Discounts or a loyalty programme? How to choose

Discounts drive quick sales; loyalty programmes build lasting customer value. The pros and cons of each, a real A/B test, and how to choose based on your marketing maturity.

Thibault Heyde4 min read

In short

  • Discounts activate customers quickly, but used too often they eat your margin and train people to wait for the next deal.
  • Loyalty programmes build first-party data and customer value, but only work when they are woven into your customer journeys.
  • You rarely need to choose: use discounts as a trigger and loyalty as the strategy, in line with your maturity.

Two classic tactics dominate the field: discounts and loyalty programmes. But which one delivers the better return? And what do they do to your brand perception, your margins, your customer data and your long-term strategy?

In this article we look at the pros and cons of both, with research, a real example and insights from our Marketing Maturity Model.

Why this choice matters

Building customer relationships takes time and, above all, consistency. Discounts get customers moving quickly; loyalty programmes add value to the relationship. Choosing between them is not a matter of taste. It is a fundamental strategic decision.

Start by asking yourself the right questions:

  • Do I want more revenue in the short term, or am I aiming for customer lifetime value (CLV)?
  • Do I have enough first-party data to make a loyalty programme succeed?
  • What is my margin, and can I afford structural discounts?
  • What stage of marketing maturity is my organisation in?

“It’s not the best product that wins. It’s the brand that builds the best customer relationship.” (Joey Coleman)

Discounts: the fast route to a sale

A well-placed discount works. Think 15% off for new customers, or free shipping above €50. There is no doubt about that: consumer research consistently shows that people are more inclined to buy when a discount is on offer.

The upside of discounts

  • Fast results: ideal for product launches, clearing stock or seasonal campaigns.
  • Low barrier: no elaborate set-up needed, and everyone understands the idea.
  • Psychological pull: the feeling of getting a deal triggers FOMO and a little hit of dopamine.

The downside of discounts

  • Structural pressure on margins: especially with repeated promotions, you risk eating into your profit margin over time.
  • Price perception suffers: once customers get used to promotions, they no longer want to pay full price.
  • Spoilt customers: discount hunters only stay as long as you keep cutting prices.

Loyalty programmes: building the relationship

Loyalty programmes are a long-term strategy. They reward repeat purchases, encourage engagement and turn customers into ambassadors. And, perhaps most importantly, they strengthen your database and your ability to segment.

Why loyalty programmes work:

  • Better customer data: members share information willingly and are easier to follow across email, app and website.
  • Higher CLV: loyal customers tend to spend more than new ones.
  • Cross-sell and upsell: because you understand behaviour, you can personalise offers far more precisely, which lifts conversion.
  • Stronger brand sentiment: the feeling of belonging, of exclusivity, deepens the bond with your brand.

One caveat: a loyalty programme only has real impact when it is built into your customer journey, through email flows, push notifications and personalisation on your webshop. A stand-alone stamp card is not enough. (More on how we approach this on our loyalty page.)

Case in point: a discount can cost you

A Belgian fashion retailer ran an A/B test on a reactivation campaign. Group A received a 15% discount. Group B received a personalised email with a points update and a reward: free shipping plus access to a pre-sale.

The result:

  • Group A: 11.8% conversion.
  • Group B: 17.4% conversion, a higher average order value and lower churn after 30 days.

The conclusion: a discount activates, but value and personalisation are what make people stay.

Match the choice to your maturity

At Pebble we use the Marketing Maturity Model to guide clients as they move from campaign-driven marketing towards intelligent, data-driven journeys. Where you sit on that curve says a lot about what you can realistically ask of a loyalty programme. (Curious where you stand? Try the maturity challenge.)

In practice we rarely see it as either/or. Loyalty platforms such as Antavo or M-Wise handle the points and calculations centrally, and we connect them to tools like Adobe Campaign, Actito or Customer.io to activate the right segments. Discount triggers are tested through A/B tests in reactivation journeys, while a CDP acts as the data backbone to understand behaviour properly. Whether you are just starting out or already well along, the aim is the same: learn to combine discounts and loyalty, optimise, and grow.

Practical takeaways for marketers

  1. Don’t let discounts become a habit. Keep them for exceptions, or link them to loyalty status.
  2. Use a discount as a trigger, not a strategy. Build the relationship afterwards.
  3. Invest in first-party data. A loyalty programme is one of the best ways to enrich your database in a world without third-party cookies.
  4. Build it into your flows. Loyalty actions only really work when they are part of welcome flows, reactivation campaigns and win-back journeys.
  5. Personalise your rewards. Skip the generic 10% and try something like “500 extra points because you’ve been with us for two years today”.

Already running a loyalty programme but missing the activation, or leaning on discounts more than you’d like? Let’s talk.

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