When your competitor launches a loyalty program, they’re not just rewarding their customers—they’re reshaping expectations, redirecting spending, and slowly making your brand irrelevant.
If you’re standing still, you’re losing ground.
Let’s explore how this plays out in the real world—what happens to a business that underestimates loyalty—and what you should be doing to avoid the same fate.
The Cautionary Tale: The Fall of Borders Books
In the early 2000s, Borders Group was one of the largest booksellers in the U.S., operating over 1,200 stores globally. They were considered a peer—if not an equal—to Barnes & Noble, and for a time, they had growth, brand awareness, and scale on their side.
But behind the scenes, something critical was missing: customer loyalty infrastructure.
While Barnes & Noble launched its B&N Membership Program in 2000—offering discounts, exclusive deals, and early access—Borders doubled down on short-term promotional pricing and handed off their online operations to… Amazon. They delayed launching any loyalty initiative until 2008, and even then, they positioned it as a generic discount program with no personalization, no tiers, and no data strategy.
Meanwhile, Barnes & Noble:
- Collected valuable first-party data through loyalty signups.
- Built direct marketing pipelines to power repeat visits.
- Created an identity of bookstore-as-community, reinforcing loyalty with in-store events and targeted offers.
- Kept its e-commerce in-house, where loyalty incentives translated to online conversions.
By the time Borders realized what was happening, they were caught in a price war they couldn’t win—and a loyalty war they hadn’t even entered. In 2011, Borders filed for bankruptcy. Barnes & Noble stayed afloat—largely due to a solid core of loyal, high-value customers who felt seen, rewarded, and emotionally attached to the brand.
Loyalty Is a Revenue Engine, Not a Side Project
Think loyalty programs are just about discounts and cards? Think again.
- Customers in loyalty programs spend 12–18% more annually than those who aren’t enrolled (Accenture).
- 79% of consumers say loyalty programs make them more likely to continue doing business with a brand (Bond).
- Loyalty members are 47% more likely to recommend a brand to friends and family (Yotpo).
- Brands with robust loyalty programs grow 2.5x faster than competitors without them (McKinsey).
That’s not just retention—that’s market dominance. Each of these requires very different technical foundations. Starting with “what tool should we use?” skips the most important part of the strategy.
How Loyalty Programs Reshape Competitive Landscapes
When your competitor launches a loyalty program, they’re doing more than giving points:
1. They Lock in Share of Wallet
Loyalty members prioritize one brand over all others. Even if they browse your store, the pull of earned perks drags them back.
2. They Build First-Party Data Moats
Every action a customer takes becomes insight: favorite categories, time of purchase, channel of engagement. That fuels personalization and future offers—something you can’t match if you’re flying blind.
3. They Create Emotional Bonds
Good loyalty isn’t about bribes—it’s about belonging. When customers feel recognized, they don’t just come back—they advocate.
What to Do When the Loyalty Arms Race Begins
If you just saw your competitor launch a loyalty program, here’s how you can respond:
1. Diagnose the Customer Journey First
Where do customers experience friction? What behaviors signal high value? Loyalty programs work best when they align with your natural value inflection points—purchase frequency, cross-sell moments, or tier progression.
2. Think Beyond Points
Points aren’t magic. A successful program might offer:
- Tiered access to exclusive experiences
- Surprise-and-delight perks
- Personalized product recommendations
- Status recognition
3. Build a Scalable Tech Stack
The right platform will let you:
- Track engagement across channels
- Automate offers based on behavior
- Integrate with CRM, POS, and email tools
Don’t overbuild, but don’t skimp—this is the infrastructure of competitive advantage.
4. Act with Urgency
Loyalty programs are habit-forming. Every week you delay, your competitor is solidifying patterns and collecting data. Move fast—but don’t be careless. Launching a half-baked program can be worse than none at all.
The Real Takeaway
Loyalty is not about giveaways—it’s about gravity.
When Borders failed to prioritize loyalty, it wasn’t just a missed feature. It was a strategic failure to understand the future of customer relationships. The company didn’t just go bankrupt because of Amazon or e-books. It went bankrupt because its customers had no reason to come back.
Meanwhile, competitors that did invest in loyalty stayed in the game—even as the retail landscape changed around them.
So if your competitor just launched a loyalty program, don’t ask if you need one too.
Ask what’s stopping your customers from becoming someone else’s loyalists.
Then build the answer.
