What Happened to Customer Loyalty?

Marketing researchers obsessed about customer loyalty for ages. Large corporations have devised elaborate customer loyalty programs. But things are changing, quickly. Nowadays, customer loyalty is slipping through the fingers of corporations. I sifted through several market research studies on loyalty and brand loyalty. I concluded that when it comes to keeping customers loyal, there’s no one magic bullet or best practice.

Here’s an example of a customer (me) going from loyal to disloyal. I used to be a loyal customer of United Airlines. I attained the status of Premier Executive, got all the perks, and enjoyed life in business class. Then Southwest entered my local market. Cheap fares, no frills, easy to book. I had reservations (is there a pun somewhere here?) about the cattle-car feeling at Southwest and its policy of using a first-come, first-served seat selection process. Before I switched, I considered what it meant to me to give up my status on United and hop on an all-steerage airline.

When I started writing this article, I realized I was Mr. New Consumer. I wanted more for less. Maybe Southwest would give me more for less. Let’s see, there were more Southwest flights available at all three of my local airports. Not only were there more flights, but Southwest also flew to more places than United.

Fares were considerably cheaper. To make matters worse with United, I became skeptical when United started limiting perks for frequent flyers. And, I was even more doubtful about the future of this airline when United merged with Continental Airlines. I started to see tangible value by flying Southwest. I decided to switch from United to Southwest. I thought I made a good decision.

To complicate matters about customer loyalty, I recently realized by using one of my credit cards, I could use points accrued from making purchases on my credit card to pay for airfares, hotels, gas, or airline baggage fees. For example, there are credit cards that earn about 2 percent rewards per $1 spent when you redeem for travel. Credit card customers acquire 40,000 (or some other amount) bonus miles when they charge $3,000 worth of purchases within a given time period. This translates into about $400 in travel statement credit. The beauty of using this type of credit card is you are not limited to using any one airline.

What did I do? I closed out my old credit card and signed up for this new one and started accruing points. So much for being a loyal credit card customer. Now I could pay for my Southwest trips using points from my credit card, and get great fares, too.

The story doesn’t stop here. In 2008, Airbnb bursts on the scene. According to its website:

Airbnb is a community marketplace where guests can book spaces from hosts, connecting people who have space to spare with those who are looking for a place to stay. Through their experiences on Airbnb, guests and hosts build real connections with real people from all over the globe.

Airbnb has taken the idea of renting rooms to a whole new level. Prior to booking your room, you can read customer reviews as well as read what the property owners say about past renters.

The arrival of Airbnb type services brings up the key fact about loyalty. Customers now rely more on information about hotels from other customers rather than from the hotel’s advertising.

There goes loyalty down the drain.

According to a recent study, there has been a drop in customer’s loyalty to hotel brands. Only 8 percent of those polled who stay in hotels said they always book at the same hotel chain. Two reasons for this mass defection might be that consumers can quickly find cheaper hotel prices and customer reviews on websites such as Trip Advisor, Kayak, Travelocity, and Trivago. Who wouldn’t want to pay less for the same or better quality hotel room? Remember today’s customer demands high quality at reasonable prices.

Customers are on high-alert, searching for the best value for their money. Kiss loyalty goodbye.

Now back to the beleaguered airlines. The market research firm Colloquy found “54 percent of U.S. airline loyalty-program members
are ‘unhappy’ with their reward options”. And, 48 percent say they’ve been “frustrated” by the reward redemption process.

Let’s look at the chronology of my story.

  • First, I defected from United to Southwest.
  • After that, I used up my hotel points.
  • Then, I applied my credit card points to pay for hotels or airfares.
  • Finally, I switched to using Airbnb properties and paying for it with points from my credit card. 
When I began to rely on other people’s reviews, I became more and more aware of the impact other customers had on my purchasing decisions.

 The customer’s needs were no longer driven by loyalty, but by quality and value.

 So, how are you going to build a culture of loyalty with your customers?