Marketers Tap Industry Partnerships and AI to Reimagine Loyalty Programs That Boost Customer Retention and Sales

Small business takeaway:

• Loyalty programs are becoming a bigger part of the customer experience, with H&M rewarding garment recycling, Delta letting top travelers choose and gift perks, and Molton Brown fragrances using unified customer profiles to sharpen repeat purchase offers. The business takeaway: Retention now hinges on relevance beyond coupons, partnership networks across noncompeting brands can make rewards more useful across everyday spending, and AI is turning one-size-fits-all programs into real-time customization engines that trigger personalized offers and prepare for agent-assisted shopping.

Successful loyalty programs are evolving to become more experiential and holistic in the value they provide, aided in part by artificial intelligence.

Brands from H&M and Delta Air Lines and luxury fragrance brand Molton Brown are expanding their loyalty rewards beyond product discounts and leveraging technology to create more engaging and relevant experiences for their best customers.

“What businesses need to understand is that loyalty programs and true loyalty are not always one and the same,” said Megan Malli, CEO of AnswerLab, which specializes in research and consulting around the consumer experience, in an interview with CO—. “It’s about moving from rewarding transactions to building relationships.”

Put another way, brands need to think about their loyalty programs as being “relational” as opposed to “transactional,” said Sara Richter, Chief Marketing Officer at SAP Engagement Cloud, in an interview with CO—. Transactional loyalty can be a cost center because it is focused on providing discounts, promotions, and point redemption, she said. Loyalty that is relational, however, can help drive higher repeat purchase rates, increased lifetime value, lower churn and reduced acquisition costs.

“Understanding customers as people, not transactions, is what creates customer value and leads to true loyalty,” Richter said.

SAP’s annual Customer Loyalty Index for 2026 found that incentivized loyalty — driven by discounts, incentives, and rewards — is in decline as a stand-alone loyalty strategy, she said.

“Rewards and deals alone no longer secure customer relationships,” Richter said. “Customers are signaling they now value other types of benefits: consistent and interconnected experiences across touchpoints, responsible use of data, frictionless shopping processes, great customer service, and more.

“Loyalty programs that incorporate these customer benefits into their engagements will have a significant advantage,” she said.

H&M leverages sustainability; Delta offers flexibility

One example of a loyalty program that combines brand experience with rewards is the Membership Program at H&M. The fashion retailer rewards members for donating used garments to the company’s recycling bins, in addition to more traditional rewards in the form of points per dollar spent. This acknowledges the sustainability concerns of its shoppers and aligns them with the retailer’s own sustainability goals, according to a recent SAP report.

Malli cited Delta as another example of a company that elevates loyalty beyond the transaction points-based approach and strives for high levels of personalized service to its most frequent travelers, she said.

For example, the company allows Diamond and Platinum Medallion members of its SkyMiles program to select the benefits they would like to receive. This includes the opportunity to share their membership status with friends or relatives as a gift — one gift when members earn Platinum status and three gifts when they earn Diamond status — or to use their benefits to fund sustainable aviation fuel credits.

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Loyalty coalitions grow to include more brands

Another key trend in loyalty programs is partnerships among brands that offer rewards to each other’s products and services.

“The loyalty programs of the future will include automated point accrual through card-linking and point-of-sale integrations alongside partnership networks that allow consumers to spend rewards across noncompeting ecosystems,” said Francesco Onorato, Director of Growth at Brandmovers, which specializes in loyalty and promotions.

For example, Delta has a partnership with Starbucks that allows members to earn miles based on dollars spent at the café chain, and many large supermarket retailers, including Kroger, Stop & Shop, and Albertsons, now have partnerships with fuel stations like Shell, Amoco, and Chevron that allow members to earn gas discounts.

Such loyalty coalitions — credit cards that earn travel miles toward airline discounts are another example — are not new, but they’re on the rise. According to a recent report from research firm EY, 79% of organizations surveyed are now part of an alliance network, up from 73% in 2025 and 68% in 2024.

