Why Loyalty Doesn’t Work the Way You Think
Rethinking loyalty myths
Mark Sage - 8 min read - 10/02/2025
Ignaz Semmelweis was a Hungarian physician whose pioneering work in the mid-19th century revolutionised our understanding of infection control. Semmelweis discovered that handwashing with a chlorinated solution drastically reduced the incidence of puerperal fever, a deadly infection that claimed the lives of many women during childbirth.
In the Vienna General Hospital where he trialled his research, the mortality rate dropped from 18% to just 2%. However, despite publishing his findings in 1861 and numerous attempts to convince people of his findings, his ideas were roundly rejected.
The reason for this was that the established medical community resisted, clinging to outdated beliefs like miasma theory and humoral theory. His idea that unseen microorganisms could be responsible for infections was revolutionary, yet because it pushed back on established norms, it was met with scepticism and outright hostility.
Semmelweis’s insistence on the importance of hand hygiene was seen as an affront to the professional pride of many doctors, and so they refused to believe that their unwashed hands could be causing harm.
It would be more than 20 years later, (and many unnecessary deaths) before Louis Pasteur provided a theoretical explanation as to why handwashing worked (i.e. germs) and the idea started to gain acceptance.
This response — whereby there is a reflex-like tendency to reject new evidence or new ideas because it contradicts the current narrative and calls into question our current ways of working — is now known as the Semmelweis reflex or “Semmelweis effect”.
Essentially a form of Confirmation Bias, this tendency to favour information that is consistent with prior beliefs or values still impacts many areas today.
Beliefs, for example in loyalty marketing, that 20% of customers represent 80% of revenues. Or that getting a new customer is 5 times more expensive than keeping an existing one. That members spending more than non-members is evidence of loyalty working.
We have many ‘beliefs’ within the practice of loyalty marketing that continue to be passed down as fact and continue to drive our thinking (and selling).
I used to do loyalty marketing training at the IDM in the UK and I was reviewing some of my course material from over a decade ago — it had exactly these statements in it. It’s not that we were fabricating things or indeed, that loyalty marketing wasn’t working. It’s just that we had no other evidence to the contrary.
That isn’t true now though.
Although the evidence against these beliefs may be an uncomfortable truth, the opportunity to understand what’s really going on presents a much bigger prize.
Lets take one of these uncomfortable truths as described by the ‘Law of Buyer Moderation’ in Byron Sharp’s ‘How Brands Grow’. Simplistically it says consumers will regress to the mean over time such that previous heavy buyers will become light(er) and previous light buyers will become heavier. Likewise, some non-buyers will become buyers and vice-versa.
Sharp provides an example of this using data from a leading brand of tomato sauce in the US. Over a 2-year period, the brands sales volume was flat (no growth or decline) yet comparing customers buying in year 1 versus year 2, they saw 14% of sales came from previous ‘non-buyers’ and a decline from 43% to 34% of its previous heavy buyers. Describing this, Sharp notes that “over time the heavier buyers get lighter, and the non-buyers and light buyers get heavier.”
If your thinking is based on an 80/20 approach, with a focus only on heavy buyers, and a view to maximise sales from these with a ‘protect and retain’ strategy, you may be missing out on the real value here — the ability to tap into the lighter buyers, who can actually be 50% of sales and 80% of your customers.
In fact, Sharp also picks up on this, suggesting that consumers aren’t really that loyal at all. When looking at loyalty for world leading brands like Pepsi and Coca-Cola, he shows that 72% of Pepsi customers also purchased Coke, and that “this proportion varies little between the different brands [whether Pepsi, Fanta, etc.] — it’s always about two-thirds of their customer base”.
This isn’t just something that happens in fast moving consumer goods. A study of grocery loyalty programmes in the Netherlands also highlighted this lack of ‘exclusive loyalty’.
Conducted over a 2-year period with 1,909 Dutch households, and covering 20 different supermarkets and 7 loyalty programmes, it showed that the overall share of wallet (SOW) was never more than 45%.
Share of wallet in this context is looking at the share of category spend that a given brand is receiving — so of 100% of a customer’s grocery spend, how much is given to a single supermarket brand.
In this case, the most loyal customers — those heavy buyers — were giving less than 50% of their spend to a single brand.
It’s worth noting here that when they looked at member vs non-member they saw a higher average SOW for members (36% vs 7%). As they rightly point out though, this is most likely a function of self-selection. Those customers already ‘loyal’ to that supermarket and spending more will benefit more by joining.
The big question then was to what extent the loyalty programs were able to lift spend further rather than simply collecting existing heavy spending customers.
