Loyalty programs are not about loyalty. They are about switching costs.
You stay at the same hotel chain forty times. You earn status. The status earns you upgrades, late checkouts, free breakfast. The breakfast earns you another booking. The booking earns you more points. The points sit in your account like a balance sheet entry that you cannot cash out, only roll forward.
This is not a relationship. It is a sunk cost spiral dressed up as a perk.
The Hostage Negotiation
The moment the brand disappoints you — really disappoints you, not just a slow elevator or a lukewarm coffee — you discover what those points actually are. They are hostage collateral.
You want to leave. You should leave. The product failed. But there are eighty thousand points in that account. Points you earned by being loyal. Points that evaporate the moment you walk.
So you stay. Not because the brand earned your trust back. Because leaving feels like losing something you already own.
This is the trap. And it was designed this way.
The Real Calculus
Points have a cash value. It is lower than you think. Most hotel points are worth between half a cent and two cents each. Your eighty thousand points are worth somewhere between four hundred and sixteen hundred dollars. Real money, but not life-changing money.
Now ask yourself: how much did you overpay by staying loyal instead of shopping rate? How many times did you book the chain hotel at two hundred a night when the independent down the street was one-twenty? Multiply that by forty nights.
The points did not save you money. They cost you money. The loyalty program did exactly what it was designed to do: it made you stop comparing.
The Infrastructure Parallel
This pattern is everywhere. Cloud providers hand out credits like hotel points. Free tier, startup grants, committed use discounts. Each one is a thread in the web. By the time you realize the pricing does not work, your entire stack is woven into their proprietary services.
Migration costs are the enterprise version of hotel points. You earned them by building on the platform. You lose them by leaving.
The best vendors know this. The honest ones compete on product quality anyway. The rest compete on switching costs and call it an ecosystem.
The Exit Test
Here is a simple test for any loyalty relationship: if the product failed tomorrow, would the switching cost stop you from leaving?
If yes, you are not a loyal customer. You are a captured one.
Loyalty should be the easiest thing in the world to walk away from. If the product is good, you stay because it is good. If it is not, you leave. Points, status tiers, and accumulated nights should be irrelevant to that decision.
The moment your reason for staying is anything other than "this is still the best option" — you have already lost the negotiation.
Burn the points. Book the competitor. The switching cost is a sunk cost, and sunk costs are not real.
The only loyalty that matters is the kind you would choose again tomorrow with a blank slate.