The basic principle is that by rewarding the best customers they in turn will continue to reward you with their business as they feel recognised and appreciated. The key objective of loyalty or reward programs is to strengthen the two-way loyalty bond between a company and its best customers.

Reward programmes needs to be innovative and motivating enough for customers to want to include themselves, and, crucially to volunteer as much identifying and demographic information about themselves as can be expected, such as name and address, thereby facilitating a company to communicate with selected customers.

Every time a reward program (reward programme) device, most commonly a "reward card" is used, it not only identifies the customer but also links relevant transactions to their record. Companies can then analyse this data and use it to reward customers with the objective of retaining or growing their profit contribution.

The fundamental assumption of reward program (or reward programme) marketing is that keeping existing customers is considerably less expensive than acquiring new ones. Reichheld and Sasser claimed that a 5% improvement in customer retention can cause an increase in profitability between 25% and 85%, which varies between industries. Increased customer loyalty, which is encouraged by reward programs (or reward programmes), has a direct relationship with increased customer profitability.

For most companies, increasing customer retention through loyalty marketing initiatives such as reward programs (or reward programmes) is a robust business strategy, which delivers results and makes sound business sense.