Are we seeing the death of brand loyalty?
Back in the 1990s, it seemed that brands, especially supermarkets, wanted so much more from their customers than simply the money in their pockets.
Brands wanted a relationship with their customers – connections, understanding, and a way to get to know them better. They wanted to know who we were as consumers, what we bought, and why we bought it. They also wanted to make sure we were committed to that brand. More than just committed but faithful, loyal. Shopping somewhere else felt almost like a betrayal. It wasn’t so much a transaction. It was turning into some sort of marriage.
The conduit through which this loyalty was borne was the loyalty card. Tesco launched its Clubcard programme, the UK's first nationwide supermarket-only loyalty card scheme, in 1995. Sainsbury's launched its Reward Card in 1996 (this was then replaced by the Nectar card in 2002, which was launched in partnership with other major brands). As a strategy, it made sense. It costs more money to attract new customers than it does to retain existing ones, and, for a while, the concept of the loyalty card and repeat custom worked.
The likes of Tesco earned more regular customers, and shoppers earned points. And when points mean prizes, everyone is happy. As a marketing strategy, it was a runaway success. We were suddenly loyal to a supermarket of choice.
But this loyalty was quickly tested. Not only did we learn that supermarkets, through tracking our shopping patterns, began to know more about us than our local councils, than our government, even members of our own family, but we also learned that our best interests weren’t at heart. This wasn’t for our benefit. This was a way to chain us to a brand. Were they thinking of that old mafia mantra: “When you’re in, you’re in”?
Supermarket price wars began to kick off, and so, we went off looking for the best prices. We went off looking for the cheapest staples. Offer on beers and wines came up frequently. The term ‘loss leader’ came up more and more – now supermarkets were selling things to us at a loss. They really were keen to lock us in. Soon a large number of stores were offering loyalty cards: Boots, WH Smith and Topshop all tried to fill our wallets with cards.
But it didn’t last. The internet made it too tricky to use loyalty as a hook. Consumer decisions started to be made online. Companies like Amazon and eBay became part of daily life and were tearing us away from the high street brands we had known and loved since childhood.
The internet meant more choice than ever and so loyalty was no longer king when it came to securing a sale. We started shopping about… and loving it.
Skip to 2018, and it is fair to say that brand loyalty is dead – and so are some of those brands who counted on it. If you need a proof point, look no further than to Woolworths, BHS, and Kwik Save.
Today, the idea of loyalty has shifted. As we seek better customer experiences we’re becoming loyal to those experiences, rather than the brand. Take a look at Tesco as an example. It is almost encouraging its customers to abandon traditional brand loyalty with Jack’s, its new store format to take on the might of the German discounters, Aldi and Lidl. Surprising as it is, this is the supermarket experience that many modern shoppers want. And as Tesco knows, if you give your customers exactly what they want, you maximise customer satisfaction, boost sales and encourage customer retention. It’s just that simple.
All of this boils down to one thing – the power of empathy. The ability for brands to surprise and delight us with information, experiences and engagements – exactly when it counts and exactly when we need them. At OpenMarket we call these Empathetic Interactions. As consumers, we’re tired of brands that just sell to us. The future lies in relevance. A brand that can reduce the friction in our lives and make them flow better won’t be forgotten.
It’s true that brand loyalty as we knew it is well and truly dead – but that’s not to say it can’t be resurrected. When it comes to choosing between two brands that offer the same service, we’ll go for the one that has improved our lives, helped in some way, or made something easier to do, every time. And we don’t need a card for that.
The value of brand loyalty itself no longer seems as relevant. Today, changing banks is as easy as filling out a form and many of us change jobs every few years – all without any feelings of guilt. The most critical moments of customer experience no longer belong on the high street, or even in the physical realm: they take place on our smartphones 24/7. Need a new bank? A new lover? A new job? Pick up your mobile and you can find them.
But brand loyalty doesn’t need to be buried forever. In the old world, loyalty was something we aspired to achieve with friends, romantic partners, employers, dentists, doctors, and even gas suppliers.
Yes, we’re a much less loyal bunch. And those brands which don’t give us what we want when we want it will be the ones consumers leave – without giving it a moment’s thought. We can bring brand loyalty back to life - but only if you offer the best experience every time.
Oisin Lunny is chief evangelist at OpenMarket