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?

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.

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.

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.