“Instead of trying to do everything on their own, companies are leaning on partners to meet customers’ evolving needs and offer a broader range of ways to earn and use rewards,” the report said. “Coalition networks make it easier to deliver more value, more quickly, without having to build every capability in the house.”

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AI can help synthesize data, improve speed and relevance of loyalty programs

The concept of customer data that is “siloed” in different areas of an organization has long been a challenge for brands seeking to drive customer loyalty. Many brands have separate point-of-sale, e-commerce, and customer service platforms that don’t share data, said Richter.

While AI promises to help companies overcome these impediments, the key to success will be unifying the data that the AI relies on, she said.

For example, she cited luxury bath products maker Molton Brown, which Richter said previously had fragmented customer profiles across 35 different brands. By working with SAP to unify its customer data, Molton Brown was able to synthesize information about cross-brand purchase behavior and the preferences of its best customers, Richter said.

That translated into better loyalty programs and a 20% uplift in repeat purchases, she said.

Meanwhile, AI is enabling both faster and more personalized communications with loyalty-program members.

“AI transitions loyalty programs from static, rule-based systems into real-time, hyper-personalized engagement engines that automatically trigger tailored offers based on individual buying habits,” said Onorato.

While brands are leveraging AI to issue instant rewards and offers, their customers are also increasingly using AI on their shopping journeys. Brands will need to ensure that the AI “agents” these shoppers are using are also learning to develop an affinity for the brand, said Malli.

“If [the customer’s] connection with your brand isn’t what they love anymore, they may train their agents to find another brand,” she said.

Brands need to consider how they can ensure that these shopping agents see and recognize the positive attributes of the brand that the customer appreciates so that the agents themselves learn the value of the brand, said Malli.

Measurement strategies evolve beyond transaction volume to assess — and reward — customer loyalty

Measuring brand loyalty has emerged as a key aspect of managing these programs. Brands need to consider factors such as engagement with content, referrals, subscriptions, support for brand values, and a willingness to share data rather than measuring transaction volume alone, Richter said.

“Who is more valuable, a customer who buys one pair of jeans and recommends you to 10 people who all [make a] purchase, or a customer who buys two pairs and tells no one? Traditional metrics miss this entirely,” she said. “That means rethinking what loyalty programs actually measure and reward in the first place.”

Malli agreed that brands will need to rethink how they measure loyalty.

“Loyalty has always been measured by repeat customers, loyalty point usage and things like that,” she said. “I think it’s going to be important for brands to look at it from a different angle and start to think about how customers are actually talking about your brand, and also, how much are they willing to spend? Is your relationship with them increasing spend value and cart value?”

Rethinking value amid consumer concerns about costs

For many consumers, cost savings are a key incentive for joining a loyalty program, but retaining customer loyalty during inflationary times can be especially challenging.

SAP’s 2025 loyalty research showed that 36% of U.S. customers prioritize cost over brand loyalty, and 26% felt they could no longer afford to be loyal specifically due to rising costs from tariffs.

Brands need to ensure that their customers continue to see value in their loyalty programs as prices rise, said Richter.

“The [loyalty] programs that suffer during inflation are those that do not adapt — the ones that devalue points, make redemption harder or raise membership fees without increasing perceived benefits,” she said.

Brands are taking several actions to adjust their loyalty rewards to counter inflationary pressures, Onorato said. These include shortening the time to a customer’s first reward through welcome bonuses and offering popular perks such as instant cashback, free shipping or gift-with-purchase promotions. Brands are also introducing more flexible redemption options that allow consumers to immediately offset out-of-pocket costs using the balance they have already accumulated, he said.

Malli said brands still need to maintain a holistic and experiential approach to driving loyalty amid consumer financial pressures, however.

“I think price gets people through the door, but the reason they come back is what brands really need to be focused on,” she said.

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