Returning the favor (1): A Quick Overview of the Loyalty Market

15 May 2023


Dinara Rosow & Dr. Tristan Ticken

Did you know?

  • It costs up to 25 percent more to acquire a new customer than to retain an existing one (Gallo, 2014).
  • 65 percent of retail purchases are generated by returning customers (Annex Cloud, 2021).
  • A 5 percent increase in customer retention correlates with a 25 percent increase in sales (Reichheld, 2001).


These are just three of the many statistics that prove it: Customer loyalty pays off for brands and retailers. But how can you actively build and manage loyalty? Loyalty offers, i.e. bonus and rewards programs, can be a central instrument for promoting customer loyalty. As a result, they have become widespread - whether operated by individual brands or as part of aggregator models that combine the brand benefits of many different providers under one roof. 

Below, we outline the trends and strategies we see in the loyalty market today, and where we think brands can best start to build a successful loyalty program for their customers.

The loyalty market is highly competitive

According to a survey by Accenture, more than 90 percent of companies offer some form of loyalty program. In Germany, four out of five people use at least one loyalty program (Hello Again Loyalty Report, 2021). In the U.S., consumers belong to an average of 16.6 programs, and about half of them are actively used (Bond Brand Loyalty, 2022).

Payback and DeutschlandCard dominate

In our opinion, the German market for rewards and loyalty programs is still underdeveloped by international standards, and we believe that there is sufficient potential and leverage to experiment with new approaches and establish a unique offering. However, it is also clear that "just another loyalty program" is unlikely to inspire customers or increase their engagement with the brand. There is simply no room for more generic loyalty offerings. Existing programs, most notably Payback, are now too established and too strongly positioned for their market position to change much. Payback works on the cashback principle: Payback points collected on purchases can be paid into a bank account or exchanged for rewards and vouchers. Apart from Payback, DeutschlandCard is the only other player in the cashback market: It is backed by a complementary partner network that also offers cashback as an incentive for customer loyalty and is characterized by a high degree of everyday relevance for customers.

Plenty of room for innovation

Despite the dominance of Payback and DeutschlandCard, there are a number of very successful programs on the market that are experimenting with different program design options and using innovative concepts and features to reward and retain their customers. We have analyzed the different loyalty trends and approaches and concluded that there is a lot of potential in the areas of end-customer benefits, partner ecosystems and technology to build a successful loyalty program that is differentiated in the market by more than just the issuing brand.

In the second part of this series, we will look at the starting points of the customer experience in terms of end-customer value, in order to retain customers through a successful loyalty program. Part 3 focuses on the potential of partner ecosystems. In the fourth and final part of this series, we will take a closer look at Web3 technology as an area of opportunity for developing a successful loyalty offering.


Header: Alexander Grey via Unsplash