Why customer loyalty is a one-sided relationship benefiting corporates

Loyalty is in the news. Not for a fuzzy feel-good program designed to woo customers as repeat spenders. Instead, IAG is subject to a class-action lawsuit by Slater and Gordon. The suit charges that the insurer used AI to target long-standing customers to hike their premiums because they were ‘loyal’ and less likely to leave.

For years, organisations have used perks and promises to keep customers. It’s big business. Airlines and supermarket programs are valued at hundreds of millions of dollars. Giving customers something extra for doing something they were doing anyway is a reliable tactic to capture people’s repeat choices.

Yet, when the core of the relationship is commercial, loyalty has limits. Because, despite the idea of give and take, the benefit favours the business. 

For example, when I buy a plane ticket, the money I outlay immediately lands in the airline’s coffers. The loyalty points I get in return sit unused in my account, often for months or years. It’s a pretty good deal. For them. The relationship is incredibly one-sided, more servant than equal.

History portrays ‘loyal servants’ as those who stick by employers or others for many years. Giving their time, effort, and fidelity in exchange for pay, some return goodwill and perhaps a few extras.

Modern corporates have flipped the model. Today, rather than ‘loyalty having its privileges’, the customer pays for the privilege of loyalty and any perks, becoming a product alongside what they buy. 

I’m not sure how to describe that relationship, perhaps quid pro quo. But ‘loyal’, it is not.

Think about someone you feel loyal to. You likely stand alongside them in moments that count, good and bad — choosing to support them and them you, which creates a reserve to draw on when you misstep, helping to keep the relationship intact.

Now contrast that with the tenuous bonds of your most ‘loyal’ relationships as a customer. Your choices are likely motivated by some combination of experience, convenience, price, product and service. Not necessarily in that order. 

Change one or two things and watch how quickly allegiance shifts. If my usual airline doesn’t fly to the place I need to go, if my closest supermarket stops carrying a product I love, if my car insurance premiums skyrocket for no reason. I’m outta there.

When treated as a commodity, loyalty balloons self-interest on both sides of the transaction. Companies pretend to value customers beyond how much they spend and get peeved when that inflates their sense of worth. Customers feign loyalty, but only as long as it suits them. And the uneasy arrangement of interests doesn’t take much to tumble down. 

Case in point. The insurance company customers suing IAG felt their loyalty was for nothing. They mistook the goodwill bonuses and no-claims discounts as evidence they were valued.

They were. Just not the way they thought.

Michel Hogan is an independent brand counsel.

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