Amazing about face.
In a world where deals and promotions abound, where “conquesting and conquering” customers has become the modus operandi (viz, the streaming brands, the automotive industry) and where value continues to be equated with price alone, Barron’s, the financial newspaper, tells us brand loyalty is “in” again. At least in fast food.
Barron’s review indicates that fast food chains are “revamping” their loyalty programs. Fast food chains such as Starbucks, McDonald’s, and Chipotle now see the performance benefits, aka financial gain, of focusing on customers who love the brand rather than those who love the deal. The loyalty programs now offer a wide range of experiential rewards. Once again, real loyalty outperforms deal loyalty any day, especially when it comes to shareholder value. As Barron’s wrote, loyalty is royalty.
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This is not to say that fast food brands are leaving the deals. The Wall Street Journal indicates that McDonald’s is still looking to regain its place as the “value brand” by promoting $3 items and a $4 breakfast option. Apparently, but not surprisingly, the previous deals have not performed as expected. It is also unclear whether the previous deals converted deal shoppers into loyal shoppers. The belief that price and value are the same appears to be remarkably embedded in the management mindset.
If you are thinking that brand loyalty seems to be common sense, you would be incorrect. Read the transcripts of earnings reports. CEOs, CFOs, CMOs, and other C-suite executives all tout the value of deals offered by their brands, ongoing, everlasting deals that may increase immediate sales but diminish the brand’s power. Deal loyalty is brand-detrimental. Strategies must emphasize great brand at a great price rather than here is a great deal at this brand.
There are many pundits, observers, and otherwise brand mismanagers who persist in saying that there is no such thing as brand loyalty.
With digital, 24/7 immediacy, the ability to click and buy on your mobile phone, and the craziness around having the latest, greatest technology, ignorance of brand principles leads brand managers to say brand loyalty is dead. Data show purchase frequencies, so marketers see declines and make incorrect assumptions.
Back to the future.
In the 1970s, some said brand loyalty was on the decline. Observing that people bought different brands rather than a single brand, these doom-slingers said brand loyalty was dead. These naysayers did not see that brands are occasion-based. The brand to which you are loyal on one occasion may not be the brand that satisfies your needs during a different occasion. For example, you might be loyal to Blue Moon beer during a happy hour on an outdoor patio, but when entertaining your boss, you might be loyal to Heineken, and when sitting on the couch watching football with your best friend, you might prefer a Bud. You will be loyal to a brand that satisfies a need or solves a problem for a particular occasion.
In the 1990s, as private labels and store brands gained significant traction, people cried that brand loyalty was over. Same situation now, as private label brands are eating the lunch of big brands. People are still loyal: people are just loyal to store brands.
People misunderstand brand loyalty. People assume that behavior is all that matters. This is wrong. Brand loyalty is committed brand behavior. In other words, there is a critical attitudinal element to brand loyalty.
Think of it this way,
Most of us sign into a brand website every day. However, Signing In and Signing On are not the same.
Signing In is all about behavior. Signing In is habit. But, Signing On recognizes that “behavior” – that is, how many times the member “frequents” the brand – is not sufficient. Attitude is critical, too. Behavior is only half of the story when it comes to brand loyalty. To be loyal, a customer must be committed and enthusiastic. Signing On develops true commitment to the brand. Signing On builds trustworthy brand value. Signing On helps move members up the ladder of loyalty. It creates brand enthusiasm. It creates brand advocates.
Repeat behavior – habit, necessity – is many times confused with true loyalty. This may lead marketers to offer deals. But, deal loyalty is not real loyalty. Brands pay a price for deal loyalty.
When I worked with IHG (InterContinental Hotels Group), one focus was the IHG loyalty club. Data showed behavior alone. There was no way to determine which club members were just staying at IHG hotels to rack up points versus those who loved the IHG brands’ experiences. Loyalty clubs have their share of deal loyal customers who just want the rewards. But loyalty clubs are havens for loyal users who become part of membership communities. Being a member of a loyalty club is based on meaningful membership.
Meaningful membership makes decision-making fast. With meaningful membership, the brand evolves from “This is the brand I use most often,” to “This is the brand I prefer,” to “This is my brand” to “This brand means something to me.” There is no doubt about which brand to choose.
Psychologists know that attitudes are much better at explaining behavior than at predicting it. Psychology shows that people observe their own behavior and then develop attitudes and beliefs consistent with it. A trial experience can become a determinant of attitude, which should be reinforced by marketing. Marketing can help move people up the loyalty ladder by evolving trial into committed repeat purchase.
Attitude is essential for brand loyalty. Unfortunately, data collection is not excellent at calibrating attitudes, and data collectors think that data speak, when, in fact, even with AI, data do not speak or feel: people do.
Barron’s reports that Chipotle, McDonald’s, and Starbucks are learning that there is a huge difference between heavy frequent users and loyal users, even though heavy frequent users generate sales. These may be the quantity of sales or the quality of sales. For quality revenue growth, a brand (and its shareholders) needs both quantity and quality of sales.
