Why are buyers loyal?
Mountains of evidence show that buyers are loyal to a brand because they receive ongoing value at a price they are willing to pay. Sure, there are categories such as travel and hospitality, where loyalty points do indeed play a role in repeat purchases. And, buyers are famous for giving repeat business to providers out of habit (for example, continued loyalty to one’s dentist or gardener despite some level of dissatisfaction). But generally speaking, buyers don’t cite points or discounts as a leading motivator of loyalty. Yet, that’s exactly how many marketers are continuing to manage their loyalty programs.1
There’s even more contrary evidence about loyalty. Retail marketers admit that loyalty is important, yet according to one study, they don’t name loyalty initiatives in their leading investments. The loyalty paradox is further evidenced by buyers who reportedly admit to actively using just two or three of the average 10 loyalty programs they subscribe to.2 These same buyers, while admitting they’ve grown weary of points-based loyalty programs, also admit they expect to be rewarded for their loyalty.
Managing the loyalty paradox
Are marketers and their customers out of touch with each other when it comes to understanding the motivations of loyalty and how it should be rewarded? While it would be easy to say "yes," the counterintuitive findings about loyalty are a function of a changing society. In today’s digital world where choices are varied and switching costs are low, traditional loyalty programs are overlooking or at least diminishing, the real motivators of loyalty: a consistently fulfilled brand promise within a unified retail experience that makes it easy to buy. And, as more and more products become commodities, competing on an experience, which is both measured and actively nurtured, becomes critical to earning a buyer’s loyalty.