Episode 37
The Loyalty Illusion: Are Your Customers Actually Loyal — Or Just Trained?
Hi, I'm Clare Bailey, founder of The Retail Champion.
Here's an uncomfortable truth I want to put on the table right at the start of this new series: most retailers think they've got loyal customers. But when you look more closely — at the apps, the points, the personalised offers, the data being harvested — you start to wonder: is that actually loyalty? Or is it just a very efficient system of behavioural compliance?
This is episode one of a three-part series — The Loyalty Illusion — and in this episode, I'm challenging what loyalty has become. Not what it used to be. What it is now. And the uncomfortable truth is that for most retailers, what they're calling loyalty is actually something quite different.
What We Cover
- Why repeat purchases and loyalty scheme usage doesn't mean your customers are actually loyal
- How the relationship between customer and retailer shifted from emotional to conditional
- The real reason supermarkets want you on their loyalty apps — hint: it's not about rewarding you
- Why modern loyalty programmes may actually be training disloyalty
- The coffee card test — and what it reveals about how shoppers really behave
- The Pret exception: what genuine brand affinity actually looks like
- Two models of loyalty in retail today, and which one actually builds something lasting
- The one question every retailer needs to answer about their own loyalty strategy
Key Takeaways
- More loyalty schemes than ever doesn't mean more loyalty
- Compliance and loyalty are not the same thing
- If your programme disappeared tomorrow and customers left, you never had loyalty
- Transactional programmes create dependency, not connection
- Real loyalty is emotional — and most businesses have stopped building it
Resources & Links
The Retail Champion: www.retailchampion.co.uk
Free Loyalty Illusion Mini Guide: retailreckoningpodcast.co.uk/retail-playbooks
All episodes: retailreckoningpodcast.co.uk
Subscribe to Retail Reckoning wherever you get your podcasts
Connect & Share
If this episode has made you question your own loyalty strategy, I'd love to know. Leave a review, share it with a fellow retailer, or come and find me on social media. And look out for episodes two and three — because this is just the beginning of a conversation that I think retail really needs to have.
Transcript
We don't have loyal customers anymore.
Speaker:We have systems that look like loyalty.
Speaker:Most retailers think they've got loyal customers, but are they actually loyal?
Speaker:Are they just responding to a system that you've trained them to use?
Speaker:I'm Clare Bailey, the retail champion, and welcome to Retail Reckoning.
Speaker:This episode, part one of a three-part series, The Loyalty Illusion, will dig
Speaker:a bit deeper into that and explore what retailers can actually do about it.
Speaker:Let me start with something that's a little bit uncomfortable
Speaker:'cause most retailers do think they've got loyal customers.
Speaker:They look at data.
Speaker:They look at repeat purchases.
Speaker:They look at frequency.
Speaker:They analyse lifetime value.
Speaker:On paper, it all looks quite reassuring.
Speaker:Customers come back.
Speaker:They engage.
Speaker:They use the loyalty scheme.
Speaker:But here's the question I want to put on the table right at the start.
Speaker:Are they actually loyal customers, or are they just responding to a system
Speaker:that you've trained them to use?
Speaker:Because right now across retail, something quite fundamentally has shifted.
Speaker:We have more loyalty schemes than ever before.
Speaker:There's apps, there's points, there's personalized offers, and if you actually
Speaker:look at behaviour, customers are switching more, comparing more, and mixing up
Speaker:where they shop more than ever before.
Speaker:So you got the same customer, same week across completely different retailers.
Speaker:So what on earth is it that we call loyalty?
Speaker:And why is it maybe not loyalty at all, just a behaviour that's been engineered?
Speaker:So across this three-part series, we're gonna unpack that properly
Speaker:because in this episode, I want to challenge what loyalty has become.
Speaker:In episode two, we'll look at the customer, particularly Gen Z, and why
Speaker:they're exposing some of the biggest flaws in how retail still thinks.
