The Illusion of Customer Loyalty

Loyal (adjective): firm and not changing in your friendship with or support for a person or an organization, or in your belief in your principles

I love the comfort that us marketers get by pedantically segmenting our customer base into inactive/lapsed customers at one end and the top-tier “super loyal” customers at the other. These super loyal customers are the top of the pyramid customers for our brand; to be protected and wooed at all costs. But this perception of loyalty may be ignorant at worst and delusional at best. Are we really expecting too much by labelling customers as “loyal”?

I am sure that all the extra kilos that I have painstakingly accumulated on my paunch, must have earned me the ‘super loyal’ badge with Swiggy. I am a frequent, high AOV user and fit most of the demographic pointers that I suspect they find valuable.

Let’s make a few assumptions (this may be grossly off, but will help us land the uber-level point of this article). Let’s assume a 3x3=9-tiered RFM based customer labelling system.

1.    Recency - 3 tiers basis last order in 30, 90 or 180 days

2.    Frequency - trailing 52 weeks - no. of orders <=26 orders, 26-52 orders, >=52 orders

3.    Monetary Value - trailing 52 weeks, AOV <=Rs. 250, 250-500, >=Rs. 500.

Let’s for a second, allow me to make the pompous assumption that I would be slotted in the top tier in all 3, making me Swiggy’s “super loyal” customer.

An oversimplification of this would mean that I make a sizeable order, once or more every week. Now let’s make this interesting. I order twice a week (once on Sat and once on Sun) and while I use Swiggy on Sundays to order my Meghana Biryani, on Sunday afternoons, I switch to Zomato and make a sizeable order at Truffles. This could make me the “super loyal” customer of two competing duopolistic platforms in a single category. Is this really true loyalty?

One may argue that the incidence of Zomato use may be lower if I have paid for a Swiggy ONE membership to save up on delivery fee. But that is not an indicator of LOYALTY, but simply of a user’s STICKINESS since the presence of a delivery fee may prevent you from using a competing platform. How many continue using Swiggy (and paying the delivery fee) once their membership expires? Would you not give Zomato a flirtatious glance to check if there’s a coupon running there? Would we call this “loyalty”?

Maybe there are a few who would continue to use Swiggy even after the expiration of their membership benefits. But would you call that loyalty? Or STICKINESS due to familiarity with the UX, the need to avoid cognitive friction arising from exploring a less familiar platform?

Customers, like me and you, are promiscuous. Period.

My spouse may have been slotted as a ‘loyal’ customer at Zara, but one glance at her wardrobe would show you a fair representation of each of Zara’s competitors. The same story plays out across product categories. There may be some exceptions but the rule, I suspect, is largely universal.

It would be more potent to classify customers as heavy users (at the top tier) and light users (of those who show up only sometimes) and focus our efforts as such. Even Byron Sharp says that the only way for brands to grow is to keep acquiring new customers and to keep acquiring new customers brands needs a long tail of light users. Loyalty is rare and is a lovely pair of rose-tinted glasses that us marketers love to put on. Looks great on decks and analytics dashboards, but far from the truth in real life. Maybe it's just one of those exaggerations that the marketing world loves to indulge and endorse.