Why Forcing Loyalty Could Be a Terrible Long-Term Strategy

Markets Authority (CMA). But the shift from a points-based reward system to a membership that offers reduced pricing at the point of purchase strong-arms consumers into signing up, irrespective of want or need.

Following high inflation over the past two years that has seen prices rocket, many consumers are trying to cut their costs. The sizeable discounts on offer for those signed up to loyalty schemes are a welcome gesture for many consumers, but some may feel they do not have a choice.

Others may feel the exchange of data for discounts is justified, but this new approach is shifting loyalty from earned to transaction.

Mind the values gap

It could be argued that when brands offered rewards, they gained trust, goodwill and loyalty from consumers. But this transactional approach makes it almost impossible for brands to build authentic, two-way relationships that would perhaps keep consumers coming back regardless of the rewards or discounts on offer.

Granted, in crowded categories, rewards can create churn amongst consumers who decide to switch brands because products are on offer, and in the process they try something new that they prefer.

Strong relationships are typically built through high quality customer interactions and experiences, but given the current economy, where many consumers are trying to cut costs, brands are more often focusing on the quick wins by offering discounts.

Short-term approaches may deliver results, but long-term, focusing on customer experience (CX) will win out — and result in lower acquisition costs and a loyal customer base that won’t be lured by offers from competitors.

Not only does ‘forced loyalty’ impact a brand’s long term relationships with customers, it has the potential to create a divide between brand and consumer values. More than two in five (43%) shoppers consider it unfair that loyalty scheme members pay lower prices for some products, and while it does not put them off signing up, it does suggest dissatisfaction and frustration with the shopper experience, creating apathy towards retailers.

To read the published article by Dan Todaro, Gekko Group CEO, please visit CXM