The marketing industry is obsessed with loyalty. Loyalty programs, loyalty metrics, loyalty-focused strategies. The underlying belief is intuitive: keeping existing customers is cheaper than acquiring new ones, so investing in loyalty is efficient.
The research tells a different story.
What the Research Shows
Decades of empirical research, documented extensively by the Ehrenberg-Bass Institute, shows that:
- Loyalty levels are remarkably similar across competing brands within a category
- Differences in loyalty between brands are largely explained by differences in market share
- Brands grow primarily through acquiring new customers, not through increasing loyalty
- Loyalty programs rarely change buyer behavior in meaningful ways
- Most of a brand's customers are light buyers who show little loyalty
This is not intuitive. It contradicts what most marketers believe. But it has been replicated across hundreds of brands and dozens of categories over decades of research.
The Double Jeopardy Pattern
The Double Jeopardy law shows that smaller brands have both fewer buyers and slightly lower loyalty rates. Larger brands have more buyers and slightly higher loyalty. The causation runs from market share to loyalty, not the other way around.
This means you cannot loyalty your way to growth. You cannot close the gap with larger competitors by making your existing customers more loyal. The only path to growth is acquiring more customers, which will automatically bring slightly higher loyalty as a side effect.
Why Loyalty Programs Fail
Loyalty programs are typically designed around heavy buyers, the customers who purchase most frequently. The logic seems sound: reward your best customers to keep them coming back.
The problem is that heavy buyers are already loyal by definition. They do not need incentives to buy; they are going to buy anyway. Loyalty programs end up subsidizing purchases that would have happened regardless, while doing little to attract the light buyers and non-buyers who actually drive growth.
Worse, loyalty programs consume marketing budget that could be spent on reaching new buyers and building mental availability.
Repeat Purchase Is Not Loyalty
When someone buys from you repeatedly, it feels like loyalty. But behavioral repeat purchase is often just habit, convenience, or lack of alternatives. It does not indicate emotional attachment or commitment to your brand over competitors.
The same customer who buys from you regularly will also buy from your competitors when circumstances change. This is not disloyalty. It is normal buying behavior. Most buyers have a repertoire of acceptable brands and distribute their purchases across that repertoire.
What Actually Matters
If loyalty does not drive growth, what does? The research points to:
- Broad reach to light buyers and non-buyers
- Mental availability built through Category Entry Points
- Physical availability through distribution and accessibility
- Distinctive assets that make the brand recognizable
- Consistent presence over time to refresh memory structures
None of these require special treatment of existing customers. They require reaching more people and being easy to think of and easy to buy.
When Retention Does Matter
This does not mean you should ignore customer experience or that retention is irrelevant. Terrible service will erode your customer base. But there is a difference between avoiding customer loss through basic competence and trying to grow through loyalty enhancement.
The research suggests that acceptable service is table stakes, but exceptional service does not drive meaningful growth. The marginal return on loyalty investment is low compared to the return on acquisition investment.