An existing customer who gets a discount learns to wait. One who gets currency, access or recognition learns to come back.
Anderson and Simester’s established customers bought less after deeper discounts. Dholakia’s self-starters reacted badly to reminder coupons and well to being recognized. Put together, the research says the people who already chose you should be rewarded in a different currency from the people you’re trying to win.
| Reward | What it costs you | What it teaches |
|---|---|---|
| Percent off | Margin on every order that uses it, including orders already coming | “The real price is lower. Wait for the code.” |
| Points or store credit | Product at your cost, only when redeemed, and only for what’s redeemed | “Coming back is how you collect.” |
| Early or exclusive access | Almost nothing, if the product sells anyway | “Being a customer gets you in first.” |
| A gift at a milestone | One product at cost, at a moment you choose | “They noticed.” |
Points and credit are the same idea Close the Loop calls a currency you can print. A $10 credit costs you the product cost of whatever it buys, and nothing at all when it isn’t redeemed. A 10% code costs 10% of revenue on every order it touches.
A discount spends margin. Points spend a currency you print.
From my work: in a retention plan I built for a jewelry brand in 2026, every lifecycle email carried one value module, and it had two states. Most customers saw their loyalty points balance, framed as something to spend (“you’re sitting on 340 points; they’d look better as jewelry”). Only customers the platform scored as high churn risk, and the last touch of a sunset flow, saw a discount code instead. One switch on the profile decided which state rendered.
The design point is the switch. Discounts don’t disappear; they become a tool for the customers who need one, instead of a habit for everyone.
The most common mistake in loyalty programs is paying the best customers the most margin. Top customers were buying at full price before the program, which makes them Anderson and Simester’s established customers in their purest form. Give them access, recognition, service and first look. Give the discount to the customers who haven’t decided yet.
This is one chapter of The First Offer, which is free and readable in full on a single page with no form in front of it.