There’s a ton of reading material on Loyalty Programs and transactional vs emotional connection. In fact, Loyalty Programs and Fan Clubs can be (and are) often used interchangeably.

However, there are some fundamental differences that brands should consider when thinking about whether they should launch one or the other. Let’s break down how the two types should be defined and thought about for maximum impact.

Loyalty Programs

My definition is: “A Loyalty Program is a structured program that rewards and recognizes registered members for repeat transactions.”

In most cases, a brand will operate the program and invite any of their existing or potential customers to join and become members.

Once the member base has been established, several things are immediately evident.

• A bell curve is visible, which generally separates the most engaged segments, the least engaged and the everyone in between.
• Activity rate (usually based on transactions) shows member spend behavior. Depending on the member segment populations from #1, the rate will fluctuate and on average be somewhere in the 50% (will be different by industry, program type, etc)
• Non-transactional member engagement is usually quite low, because often, the program has been designed around supporting transaction frequency and basket size.

Ultimately, what the brand is trying to do here is stimulate the ‘right’ member behavior that is deemed valuable to the brand.

Highly engaged segment

Usually, the first ones to join a program are the brand’s most ardent supporters because they are making an easy choice to continue engaging and extracting value ongoing. There is little need to change the behavior of this group, because they are already displaying behavior that is valuable to the brand. For this segment, the brand should deliver elements of recognition, surprise & delight and provide a pathway to amplify advocacy.

Least engaged segment

These are usually the value seeking single purchasers who join to access either a bonus or a discount. Once transacted, many never return. For this segment, the brand typically tries to plan ways to secure at least 1 incremental transaction from a subset of members.

Everyone in between

This is a bit of a mixed bag. There are the members who have the potential to become highly engaged, if nurtured correctly. There are members who may have transacted a couple of times and perhaps had a sub-optimal experience. The treatment for these segments should vary and that’s naturally up to the program manager to leverage the most optimal path forward.

This is the traditional Loyalty Program model. The key takeaway is that most of this database are generally not hardcore brand fans with a strong emotional connection.

Fan Clubs

My definition is: “A Fan Club is a structured community that converts existing brand affinity into content creation, insights, advocacy and incremental commercial value through engagement-led experiences.”

Find it

The Fan Club effectively flips the traditional Loyalty Program model on its head. Instead of trying to stimulate the right behavior, the behavior already exists. That’s a much easier proposition to manage. Therefore, the challenge isn’t to change behavior; it’s to find the right behavior.

Acquire it

Under this mode, what brands must avoid doing is running general acquisition campaigns that stack the Fan Club membership with anyone and everyone. That will only dilute the highly engaged fans and create an environment similar to a Loyalty Program. Restraint is key.

When done correctly, each fan becomes a multiplier many times over. Fans join the Fan Club for the love of the brand, not for discounts. Intrinsic motivation is the entry requirement.

That’s the single biggest differentiator and the real unlock in terms of thinking.

Amplify it

These fans are already doing all the things that are valuable to the brand. They are engaging with its content, they are talking about it to others in person and online, and of course, they are transacting. But the transaction is the outcome, not the baseline expectation.

The objective should really be to measure the influence of these fans, rather than talk about the size of the base. The real question is how many new fans does each true fan convert? That’s the multiplier.

It’s worth being clear that a Fan Club and a Loyalty Program aren’t opposites. The most sophisticated Fan Clubs don’t discard transactional mechanics; they absorb them. A well-built Fan Club can still reward spend, but it does so inside a community built on belonging, rather than the other way around. The distinction isn’t loyalty versus community; it’s which one leads. In a Loyalty Program, the transaction leads. In a Fan Club, the belonging leads and the transaction follows.

Where fans naturally form

The right program model isn’t just an industry decision, but a brand one. The question every brand needs to ask is: do fans naturally form here?

Organic engagement

For brands where the product itself generates organic engagement, where consumers are already posting, sharing, creating content, recommending without prompting and building identity around what they buy, a Fan Club may be the right choice.

The infrastructure already exists in their behaviour. The brand then finds it, formalizes it with a bit more structure and helps to amplify it.

Think craft food and beverage brands, beauty and personal care, fitness, lifestyle and culture-adjacent categories. These are spaces where fans form long before a program exists.

Transactional skew

For brands where engagement is driven primarily by purchase frequency, convenience or price sensitivity, where the product is functionally important but emotionally neutral – a Loyalty Program may make more sense. The program will stimulate repeat transactions, capture data and reward the right member segments for the right behaviors.

Of course, brands should still add quality experiences, structure the earn rates well, gamify journeys, optimize the reward selection, collect the right data and use it for personalization. Design and execution remain key.

Think commodity retail, financial services, grocery and most utility categories. The program has to do more heavy lifting because the product does not.

The remainder

Then there’s a third group, and arguably where most brands sit. Here, the answer may not be immediately obvious. For these brands, either more thought is required, or a hybrid model could be an option.

In CPG for instance, programs are rarely top of mind for consumers where the brand running the program isn’t the same as the retailer where the purchase happens. Whilst CPG brands may not own the transaction, they can certainly own the community. A Fan Club will therefore give a CPG brand a direct line to their most engaged brand fans.

An opportunity, therefore, might be to run a Loyalty Program for the broad base and run a Fan Club for the few.

Think specialty retail, mass-market CPG and even some B2B categories, which have pockets of genuine fandom that may be buried inside a much larger transactional base.

What outcomes are you solving for?

Even within the right category, the choice often comes down to what the brand is actually trying to achieve.

