Rethinking loyalty myths

Rethinking Loyalty Myths

Ms Chan: Welcome back to Loyalty Unlocked! An AI-driven podcast that takes you behind the scenes of one of the most ambitious and successful coalition loyalty programmes ever launched. yuu Rewards in Hong Kong!

Ms Chan: For full transparency, the voices and script you hear within this podcast are totally AI generated and are based on chapters from the forthcoming book on loyalty marketing by my co-host, Mark Sage.

Ms Chan: In the previous episode we discussed the standard approach to loyalty marketing communications. We'll now pick up from there to discuss what we're likely missing.

Ms Chan: Alright, so - check this out - do you know the story about Ignaz Semmelweis? Like, the guy who totally changed the way we think about washing our hands?

Mark Sage: Oh, absolutely. Semmelweis is fascinating, really. He’s one of those unsung heroes of medical history. Back in the 19th century, he discovered that handwashing with a chlorinated solution could drastically reduce puerperal fever—

Ms Chan: Oh, like fever during childbirth?

Mark Sage: Exactly. It was devastating back then, killing so many women. But, thanks to Semmelweis, his methods brought the mortality rate in one Vienna hospital down from, get this, 18% to 2%.

Ms Chan: Whoa, that’s a huge change.

Mark Sage: It was. You’d think everyone would’ve jumped onboard, right? But instead, his ideas were rejected. People literally ignored him because his findings challenged their established beliefs. That resistance to evidence is what we now call the Semmelweis effect.

Ms Chan: Okay, hold on—so they had proof it worked, but they still said no?

Mark Sage: Yep. It was all about preserving status quo thinking. Doctors didn’t want to admit that their practices might actually be harming patients. It’s a great example of what happens when evidence clashes with entrenched beliefs.

Ms Chan: Kinda reminds me of loyalty marketing, y'know? Like this whole "20% of customers make up 80% of sales" thing. That belief’s been out there for decades, right?

Mark Sage: It has, and it’s become one of those almost sacred truths in the loyalty industry. But here’s the thing: it’s not entirely accurate. The research shows us that our assumptions about customer loyalty aren’t as rock-solid as we thought.

Ms Chan: Oh, okay, spill, spill. What are we getting wrong?

Mark Sage: Well, take grocery loyalty programs, for example—a study in the Netherlands looked at shopping behaviors across 20 supermarkets and seven loyalty programs over two years. The findings were eye-opening. Even the most loyal customers gave less than half—about 45%—of their spending to a single brand.

Ms Chan: Wait, what? Less than 50%? I thought loyalty programs were supposed to, like, lock people in?

Mark Sage: You’d think so. But, instead, what we're seeing is that most so-called "loyal" customers aren’t exclusive to one brand. And the loyalty programs themselves? They only lifted that share of wallet by an average of just over 4 percentage points. So, the impact isn’t as monumental as many marketers assume.

Ms Chan: Hmm, 4 percentage points doesn’t sound like much, but, I guess, scale it up...yeah?

Mark Sage: Exactly—it adds up when you’re dealing with millions of members. Still, the bigger takeaway here isn’t just the numbers—it’s the realization that loyalty programs might be too focused on heavy buyers while overlooking the importance of lighter ones.

Ms Chan: So, we’re like, chasing whales and totally missing the schools of fish?

Mark Sage: That’s a great way to put it. Heavy buyers will eventually move on—life happens. A new job, a house move, kids...you name it. But lighter buyers? They represent most of your customer base and a surprising percentage of your revenue.

Ms Chan: Wow. So instead of focusing on just retaining the big spenders...

Mark Sage: ...We need to think broader. The opportunity isn’t in exclusivity; it’s in inclusivity.

Mark Sage: Loyalty programs should be about creating mental availability—making sure that when someone is ready to buy, your brand comes to mind first.

Ms Chan: That’s kind of radical. Like, loyalty without loyalty?