Loyal customers are valuable customers. Loyal customers trust and perceive the brand to be a quality brand when they believe – through experience or the expectation of an experience – the brand will deliver on its promise.
Shareholders take note: brand loyalty is valuable. Truly loyal customers are more profitable, leading to high-quality revenue growth due to increased spending and reduced defections. A brand increases brand loyalty by strengthening the quality of the relationship with the customer.
For example, about five years ago, before COVID-19 and years of price hikes, we worked with a McDonald’s franchisee organization. In a speech to the organization’s membership, I wrote the following:
Consider this scenario:
I am told that the current estimated average (McDonald’s) check is around $6.50. And, the average customer frequency is around 3.1 times per month.
Instead of increasing the average check to cover for declining customer visits, what would happen if, over the next year, McDonald’s committed to holding the average check at $6? And then, persuaded the average customer to frequent McDonald’s just one more time every four months?
The result would be an 8% increase in your store sales. This is actually higher than the 6% comp sales currently reported… and it is achieved by focusing on increasing customer loyalty!
A small increase in frequency … can make a huge difference to brand health.
A brand increases brand loyalty by strengthening the quality of its relationship with customers.
As true brand loyalty increases, the likelihood of defection because of a competitive price promotion decreases. Past research showed that reducing defections by 5%, increased profits by 25% and over. And, meaningful members who are brand enthusiasts will pay more than those who will only consider a brand.
Do not depend on satisfaction scores. Although customers may state they are satisfied with the brand, they still defect. In fact, in one study, fewer than 50% of satisfied customers are repeat buyers.
This was a high-profile study conducted in the 1990’s. Imagine today: with speed and access as givens and with information simple to obtain, it is easier and faster to drop one brand for another. It is imperative to know whether your members are increasing their loyalty, not just frequenting the brand.
Here is something else that must change.
A small percentage of users can account for a large percentage of sales. The common 80:20 Rule should be replaced with the 10:50 Rule. The 80:20 Rule is old-school marketing. You can only live by the 10:50 Rule if you have a committed customer base that is incredibly enthusiastic about the brand. Ten percent of your customers – the loyal customers – generate 50% of your profits.
A decade ago, when Macy’s was beginning its first of many turnarounds, Macy’s focused on its core customer base through its loyalty program. Macy’s noticed that 10% of its best customers accounted for 49% of Macy’s sales.
The Macy’s situation reminded me of a presentation from the early 1990s. I had the privilege of listening to the results of a Campbell’s Soup Co. study that used scanner data – very high-tech at the time. The Campbell’s marketing head spoke about one small piece of the study at a conference.
Campbell data showed that all of one (leading) brand’s profits came from a mere 10% of the customer base. Sixty-five percent (65%) of the brand’s users fell into the Unprofitable group, which accounted for 51% of the brand’s sales volume. This unprofitable group returned only 38 cents on every marketing dollar spent to reach them. Or, as the marketing leader told the audience: 60% of our marketing dollars were wasted; 63% of trade promotion dollars were wasted; 95% of advertising and media dollars were wasted. The brand’s marketing budget was $33 million, and, by these calculations, over $20 million would have been better left unspent.
The Campbell study reported that for the most loyal customer group, the return on marketing investment was $3.38 million.
I highlight this old study because on March 12, 2026, the Wall Street Journal reported that Campbell’s cut its yearly outlook because it strategies were not creating the expected performance. The new approach: more deals and promotions. If I can dig up the Campbell’s study, so can Campbell’s. Loyal customers are valuable customers. Valuable customers create brand value, which leads to shareholder value.
What I have recommended to clients is to use databases more creatively. Really, Amazon must do more than give me brand suggestions based on my previous behavior. Sure, I bought this product before. But that purchase was for a specific need and occasion. I am past that need and occasion now.
As a marketer, your job is to compete. Compete differently with The Blake Project.
At least add these questions to the research, analysis, and synthesis:
You already know the brands a customer buys. You can probably figure out which brands comprise the competitive set. Now, 1) ask which is the first choice brand, and 2) which is the second choice brand. Once identified, ask the price question: 3) If your second choice brand were offered at 10% less, would you still buy your first choice brand?
The percentage of customers who answer yes to question #3 will be small – 6% to 10%. But these customers are extraordinarily valuable.
Building brand loyalty is the only basis for enduring profitable growth. Conquest, acquisition, trial – all of these are important. But data do not lie: when it costs at least four to six times as much to acquire a new customer as to retain and nurture an existing one, focus first on building brand loyalty. Sure, you lose customers – the leaky bucket. But please make sure the customers you attract become loyalists. Then do everything your brand can do to maintain and grow these customers’ loyalty.
Contributed to Branding Strategy Insider by Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients create meaningful differences that increase value and underpin competitive advantage. Please email us to learn how we can help you compete differently.
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