Speaker:And in episode three, we're going to answer the question
Speaker:most businesses are avoiding.
Speaker:If loyalty needs to be engineered, is it actually loyalty at all?
Speaker:Alongside this, there'll be the free Loyalty Illusion mini guide
Speaker:that pulls this into something practical for your business.
Speaker:Link is in the show notes and also below.
Speaker:Right then.
Speaker:So what has loyalty become?
Speaker:It used to be really quite simple.
Speaker:You chose a retailer because I, I guess you trusted them.
Speaker:You liked the experience.
Speaker:It kind of felt familiar.
Speaker:There was an emotional layer to it.
Speaker:For example, you always went to one particular place because you knew
Speaker:they were reliable, they knew you by name, the product always lived
Speaker:up to expectations, and so on.
Speaker:You didn't need prompting.
Speaker:You didn't need rewarding every time you shopped.
Speaker:You just went back because you wanted to.
Speaker:And now that's not really what loyalty looks like today. There's a process today.
Speaker:Download the app, scan at the till, activate an offer or get a special
Speaker:price, and if you don't, you pay more.
Speaker:I've talked about this at conferences.
Speaker:I really don't like the way that say Tesco, Sainsbury's and others have made
Speaker:it that almost if you don't have their so-called loyalty scheme, then you
Speaker:almost have a gun to your head to pay a higher price, whereas if you've got the
Speaker:loyalty scheme, you pay the price that we would have been paying a year or so ago.
Speaker:So it's almost like you're forced to have a card or a app for so-called
Speaker:loyalty, but it doesn't matter whether it's Sainsbury's, Tesco's, Morrisons,
Speaker:Asda, Aldi, Lidl or the corner shop.
Speaker:If you want to pick something up for dinner, you go wherever's
Speaker:nearest or wherever's convenient or wherever might be best value now,
Speaker:and you watch and track offers.
Speaker:So it's not really loyalty, is it?
Speaker:The relationship shifted from I choose you because I know, and trust
Speaker:you, you've got a reliable quality, a reliable experience, and it's a,
Speaker:an atmosphere I feel comfortable in, to I comply because it benefits me.
Speaker:But that's not the same, is it?
Speaker:One's emotional, one is sort of conditional.
Speaker:Like I say, it's like having a gun against your head.
Speaker:It's like being blackmailed.
Speaker:If you don't have a club card, you're going to pay more.
Speaker:If you don't have a Nectar card, you're going to pay more.
Speaker:That doesn't feel particularly encouraging.
Speaker:And we all know that the reason they want us to have the cards is actually to
Speaker:collect data on us all and our shopping behaviours, anonymise it and sell it
Speaker:on to other brands and other agencies.
Speaker:So it's kind of like a bargaining chip.
Speaker:If you take our card and pay less, we can make more money out of selling your
Speaker:data to various other people than we lose by discounting the product.
Speaker:So I think that for really any kind of so-called conditional loyalty is
Speaker:actually not really loyalty at all.
Speaker:Is it really loyalty or just compliance with the process that we know we have
Speaker:to go through to get the best value?
Speaker:And I think that modern loyalty programmes are doing the opposite of
Speaker:building loyalty because if they took those programmes away, you then might
Speaker:choose on best value or convenience.
Speaker:So actually all the retailers who've got these particular programmes, whether
Speaker:it's a surprise reward on checkout or whether it's vouchers that spit out
Speaker:the EPOS system when you scan your card or whether it's a better price, for
Speaker:instance, they're just training behaviour.
Speaker:They're making us compliant to their systems.
Speaker:They're rewarding our participation in the scheme and capturing our data
Speaker:They're very good at it though, but it's not pleasant, and they've created
Speaker:a dependency on their systems, but with no real attachment to their brand.
Speaker:And that's, I think, where a lot of businesses get caught out because
Speaker:dependency disappears the moment something better comes along.
