August 3, 2023 | 5 MINUTE READ

True Loyalty Is (Not) Transactional

  • Loyalty Programes

This is an interesting debate – how are loyalty programmes that are predicated on a transaction considered true loyalty? I get asked this a lot – and while I have an issue with the name of this eight billion dollar industry (expected to grow to USD 18.17 billion by 2026) – let’s save that conversation for another day. I would like to postulate that as long as human beings need some kind of economic currency to live, and businesses use money as a currency to buy and sell goods and services, and measure success – transactions underpin most exchanges in life.

When we think of the connotations of loyalty, an ordinary person might think of a bond, relationship or connection between two things that is formed based on emotion. However, when it comes to brands trying to ‘buy’ loyalty, we find a situation where companies use money to create emotion.

But can customer loyalty just be bought?

Not necessarily.

Just because we interact with businesses on a transactional basis, does not mean that our relationship with these brands is just formed around money. Businesses have constantly been trying to understand what makes customers loyal. Between a competition to offer the best prices and trying to make their service as personalised as possible, corporations have been constantly raising the bar when it comes to trying to retain their customers. Particularly during the pandemic, several businesses were struggling due to a lack of regular customer base, and so loyalty to our favourite brands meant even more in such uncertain times.  

The debate as to whether loyalty can be bought is multifaceted; can we consider loyalty to be formed on a transactional basis, or an emotional one? While we do interact with companies based on an exchange of goods and services for money, the aspect of loyalty is not necessarily attached just to the value of the transaction.

Let’s take the example of the Samurai warrior. They were the well-paid retainers of the ‘daimyo’ (the great feudal landholders) or Shogun. They cultivated the ‘bushido’ codes of martial virtues when engaging in battle: indifference to pain and unflinching loyalty. In the 1870s, Samurai families comprised just 5 percent of the population. The Samurai would fight to the death for their Shogun, and a masterless Samurai was referred to as ‘Ronin’ (a derogatory term, used with disgust). If a Samurai’s Master were to die, the Samurai would typically kill himself from shame. How’s that for loyalty? Nevertheless, the Samurai were still paid for their services.  

 The reality is, loyalty is a combination of multiple things. 

Loyalty is not brought. its earned brand look developing a personal and affection dynamic with their customer.

Of course there is a rational aspect to it – we try to gravitate toward brands that we believe are giving us a good value for money. Transactional loyalty is very much centred around economics – convenience, price, and everything else that might influence the rational part of our decision making.

However, our emotional biases and perspective will also contribute to how a brand makes us feel. Is there a certain appeal of ‘exclusivity’ that this brand gives us? How do we feel when we talk about our purchase choices to our friends and family? Research has shown that customers will stay loyal to their brand even when alternative options are presented, partially because they are ‘emotionally loyal’ to them.

This type of loyalty does last longer, because our emotions are less likely to change as fast as the prices of other competing brands. We choose to devote our money, time and  purchase preferences to brands that make us feel special, and looked after. If the transaction isn’t ‘layered’ with other qualities like efficient service, the ability to personalise someone’s shopping experience, and customer care, there will inevitably be customer attrition.

So where do loyalty programmes fit into this? There are multiple loyalty programmes out there. If anyone has read ‘Why Loyalty Matters’, you’ll see that rational loyalty is a consequence of most brands being unable to generate an effective connection with customers. And just a loyalty reward programme will be unable to change that. We can put together the most elaborate, rewarding programme out there. But how far can that go in making a customer feel unique and appreciated?

I have lived this learning myself. My Sensei, John, was a man who devoted his life to teaching martial arts. I met him in 2003, and consistently trained with him right up to 2011, when I earned my black belt stature. I continued to train with him regularly, but various injuries reduced the frequency of my training. Then, his sudden and unexpected demise put a complete halt to my training. I packed away my belt, Gi and Hakama, without ever even considering training with someone else as my Sensei.

You see, I believe that the relationship with one’s Sensei is sacred. This person pushes you to your limits; they recognise your physical, mental and emotional potential and help you achieve it. Nevertheless, this relationship was ultimately based on a financial transaction. After all, I did have to pay for these classes, and Sensei did have a family to support. Still, none of that takes away from the bond we shared; I was, and remain deeply committed to him and to Aikido, as both have played a huge role in my life and given me value far beyond the fee I paid every month. Does this transaction then detract from the emotion of loyalty attached to it? 

I think of loyalty in ‘Maaslow’ terms. At the base of the pyramid, we can find for example, an employee-employer relationship, which is transactional. This could be where his salary is being paid on time. Then, we proceed further up the hierarchy, looking at functional benefits – such as the covered parking spot in the building.

Then we come to emotional loyalty – perhaps some words of appreciation in front of the office.  

As we proceed higher up, we reach the social aspect of loyalty – community based appreciation, which could perhaps be an invitation to an award gala or time off work to support a charity. And finally, the most intimate form of loyalty – a personal bond. Whether you wish me on my birthday, or ask after my children, both parties feel like there is a pure connection.

Ultimately, loyalty is not bought. It’s earned. Brands need to look at developing a personal, affectionate dynamic with their customers. It should not be a question of ‘can I get a better price elsewhere?’, but more of ‘will I be looked after like this elsewhere?’. There has to be just the right balance of value and quality of service to ensure loyalty is maintained from both sides. However the paradox of loyalty is the transaction and I believe this exchange is not only a part of loyalty, it actually underpins it.

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