Mark Sage: It’s a rethink, for sure. And it’s why we need to move past those outdated assumptions and focus on what the data actually tells us about customer behavior.

Ms Chan: And that’s where Byron Sharp’s ideas come in, right?

The Illusion of Heavy Buyer Loyalty

Mark Sage: Exactly. Byron Sharp’s “Law of Buyer Moderation” perfectly ties in here—it shows us that heavy buyers naturally taper off over time, while lighter buyers tend to step up their purchase frequency. It’s a reminder that buying behaviors evolve, which is why inclusivity is so crucial.

Ms Chan: Wait, so the heavy buyers don’t stay loyal? Like, they’re gonna drift off over time?

Mark Sage: That’s right. Think of it like this: people’s lives change, you know? Situations shift. A once-loyal customer who bought frequently might move to a competitor, or they just stop buying as much. It’s not that they dislike the brand—it’s just regression to the mean.

Ms Chan: Regression to the mean...okay, so you're saying it’s kinda inevitable?

Mark Sage: It is. And that’s why Sharp talks about broad reach being essential. If you only focus on your heavy buyers, you risk losing out on the lighter ones who might grow into heavy buyers or the non-buyers who could become new customers.

Ms Chan: Huh. So it’s like—trying to catch people before they slip through the cracks.

Mark Sage: Exactly. A brand’s success often depends on how wide its reach is, how effectively it connects with as many potential and current buyers as possible. Sharp highlights this with data from leading brands like Coke and Pepsi. In his book How Brands Grow, he highlights how 72% of Coke buyers also buy Pepsi?

Ms Chan: Wait, what? That’s like—almost three-quarters! So much for loyalty.

Mark Sage: Right? And this isn't exclusive to soft drinks. It’s common across all kinds of industries, from FMCG to grocery shopping, even airlines. Consumers naturally spread their purchases across brands, and heavy buyers of any one brand are still engaging with others pretty frequently. So, focusing solely on these “loyal” heavy buyers really misses the broader picture.

Ms Chan: Okay, so basically...loyalty’s an illusion?

Mark Sage: Not an illusion. Loyal customers are important, but loyalty isn’t as deep or exclusive as we like to think. This is why Sharp emphasizes that the goal should be mental availability—getting your brand to come to mind first when someone is ready to buy.

Ms Chan: Ah... so like, being memorable instead of just trying to tie people down.

Mark Sage: Yes. It’s about being there when they need you, not trying to own them entirely. Loyalty should be thought of as keeping your brand relevant, visible, and top-of-mind—rather than cornering a market of heavy spenders and then hoping they stick around forever.

Ms Chan: Hmm, I’m starting to see it. So, it’s not loyalty in the traditional sense...it’s more like being on their radar at the right time.

Mark Sage: That’s precisely it. And, as we’ll see, the same thinking applies to loyalty programs themselves.

A Progressive Engagement Approach

Ms Chan: So, if heavy buyers are naturally moving on, like you said, how does that play into the way loyalty programs are designed?

Mark Sage: Well, that’s where things get interesting.

Mark Sage: Take that Dutch grocery study I mentioned earlier. Over two years, they looked at 1,909 households involved with seven loyalty programs. The average boost in share of wallet was just over 4%.

Ms Chan: Hmm... yeah, I kinda remember that. It doesn’t sound massive, though.

Mark Sage: It’s not massive, but that’s just the thing. When scaled across millions of customers, even modest gains add up to something tangible. Still, what’s more revealing is how these programs often focus so heavily on the biggest spenders.

Ms Chan: Okay, so they’re treating the heavy buyers like VIPs and ignoring, what, the “lightweights”?

Mark Sage: Exactly. Here’s the catch—those lighter buyers? They’re a much larger group, typically making up about 80% of the customer base and driving around 50% of the revenue.

Ms Chan: Whoa, I feel like we’ve been doing loyalty all wrong. Like...trying to “protect” the wrong group?

