As consumers, we’ve been told for years that to be considered ‘loyal,’ we must collect and redeem points — and ultimately feel rewarded. However, these schemes often create a dependency on discounts and incentives, instead of deepening the bond between a brand and its customer.
All this does is condition consumers to wait for the next reward, with loyalty becoming less about the genuine relationship and more about the price of the next transaction.
Points often just reflect behaviour, which can be trained and ultimately bought. True loyalty looks different. It’s when a customer puts their reputation on the line by recommending a brand to someone they know. That’s why word-of-mouth advocacy remains one of the most honest currencies of loyalty in retail.
That’s not to say points are, well, pointless. Many leading loyalty programmes already go beyond discounts, blending transactional rewards with experiences, access and recognition. Points can be a useful mechanism, but they rarely reveal the depth of advocacy that word-of-mouth can.
Why Word-of-Mouth is a Stronger Measure of Loyalty than Points-Based Schemes
Unlike points schemes that reward repeat transactions, advocacy programmes build on the oldest form of marketing (personal recommendation) by recognizing customers who actively share the brands they love.
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That could mean a discount for both the advocate and their friend, an exclusive perk or even recognition within a community. In essence, word-of-mouth turns loyal customers into advocates: people who proactively and authentically grow the brand by sharing it with others. This is pure, customer-led growth.
Yes, points can drive purchases and customer interest, but they don’t always prove loyalty. In fact, recent research from BCG shows that engagement with loyalty programmes in the U.S. has dropped about 10% since 2022, and ‘loyalty’ itself has declined by roughly 20%. This suggests that people are growing weary of traditional points and perks schemes.
Getting your free coffee after collecting points? That isn’t loyalty. You’re responding to a prompt. On the other hand, word-of-mouth tells us something deeper: that a customer actually values their experience so much that they’re ready to put their name behind it.
Unlike points-driven behaviour, personal recommendations are not trained or bought — they come from customer trust. Trust is hard to win and very easy to lose, which is why it carries far more weight than a few points on a card. That said, word-of-mouth carries its own risks, such as ‘referral fatigue’ once a customer’s immediate circle is tapped out. You also risk incentivised ‘spammy’ behaviour. To avoid these pitfalls, you must focus on the quality of the customer over volume of endorsements.
This doesn’t mean points programmes have no place in the industry — they can be effective tools for rewarding repeat purchases and encouraging engagement with the brand, but they are most powerful when paired with advocacy. Put simply: points drive engagement, organic endorsements prove advocacy, and together, they create a fuller picture of loyalty.
The Psychology of Why People Share Brands They Love
Humans are inherently social. We crave connection, which is the cornerstone of brand advocacy marketing campaigns. We’re hardwired to seek out community and become part of ‘our tribe.’ The connections, whether family, friends or colleagues, are built on a foundation of trust and authentic experiences.
So why do we refer? Simply put, it makes us feel good. It lets us help others, look knowledgeable or strengthen our social ties. Telling a friend about a brand you love can feel like giving a gift: “I found this, I think you’ll like it, too.”
Some brands are even turning their top referrers into VIPs. Take the jewellery brand, Astrid & Miyu. It recognises its biggest advocates with exclusive access and status rather than endless discounts and points. Money-off vouchers have their place, but recognition, belonging and identity are often more powerful motivators for customers to want to return and vouch for their favourite brands.
Why Boards Should Start Tracking Extended Customer Revenue
Customer Lifetime Value (CLV) has long been the main way to measure customer value, calculating the net profit a customer generates over their time with a brand. But CLV only measures what a customer buys themselves, and doesn’t consider the value of the customers they bring with them via referrals.
That’s where Extended Customer Revenue comes into the picture. This idea expands the view of customer value to include both direct purchases and the additional revenue that comes from any word-of-mouth endorsements. In practice, it can completely change how a board views its most valued and important customers.
To use a real world example, Huel, the British nutrition brand, found that customers who joined through a referral were twice as likely to sign up for its loyalty programme. Loyalty members were in turn 53% more likely to refer themselves. This creates a 360-degree effect where referrals grow loyalty, loyalty grows referrals and the cycle repeats. That’s what I call an organic growth loop.
Forward-thinking boards should consider tracking ECR alongside CLV in their dashboards, as it provides a more holistic view of how value spreads through networks — not just through transactions.
A New Loyalty Playbook
Retailers today, more than ever, face immense competition with other new brands entering the market for the first time. Customers can switch their preferred brand with just a swipe and are very easily led astray. With that sort of environment, points alone won’t cut it. Instead, which channel will reveal the most genuinely loyal customers who keep returning? Yes, referrals.
As I said, that doesn’t mean abandoning loyalty programmes altogether — it simply means re-balancing the equation. Points reward transactions, referrals reward advocacy. When you have both in play, you can build loyalty strategies that protect margins while also creating communities of genuine brand fans.
Word-of-mouth may be the oldest form of marketing, but the future of loyalty isn’t about clinging to that phrase. It’s about what it represents, and that is authentic advocacy, trusted recommendations and customer-led growth at scale. That’s the loyalty currency retailers need for the years ahead.
Neha Mantri, MBA, is VP of Marketing at Mention Me, taking the brand’s customer-led growth vision to market while driving business expansion. With 15+ years in consumer retail and tech, she has led brand campaigns that boost revenue and loyalty and helped companies like Trustpilot and Vonage scale internationally. Known for blending data-driven insight with creative vision, Mantri delivers marketing that accelerates global growth.