This is, in part, what the study set out to investigate and the analysis showed that the loyalty programs were able to further lift that share of wallet by 4.1 percentage points on average, equating to around a €240 lift in annual revenues. When accounting for the costs of the program itself, this gives an annual lift of around €163 in net revenues. Obviously, this is just an average and the research showed this figure varied between €91 and €236 net revenue lift per member, per year.
Whilst it’s easy to say from this research that loyal customers aren’t all that loyal, and the impact of loyalty programmes seems quite small — of the 29% percentage point gap between member and non-member, only 4% of this is linked to the effects of the loyalty programme — it’s worth noting a few key points.
Firstly, although 4% lift in SOW sounds small, multiplied over a few million members, it adds up quite quickly (and that lift is essentially a shift from competitors — i.e., it’s market penetration growth). It’s also a number we saw evidenced within yuu Rewards when we measured programme lift using the Return on Member Activity (ROMA) approach, discussed previously.
Secondly, the gap in performance across the different programmes in the research study is wide — between €91 and €231 lift — which means that great programmes, and great programme design, can still get great results.
As one supermarket manager says within the report “You don’t have 100 percent of a share of a customer’s wallet. Customers shop about five times a month. Maybe you’ll get three of those trips and the competition gets two. The loyalty program eliminates at least one shopping trip you weren’t getting and creates an additional shopping trip to your store”.
So, with less than 45% of share of wallet from customers, lighter buyers really do matter
Regardless of your spend on heavy buyers, eventually life will get in the way — a new job, a house move, retirement — and that great customer just won’t be so great anymore. Instead, focusing on all buyers (and non-buyers!) within the loyalty programme enables you to maximise what is, in effect, an exclusive marketing channel.
Byron Sharp highlights this approach saying “When marketing succeeds in increasing a brand’s market share, then buying propensities change across the board. This tells us that marketing has the best chance of being successful when it has as much reach as possible. Marketing is particularly successful when it reaches light and non-buyers of a brand.”
As loyalty marketers we’re used to talking about the customer journey — the earn, burn, churn approach — this though assumes that customers go through each stage.
Many clearly do as they move from light to heavy and back to light; however, the strategy misses those that are light and stay light for quite a while. Worse still, it tends to ignore those who were heavy and then ‘churned’. In many cases, those customers are effectively excommunicated from the programme!
Considered ‘lost’, their points are removed and comms dialled down. They’re a casualty — the ones that got away. It’s the loyalty equivalent of ‘my way or the highway’.
Frequent flyer programmes are some of the worst offenders here. A change of job (or a global pandemic) can impact someone’s ability to fly in the near term. That once Gold or Platinum member who was treated to priority queuing, lounge access, a free water if flying economy, is now ignored. There is typically no soft landing, no recognition of what has been, and no acknowledgement that they may be able to come back when circumstances change.
Of course, you can’t keep benefits open. However, acknowledging their previous status, creating comms optimised to this and sprinkling some level of recognition can help to keep the flame alive and keep the brand front of mind.
Ultimately, that should be our aim as loyalty marketers — to keep the brand front of mind. To both build and maintain mental availability.
This mental availability is basically the space your brand occupies within your potential and actual customers mind, such that you come to mind more easily when they move (back) into a buying situation in your category. Done well, you end up being thought of more favourably and recalled more easily when the buying need arises.
Byron Sharp discusses this longer-term sales effect saying, “Successful advertising, in particular, reaches the millions of consumers who have a very low probability of buying a brand next week or month. If a brand’s advertising reaches them, if they notice it, if it refreshes or builds the memory structures that make the brand more likely to be noticed or come to mind in a buying situation (i.e. enhancing mental availability), then it nudges their propensity to buy the brand.”
So, I’m at peace with the revelation that loyals just won’t stay loyal, and you should be too — but it means we need to think differently about loyalty communications, loyalty recognition and the wider purpose of loyalty programmes.
Rather than being myopically focused on the ‘loyalty ladder’ and moving customers up from unknown to known and through to advocate, we need to focus on building mental muscle. When customers lapse and churn with us, we need to foster the relationship, not forget it. Staying relevant and engaging, cultivating more connections between our brand and key Category Entry Points (CEP) for the customer.
This doesn’t though mean we should abandon the classic loyalty marketing CRM journeys; it simply means they are not the main show.
It also means that we need to look at our loyalty marketing channels through a slightly different lens. They are a channel — a direct channel, one which can be targeted — but the message they carry can be different and can serve a different purpose.
Ultimately, this brings us to a pivotal realisation: loyalty communications are not just performance tools — they’re an untapped channel for brand building, provided we rethink how we deliver messages.
With a shift of mindset, we now need to shift our marketing — and this will be the subject of the next article where we’ll discuss how marketing is more about the message, not the messenger.