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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:

8 out of 10 shoppers use all different types of promotional and mechanics by brands other than the ones they would normally purchase.
More than half of the different types of promotions being used in the market had been used by 9 out of 10 consumers.
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.
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 in 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.

This article was originally published by The Customer Institute

Published: November 29, 2013
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Bill Bleuel

Dr. Bill Bleuel is an award-winning Professor of Decision Sciences at Pepperdine University’s Graziadio School of Business and Management. Dr. Bleuel’s expertise lies in the quantitative aspects of business. He specializes in the measurement and analysis of operations, customer satisfaction, customer loyalty and customer retention. He has held senior positions in engineering, marketing and service management at Xerox, Taylor Instrument Company and Barber Colman Company. Dr. Bleuel has also experience as general manager in two start-up companies that he co-founded.