According to recent consumer research from Kantar Retail, 71% of consumers now claim that loyalty incentive-programmes don’t make them loyal at all. Instead, in this new era of digital-based competition and customer control, people are increasingly buying because of a brand’s ‘relevance’ to their needs in the moment.

If your customer retention strategy relies on rewards, rebates, or discounts, I would argue that this approach will never actually create loyal customers. It is incentivising purchase which can result in improved customer retention but not necessarily customer loyalty.

Purchase behaviour and customer loyalty are not intrinsically correlated. It is possible to be a regular or repeat customer but not be loyal and equally you can be very loyal to a brand but buy more from a competitor, Purchasing is a behaviour whereas loyalty is an emotion. Brand loyalty is possible on an emotional level but most loyalty programmes do not work on an emotional level, they operate on a behavioural level.

Unlike customer retention, customer loyalty measures how attached your customers are with the brand and how likely they would be to share the brand with others. In this new era of digital-based competition and customer control, people are increasingly buying because of a brand’s ‘relevance’ to their needs in the moment.

Additionally, customer loyalty provides opportunities to upsell and cross-sell. That's because loyal customers are your company's most valuable asset. On whole they buy more frequently than other customers and are closely aligned with your brand's values.

Some marketers believes customer loyalty is largely a myth (customers are at best ‘promiscuous loyals’ – flitting fickle-like between alternative rival brands based on availability – 72% of Coke drinkers also buy Pepsi in the UK. Likewise, for brand commitment – people buy brands out of habit, not commitment.

I don’t agree. I believe brand loyalty is possible on an emotional level but most loyalty programmes do not work on an emotional level, they operate on a behavioural level. In this age of never ending customer choice, customers are in constant churn. Loyalty programmes based on rewards, rebates, or discounts can reduce customer churn but they won’t increase customer loyalty.

Further Reading

If you would like to read more about how to generate more income from existing customers with a modern vip programme than read this article.