Loyalty has received one of the highest distinctions in marketing metrics, usually being hailed as the metric of all metrics, and ultimate purpose of companies. After all, who wouldn’t want customers who come back for more and more purchases, tell their friends and family about how great the product or service is, become evangelists,and even build their own communities around worshiping your brand? The truth, however, is that loyalty is feeble.
First, few consumers are ever actually loyal. Most consumers oscillate between a few brands within every category. Customers who buy sportswear for instance will often switch between the main brands, like Adidas, PUMA, or Nike, and their preference is usually driven by general market shares rather than brand loyalty. We choose the products we like from a small pool of preferred brands, rather than contain our choices to one brand.
Second, most of what we consider loyalty is actually just inertia: customers stick to what they bought before as a means of decreasing the mental effort it takes to make a purchasing decision. Or, they chose the same product in order to avoid testing a new one, rather due to an inherent loyalty towards the brand or the product. Repeat purchases save time and energy, but the motivation behind them is rarely loyalty. We are creatures of habit, after all.
Third, consumers don’t think about brands, as much as marketers think they do. There are no brand onions in the consumer mind, no matching of deep hidden values in every purchase decision, or extensive processes going into deciding which brand of shampoo to get other than “this smells nice.” Marketers have been rationalizing consumer choices for a rather long time, when the truth is most decisions are spontaneous, based on product placement in the supermarket, or the look, feel and taste of a product. Did you ever pick a bag of chips because it looked cooler than the one you used to buy? Or just reached out for the pasta package closer to you rather than spend 10 minutes deciding the optimal fiber/texture ratio for your dinner?
Fourth, even among brands who are believed to have a loyal customer base, loyalty usually significantly decreases when the brand starts making mistakes, such as in the recent case of Lululemon. Loyalty is usually tested in moment-of-truth situations, where if the company / product / service performs as expected, the customer will continue being loyal. Yet, if something goes wrong, they have no problems finding a competitor with a similar product that will work almost as well. If you move, will you continue shopping at the same supermarket brand if it stops being conveniently close to you? If you get a mortgage, will you stay with your bank or choose the one with the lowest interest?
The truth is, we are selfish as consumers. We act in our best interest, and that interest sometimes coincides with being loyal (e.g. discount for members), while other times disloyalty pays more (e.g. switching or signing bonuses).
In the words, of the Financial Times: if you still want loyalty, buy a dog.