Speaker:If there's a better offer, a better discount, or a more convenient option,
Speaker:suddenly that so-called loyal customer isn't loyal after all. In fact, I often
Speaker:talk again at events about disloyalty and saying, "I've used to have, back
Speaker:in the day, five, six, maybe more of those coffee cards in my wallet," and
Speaker:whichever coffee shop I was walking past at the time, I have a quick
Speaker:flick through my loyalty cards and go, "Okay, I can get a stamp there."
Speaker:And then I would redeem my six... You know when you get six stamps, you
Speaker:get free coffee or whatever it was.
Speaker:But I had them for Caffe Nero, M&S, Costa, Starbucks, the
Speaker:list was relatively endless.
Speaker:And I, I say, you know, in the, in the room I'd say, "How many people
Speaker:have got five or six different loyalty cards or loyalty apps depending on
Speaker:where you decide to shop today?" And, probably 95% hands go up.
Speaker:Pret's actually a little bit different actually.
Speaker:They didn't have the card.
Speaker:What they did have was a policy of allowing the store staff to tell you
Speaker:your coffee's on the house today.
Speaker:And when it happened to me, I was like, "Oh my goodness, that is so
Speaker:cool." And then what I did do was go on social media and talked about it,
Speaker:which of course is beneficial to their brand, and I decided to walk
Speaker:past other coffee shops where I'd got my little paper card to go to
Speaker:Pret just in case I got lucky again.
Speaker:So that did create an affinity to the brand, and that was quite a clever system.
Speaker:But apart from that, it's disloyalty because not one of those coffee shops was
Speaker:I particularly choosing, apart from the nearest, and I had a card for all of them.
Speaker:Anyway, moving on.
Speaker:I want to talk about what I see as two models of loyalty, and it's playing out
Speaker:really clearly in retail at the moment.
Speaker:There's one model that says, "If you don't join the system, you don't
Speaker:get the benefit," and the other model says, "Engage with us, and
Speaker:we'll make it worth your while."
Speaker:Obviously, the first is more transactional, and the
Speaker:other is more experiential.
Speaker:The first is driven by kinda necessity, keep your costs down and everything else.
Speaker:The other is driven by engagement.
Speaker:Of course, both are influencing consumer behaviour, but only the second has
Speaker:the potential to build something that lasts beyond the next offer, and this
Speaker:is where the real tension is sitting right now because most businesses think
Speaker:they're building loyalty when actually they're just building very efficient
Speaker:systems to keep people coming back.
Speaker:So here's a question I'd like to leave you with.
Speaker:If you had a loyalty programme, as some of these bigger retailers have, and
Speaker:that loyalty programme vanished overnight, would the customers still choose you?
Speaker:Not occasionally, but consistently, as we used to do back in the day before
Speaker:all this loyalty explosion happened.
Speaker:If the answer is no, they wouldn't actually, then you don't have any loyalty.
Speaker:You have a system that obviously works very hard to keep people
Speaker:held in a behavioural place, but not in an emotional place.
Speaker:In the next episode, we're gonna take this one step further because if loyalty's
Speaker:changed, then the obvious next question is, have customers changed as well?
Speaker:And that's probably nowhere more visible or perhaps more misunderstood
Speaker:by middle-aged management and, like, executive leadership than with Gen
Speaker:Z. In the final episode, we'll bring it all together and tackle the big
Speaker:issue about is loyalty engineered, so what actually builds connection now?
Speaker:If you want to get ahead of those, then you can download
Speaker:the Loyalty Illusion Report.
Speaker:It'll be in the show notes, but it will also be on
Speaker:retailchampion.co.uk/retail-playbooks.
Speaker:It's a free download, and it's available to all.
Speaker:So I've been Clare Bailey, the Retail Champion.
Speaker:This is Retail Reckoning, and hopefully you'll join me again
Speaker:for episode two of this series.
Speaker:Thank you for listening
