What is Happening to Loyalty?

The research company fast.MAP partnered with the Institute for Promotional Marketing (IPM) completed a survey to understand what is happening to competitive loyalty programs in the UK.   Some of the findings from this study suggest that loyalty may be changing in the consumer marketplace. If this study is relevant outside the UK, then companies must be aware of the changes in customer loyalty and think through the impact of their strategy in the marketplace.

Some of the more dramatic findings are:
1.     8 out of 10 shoppers use all different types of promotional programs by brands other than the ones they would normally purchase.
2.     More than half of the different types of promotions being used in the market had been used by 9 out of 10 consumers.
3.     3 out of 10 shoppers are tempted by a free sample to swap brands. 96% of the shoppers were tempted to use a different brand by price promotion and 31% claim they are doing this often.
4.     1 out of 3 shoppers stated they often used reward or loyalty schemes for products they do not usually buy.

With these staggering statistics, customers appear to be less loyal than the past.  Brand loyalty can no longer be taken for granted. If these statistics are representative of the current market in other countries outside the UK, companies may be forced into price discounting as a normal mode of business. One possible explanation is that the current economic environment may be leading customers to shop strictly for price. If this trend continues, brands with a strong market presence will see their product prices becoming totally elastic with little or no differentiation for brand names.

The bottom line is customers will always be adapting to changes in the market, the economy as well as changes in technology and competition. In difficult economic times price becomes a significant variable. However, customers know value and understand the implications of good customer service versus poor customer service. A price war should not be the preferred answer for a company; rather, providing value-added offerings to the company product or service may be the key to survival and maintaining profitability.

What is "Deal" Loyalty?

The Edgell Knowledge Network found in a recent study that actual brand loyalty among consumers of partner loyalty program is not any different than consumers who were not part of the loyalty program. In other words, there appears to be no significant difference in loyalty between consumers who were members of a loyalty program and those who were not. The same study found that approximately 81% of the members in a loyalty program did not fully understand the entitlements associated with loyalty nor how they could claim the program loyaoty rewards. According to the results from the same survey, the average consumer belongs to approximately 18 different loyalty programs.

It's been noted in this blog in the past that customer satisfaction is an instantaneous measure that reflects only the outcome.of a particular event.  Loyalty programs that provide points or rewards for a sinble transaction of some type are nothing more than relabeled customer satisfaction programs.. The idea of providing rewards as incentives does not create loyalty.  Some researchers describe this type of loyalty as  "deal loyalty" since it contains no aspect of relationship building and only depends on the "deal".  The customer is "loyal" only as long as the "deal" is offered.

True loyalty programs are built on the basis of establishing a long-term positive relationship between the company and the customer and is not accomplished with a single "deal" or even multiple "deals".  Loyalty of customers comes from the relationship between the customer and the company without the need for an instant reward. The reward is the relationship.

 Since there is no apparent difference in loyalty between customers involved in a loyalty program and customers who are not, the question is, why bother with that type of the loyalty program .  If the money spent on a loyalty program which provides points or rewards of some type were redirected to building individual customer relationships, the long-term benefit will probably be significantly greater.

The bottom line is that there is no shortcut to customer loyalty.