For restaurants, historically a cash-based business with anonymous customers, the primary purpose of a loyalty program isn't discounts. It's a data acquisition tool that converts 'unknown diners' into known customers, providing actionable data on visit frequency and purchase behavior.

The goal is not just to drive another purchase with a discount, which is described as a "drug." Instead, brands should foster an emotional attachment through superior product, experience, and personalization, making customers genuinely happy to engage with the brand.

Co-branded card partnerships are far from ancillary income. For airlines, this stable, high-growth revenue stream can account for up to half of their total mid-cycle profitability, boasting operating margins of 35-50% in an industry that struggles to reach double-digit margins on its core business.

Brands often misinterpret repeat purchases driven by discounts or points as genuine loyalty. True loyalty is an emotional connection, not a transactional one. This "entrapment" model fails to build lasting customer relationships or brand affinity.

The relationship between banks and airlines is shifting from pure partnership to competition. Banks are developing their own premium travel benefits, including proprietary airport lounges and flexible reward points, which directly challenge the value proposition of airline-specific loyalty programs and vie for the same affluent customer.

Previously, brands used rewards platforms tactically for seasonal promotions. Now, due to economic pressures and the need for proven ROI, they view these platforms as strategic partners, collaborating on audience acquisition and mutual goals rather than dictating terms in a one-sided relationship.

The media narrative that credit cards subsidize unprofitable flights is wrong. The two are linked businesses. The massive income from card programs would not exist without the core airline product and route network that gives the points value.

Loyalty programs don't just ensure repeat business; they accelerate it. Due to the 'goal gradient effect,' as people get closer to a reward (like a free flight), they increase the frequency and size of their purchases to reach the goal faster, often overspending.

While upfront discounts boost initial sign-ups, they often lead to high churn as the value is immediately spent. An "airline miles" style loyalty program that rewards customers over time builds long-term value and keeps them engaged with the service.