Australian brands urged to rethink loyalty schemes

Australian brands are under growing pressure to rethink customer loyalty programmes, according to new research from the Australian Loyalty Association, as household budgets remain strained and consumer expectations rise.

The research found that 80% of Australians expect better offers from brands when they are part of a loyalty programme, while 72% expect better service. More than half (52%) said their household budget is under significant pressure, and 86% said they are using cost-saving measures such as comparing prices, buying on promotion, and switching to home brands.

The results suggest loyalty schemes are being judged more directly on immediate value during a period of weak consumer confidence. They also point to a more demanding customer base that is less willing to remain loyal without clear financial or service benefits.

Another shift is emerging in how people make buying decisions. The association found that 41% of Australians used artificial intelligence tools to research purchases over the past year, adding a new layer of complexity for marketers trying to influence discovery and retention.

Changing habits

The growing use of AI in shopping research means consumers may increasingly compare products, assess alternatives and seek recommendations before visiting a brand's own channels. That challenges the traditional assumption that a customer's direct relationship with a brand begins on its website, in its app, or in its in-store environment.

Sarah Richardson, Founder and Chief Executive Officer of the Australian Loyalty Association, said the sector is being reshaped by economic stress and changing digital behaviour.

"Brands can no longer assume loyalty is a given. Consumers are under pressure, they are actively comparing alternatives and they expect tangible value in exchange for their engagement,," Richardson said.

She said many existing programmes were built for different market conditions, when customers may have been more willing to stay engaged without frequent and visible returns.

"The reality is that many loyalty programs were designed for a very different economic environment. Today's customers expect relevance, personalisation and immediate value. If brands fail to deliver, customers have more tools than ever to find alternatives," Richardson said.

The findings add to a broader debate across retail, travel, financial services and hospitality over whether loyalty schemes still work as long-term relationship tools, or whether they have become short-term discount mechanisms shaped by inflation and digital comparison tools.

AI impact

Artificial intelligence is becoming part of that debate because it can change how consumers filter choices before interacting with brands. If recommendation engines and generative AI tools become a starting point for purchase decisions, companies may need to adapt both marketing and reward structures to remain visible and relevant.

Richardson said the shift has implications beyond customer acquisition.

"AI is becoming the new front door to the customer journey. Consumers are increasingly using AI tools to compare products, research purchases and seek recommendations before they ever reach a brand website. That has profound implications for loyalty, acquisition and customer retention strategies," she said.

Her comments reflect a wider concern among marketers that customer loyalty is no longer confined to points, perks and membership discounts. Instead, it is increasingly tied to how well a company uses data, personalisation and service design to make the customer experience worthwhile at each stage.

"The brands that thrive in the next decade will be those that can demonstrate value at every customer interaction. Loyalty is no longer just a rewards strategy. It's becoming a business-wide growth strategy," Richardson said.

The association represents more than 4,500 members, including Chief Marketing Officers, Chief Customer Officers, loyalty managers and specialists in customer relationship management, analytics and AI. Its research and training activities cover sectors including grocery, sport, retail, charities, financial services, restaurants, travel, entertainment, utilities, business-to-business and business-to-employee programmes.

Mandy Gallie, Vice President of Specialist Sales and Services Business Development at Mastercard, also addressed the backdrop facing loyalty teams.

"The macro environment has never been so volatile. Political uncertainty, economic upheaval mixed with technology and regulatory changes mean that marketers are navigating their loyalty programs through a faster than ever changing landscape. All these disruptive factors are affecting how consumers view loyalty programs whilst the way in which we will purchase in the future will be fundamentally different. As such, the question of trust between a brand and its customers has never been so important. This thought-provoking session by Mastercard will take a glimpse of what the future of loyalty may look like in this brave new world," Gallie said.