If the primary objective is first- and zero-party data acquisition at scale, then understanding who customers are, what they buy, how often, and through which channels, a Loyalty Program is a natural vehicle. It collects behavioural and transactional data systematically, creates the conditions for personalisation, and builds a member base that can be communicated with directly.

But data isn’t loyalty’s alone. Fan Clubs often capture richer, more voluntary data such as preferences, opinions, content and motivations, precisely because members are engaged rather than incentivised. Loyalty data tells you what someone bought. Fan Club data tells you why. The difference isn’t whether you collect data; it’s the kind of data you get, and how willingly it’s given.

If the primary objective is organic reach, UGC, advocacy and earned media, turning existing fans into a distribution channel and reducing reliance on paid acquisition, then a Fan Club may be the better answer. The fans are already creating content, already talking, already recruiting. The Fan Club gives that behaviour structure, recognition and direction.

If it’s both, build both. But build them deliberately, with separate objectives, separate success metrics and a clear understanding of which audience belongs where. The worst outcome is a program that tries to serve all members equally and ends up genuinely valuable to none of them.

Brand examples

The following examples underscore how product type and brand perception can influence the choice of whether to opt for a Loyalty Program, a Fan Club, or even neither.

LEGO

LEGO is a rare case of a brand with intense, self-organising fandom that has deliberately reshaped its program to match. Adult fans of LEGO are a globally recognised subculture, complete with conventions, exhibitions, fan-designed models and decades of unprompted advocacy. The product generates the affinity; the community formed on its own.

What makes LEGO instructive is the direction of travel. In 2023, LEGO rebranded its long-running VIP scheme to LEGO Insiders, consolidating its accounts and folding in community features like LEGO Ideas, where fans submit and vote on designs that can become real products. The company’s own loyalty leadership framed the shift as a move away from a purely transactional cashback scheme toward something built around belonging and creativity.

It’s a brand actively building Fan Club thinking into a Loyalty Program structure, and it works because the fandom was always there to build on. Like the best of these cases, it started with the product.

Dollar Shave Club

This brand launched in 2012 with a product that, by any objective measure, is a commodity: a razor blade. The category was mature, the shelf was crowded and there was nothing inherently exciting about the product itself.

What Dollar Shave Club did differently was build a brand with so much personality, irreverence and direct-to-consumer confidence that fans formed around the brand long before any formal program existed.

Consumers weren’t buying a razor. They were buying into an attitude. That is organic engagement doing the heavy lifting, and it is textbook Fan Club territory. The product did not create the fans. The brand did.

Dollar Shave Club later layered a points-based program, Razor Rewards, on top of that fandom, a hybrid that rewards purchases but also points, referrals and social engagement. It’s a reasonable illustration of the sequence this article argues for: build the fans first, add the structure second. The brand did the hard part; creating the affinity, before it ever introduced a mechanic to reward it.

Nike

Nike sits where product desirability and program design reinforce each other. Nike Membership is free, with no points and no traditional tiers; instead it offers access, content, early product drops and community. The program is explicitly built around identity and belonging rather than transactions. The language is “join us” and “belong”, not “earn and redeem”.

What makes Nike relevant here is that the brand had every excuse to run a conventional points program and chose not to. The product is aspirational enough to sustain fandom, and the program is designed to amplify that fandom rather than simply reward spend. It’s a mass-market brand operating Fan Club logic at enormous scale, proof that the two models aren’t mutually exclusive, and that a large brand with genuine heat can lean toward influence and community rather than pure transaction.

Trader Joe’s

Trader Joe’s operates in grocery, one of the most transactional, price-driven, loyalty-program-saturated categories in retail. Almost every major grocer runs a points or card program. Trader Joe’s runs none. No loyalty card, no points, no app-based rewards. And yet it commands some of the most intense customer devotion in American retail, ranking first in the 2025 Axios Harris Poll of brand reputation.

The fandom is entirely organic. Customers evangelise products unprompted, trade recommendations in dedicated online communities, and treat new product drops as events. The brand generates this through curation, private-label exclusivity and a distinctive in-store experience rather than through incentives.

By its own account, it views a points scheme as a cost it would rather remove and pass back to customers as everyday value. Trader Joe’s is the counterexample that proves the framework: in a category where a Loyalty Program is the default expectation, a brand chose to build neither a program nor a formal Fan Club because the affinity was already there, and structure would have added cost without adding love.

The cost of getting it wrong

Choosing the wrong model isn’t a neutral mistake. It’s an expensive one. Build a Loyalty Program for a brand whose fans were ready to advocate, and you spend money manufacturing transactions you could have earned through influence, while training your most passionate customers to expect a discount for behaviour they were giving you for free.

The framework isn’t academic. The cost of the wrong choice shows up as wasted acquisition spend, margin given away unnecessarily and (hardest to recover), advocates who stop advocating because you turned their loyalty into a transaction.

Takeaways

A Loyalty Program should be open to everyone. It is structured, transaction-anchored and extrinsically motivated. Its primary currency is data, and its primary objective is repeat purchase behaviour.

A Fan Club should be more selective. It is passion-anchored, intrinsically motivated and built around the behaviour that already exists. Its primary currency is influence, and its primary objective is to multiply it.

Both serve a purpose and neither is inherently better on its own. The question has never been which one is more valuable: it is which one is right for the brand, the category and the outcome being pursued.

Members buy. Fans belong. You decide where you want to play.

About the author

Max Savransky is the Global Director of Loyalty Strategy at TrueLoyal. Max is a customer strategy, loyalty and data leader with a proven 17-year track record of designing, validating and deploying successful client strategies to drive engagement, retention and revenue growth. Max is also one of the co-authors of 'Loyalty Programs: The Complete Guide' (editions 1 and 2), the definitive book on loyalty for industry professionals.