Why identity benefits are the key psychological connection in loyalty programs

Part 4 of 4 in our series covering the psychological benefits influencing customer loyalty programs.  

Identity is the invisible force behind many decisions. Whether choosing a brand that aligns with your values, joining a loyalty program that makes you feel included or buying products that reflect who you want to be, a sense of self plays a powerful role in customer behavior.   

In fact, a loyalty survey found 60% of customers are satisfied with the current level of personalization in their loyalty programs. This is just one small example of how customers not only want rewards; they want connections that support their identity. 

A well-designed loyalty program enhances a customer’s self-perception, allowing them to express who they are (or who they aspire to be), while reinforcing their role in a community. In the fourth and final article in our series, we'll explore how weaving identity benefits into a loyalty program strengthens a customer’s connection to a brand, creating a deeper sense of value and belonging. In turn, this creates stronger customer engagement, increased lifetime customer value and longer-term brand advocacy. 

Why identity is essential for the best customer loyalty programs 

To best understand the importance of identity in psychological wellbeing and customers’ experience, let’s recap functional and emotional benefits. 

• Functional benefits are the real and useful advantages that help customers reach their goals. They save time and offer financial value, among other things. 
• Emotional benefits help customers see the brand positively. They feel appreciated, special or happy when they join the loyalty program. 

Identity stands out. Identity benefits integrate the brand into a customer’s self-concept. This connection encourages long-term loyalty. When a customer feels aligned with a loyalty program’s values, lifestyle or community, it fulfills a core need for self-affirmation and belonging.   

Strong identity benefits turn customers from loyalists into fierce brand advocates who view a brand’s loyalty program as a reflection of themselves, their aspirations and their sense of community. But identity isn’t just personal—it's social as well.  

Related link: Understanding the power of emotion in loyalty programs and how it drives retention 

How social identity and belonging drive loyalty program success and retention 

The human need for community is “a powerful, fundamental and extremely pervasive motivation,” as stated by Roy F. Baumeister and Mark R. Leary in their landmark research study, “The need to belong: desire for interpersonal attachments as a fundamental human motivation.” Understanding identity’s role in how customers see themselves in social groupings influences the impact of your loyalty program. Loyalty programs help customers express who they are or who they aspire to be, while also surrounding themselves with people who have similar values, lifestyles or preferences.  

For example, a high-status airline loyalty tier can signal prestige and exclusivity to others. A member of that airline loyalty program enjoys the reputation tied to both the loyalty program and the esteem of other members.  

Should you doubt that this is the case, the next time you fly, watch the passengers who get to board first and how they interact with each other, even as strangers. Their status is a common bond they share, and they feel like they’re part of the same club. That’s social identity.  

Loyalty programs that reinforce identity help customers embody the person they aspire to. For example, a doughnut shop can help customers become the “office hero,” where a customer takes pride in bringing treats for their coworkers and earning appreciation. In recognizing and rewarding this behavior, the shop reinforces the customer’s role as a generous team player, strengthening their loyalty to the brand and their social identity in the office. 

Why building identity in loyalty programs is challenging 

All this may sound like a lot to navigate for brands, and it is. Maximizing a loyalty program’s strong psychological benefits requires brands to balance how they speak about the functional, emotional and identity elements of their loyalty platform. Effectively conveying the full range of these benefits is a significant challenge and investment.  

Many brands struggle to create any kind of identity, let alone a strong identity connection, often due to a lack of personalization or an inability to clearly communicate the deeper value of their program. Without this, loyalty programs risk becoming just another transactional perk rather than a meaningful extension of a customer’s identity. That connection integrates the customer to the brand’s overarching engagement strategy.  

Related link: Why should brands care about customer habits? 

How to strengthen identity benefits in your loyalty program 

1. Incorporate appropriate personalization and targeted messaging

Consider how personalized communications and targeted offers help reinforce a customer’s sense of identity and belonging. An example could include brand messaging or breakthrough touchpoints making customers feel like they belong to an exclusive, smart or unique group. 

2. Refine your program to build stronger identity, with a focus on community

Move beyond transactional rewards only to benefits that align with the customer’s self-image and social connections.  

3. Communicate identity through your brand values and loyalty platform messaging

The way brands communicate their values and loyalty benefits shapes how customers see themselves within their desired community. Customers are drawn to brands that reflect their personal identity and foster a larger sense of belonging. Clearly state how membership connects customers to a like-minded group, whether through exclusivity, shared values or status. When done well, this communication reinforces a customer’s desire to be seen as part of something bigger.  

When customers see themselves in your brand, they embrace aspects of the brand’s identity as their own. A strong loyalty program provides customers with a sense of belonging, a way to express themselves and a connection to a larger community. Embedding identity benefits into your loyalty program transforms passive customers into passionate advocates. When customers feel understood, valued and part of a larger community, their relationship with your brand deepens, driving engagement, advocacy and lasting loyalty. 

Discover how to further deepen customer relationships through your loyalty program with our exclusive loyalty research. Read feedback from 5,000+ customers on what they really want from loyalty programs.