically at checkout - removing friction and keeping engagement high.
Woolworths has combined this seamless digital experience with a subscription model to go beyond the earn and burn model in market through its Woolworths Extra program. With Woolworths Extra, customers can take advantage of 10% off one shop each month at Woolworths & Big W, extra points and extra perks for just $7 a month or $70 a year.
Whilst program design and the mechanisms to drive loyalty are key, brands should be thinking about how to integrate loyalty into their broader experience. Whether through mobile apps, digital wallets, or automated rewards, the less effort required from customers, the more likely they are to stay engaged.
The future of loyalty: where are we heading?
Looking ahead, several trends will continue shaping the future of loyalty in Australia and globally:
Emotional loyalty over transactional loyalty – Customers want to feel connected to brands, not just rewarded for spending. Programs that foster genuine engagement will stand out.
AI and predictive personalisation – Brands will increasingly use AI to predict customer preferences and tailor rewards in real-time.
Seamless omnichannel integration – Loyalty programs will need to work fluidly across online, mobile, and in-store experiences.
Sustainability and values-based loyalty – Consumers are more conscious of sustainability, and brands that align loyalty with purpose-driven initiatives will see stronger engagement.
Loyalty isn’t dead – it’s just evolving. The question for brands is: are you keeping up?
Arktic Fox partners with an array of brands to develop customer-centric strategies that drive retention and growth. Find out how we can help your brand build a winning loyalty strategy in today’s competitive landscape.