Mark Sage: In many cases, yes. That protect-and-retain strategy only goes so far. Eventually, even your heavy buyers will move on, whether that’s due to life changes, new needs, or just, well, competition.

Ms Chan: Right, right. Okay, so here’s a thought—what happens when they do come back? Like, shouldn’t there be some way to kind of, I don’t know, keep the door open?

Mark Sage: That’s a great point. Frequent flyer programs are a classic example. When someone’s flying habits change—maybe because of a new job or, say, a global pandemic—they’re often dropped from the program entirely. No soft landing, no recognition of their past loyalty. They go from gold status to, well, nothing.

Ms Chan: Ouch. I mean, talk about a cold shoulder.

Mark Sage: Exactly. And that’s a mistake. Even if you can’t exactly keep all the perks open, acknowledging their history with the brand can make a huge difference. A little recognition goes a long way toward keeping the relationship alive.

Ms Chan: Okay, so this is where branding comes in, yeah? Like, staying in their mind even when they’re not actively buying?

Mark Sage: Yes. It’s about building and maintaining mental availability. Keeping your brand relevant and top-of-mind means that when customers are ready to return—or even recommend you—you’re the first name they think of.

Ms Chan: So, kinda like a light touch approach? Not full-on loyalty, but more like...a friendly reminder?

Mark Sage: That’s one way to think about it. The goal is to balance loyalty marketing strategies so that you foster long-term brand visibility and relevance, especially with lighter and lapsed buyers, not just heavy buyer trade driving.

Ms Chan: Huh, okay. So it’s less about chasing after the heavy hitters and more about, like, casting a wider net.

Acceptance of New Loyalty Landscape

Ms Chan: So, Mark, with what we’ve discussed, are we pretty much rethinking how loyalty marketing strategies should work?

Mark Sage: In many ways, yes. What we’re realizing now is that loyalty isn’t just about protecting and retaining the heavy buyers. It’s about broadening the scope—using loyalty as a gateway to connect with lighter buyers and even those who might not be buying yet.

Mark Sage: It’s a total mindset shift.

Ms Chan: Got it. So instead of climbing this “loyalty ladder,” we’re like, building bridges or something?

Mark Sage: We are. It’s not about getting every customer to the top rung; it’s about creating enduring relationships at every level. It’s fostering those meaningful connections across all your buyers. That’s where focusing on mental availability really comes in.

Ms Chan: Right, making sure your brand is in their mind when the time comes, like you said before.

Mark Sage: And here’s the thing—this doesn’t mean abandoning what we’re already doing in loyalty marketing today. The traditional CRM approaches. Those absolutely have their place. But we’re not stopping there. We’re extending that thinking. Loyalty channels should be used to foster what Byron Sharp calls Category Entry Points, or CEPs. It’s all about being relevant in those key moments when customers are deciding.

Ms Chan: Huh. So it’s like doubling down on loyalty channels, but using them in a smarter, more...diverse way?

Mark Sage: That’s exactly it. Loyalty communications don’t have to just be transactional or performance-driven. They’re untapped channels for brand building. But to unlock that potential, we need to rethink how we’re delivering our messages.

Ms Chan: Gotcha. So, we’re switching gears—from just loyalty-as-rewards to loyalty-as-brand-building.

Mark Sage: That’s a perfect way to put it. Loyalty marketing is a tool, not just for today’s performance, but for building a stronger, more visible brand for tomorrow.

Ms Chan: Wow, this has been such an eye-opener. Honestly, I think I need to rethink everything I thought I knew about loyalty marketing. And probably wash my hands more...thanks, Semmelweis!

Mark Sage: It’s been great digging into this with you. Loyalty is evolving, and as marketers, we’re just starting to see the bigger picture.

Ms Chan: Well, that’s all for today, folks! Thanks for tuning in and going on this little loyalty journey with us.

Ms Chan: Don't forget, subscribe via Apple or Spotify to make sure you don't miss out on future episodes. Also, if you want to deep dive this topic further, checkout the link to the article in the show notes.