Marketers Underestimate Loyalty And Don’t Understand Its Drivers

In December of last year, as part of my annual predictions piece, I wrote that many consumers have faced a tough time economically over the last few years and that the situation in 2025 was set to persist.

We are now just over a third of the way through 2025, and it’s fair to say that, regardless of where you are in the world, the average consumer is still under pressure and is becoming increasingly discerning about what to spend their money on and with whom.

As a result, many brands are scrabbling around trying to win, retain, and earn the loyalty of their customers.

But with so many changes happening in the world right now, have the rules of customer loyalty changed in 2025?

Two recent research reports offer some insights into the current state of customer loyalty. However, they also raise some serious questions.

The first report, conducted by Medallia and Ipsos, finds that although 97% of CX practitioners agree that customer loyalty is critical, and nearly 90% of them believe that loyalty will increase in importance as a business metric in the future, it also questions whether brands really understand loyalty and what drives it.

In particular, the report finds that there is an 11-point gap between how loyal a customer is to a brand and how loyal brands think customers are.

This is surprising as it is the inverse of what normally happens. Brands are often guilty of overestimating their importance in the minds of their customers and their own capabilities.

Moreover, the report goes on to find that customer loyalty is not as volatile as many marketers and CX professionals think. Specifically, the report finds that 59% of brands believe that one or two bad experiences will drive customers away. However, only 35% of customers agree, and, in reality, nearly three-quarters of customers say that it would take around four bad experiences before they switch their business to another brand.

Now, a degree of paranoia about the risk of customer churn among marketers and CX professionals is, I would suggest, a healthy thing. I’d rather have it that way than the other way around, where marketers and CX professionals are too blasé about customer loyalty.

However, this finding emphasises the crucial role that customer service plays in fostering customer loyalty and how brands would benefit from addressing customer pain points quickly and effectively in this context.

Finally, the report uncovers another finding that further questions whether brands truly understand loyalty and what drives it. Specifically, the report finds that 52% of customers say they’ve felt some level of loyalty after just one transaction, yet only 4% of the professionals surveyed believe customers become loyal after only one transaction. In fact, according to the report, marketers and CX professionals generally think that it takes three to seven positive experiences to foster loyalty.

Overall, the Medallia Ipsos report does a good job of identifying some key gaps in marketers’ and CX professionals’ understanding of their customers and what affects their loyalty. It also uncovers the really interesting insight that just over half of customers would have some sort of loyalty to a brand after one, presumably good, transaction. It goes on to highlight that many brands are failing to “recognize customers as loyal — and not taking appropriate steps to nurture these feelings — as early as they should be in the relationship.”

Those are all great insights, but reading the report left me with one big question: Why does only one transaction generate loyalty in just over half of all customers?

Another report, SAP Emarsys’ latest Customer Loyalty Index report, however, could offer some clues.

Now, for the last four years, they have been exploring what drives customer loyalty, but at the same time have been mapping customers across five key types of customer loyalty. They are:

1. Incentivised Loyalty – where customers are offered discounts, incentives and rewards in exchange for their loyalty.
2. Inherited Loyalty – where customers are loyal to a brand based on the brand’s heritage or a customer’s longstanding association with a brand.
3. Silent Loyalty – where a customer is loyal to a brand but wouldn’t publicly endorse it.
4. Ethical Loyalty – where a customer feels that there is an alignment between their own social and ethical values and those of the brand.
5. True Loyalty – where a customer has an unwavering, unshakeable loyalty to a brand that is built on trust, love, and devotion. This is the holy grail of loyalty.

Talking to Sara Richter, CMO at SAP Emarsys, about the results, she told me that “Within the five different types, there are only two of the five types that have grown consistently since they started the research in 2021, and they are True Loyalty and Ethical Loyalty.”

According to Richter, that tells us a few important things:

1. While the Incentivized, Inherited, and Silent Loyalty categories experienced minor variations over the last four years, the results suggest that discounts and brand heritage alone are no longer sufficient to retain customers.
2. Moreover, only the True Loyalty and Ethical Loyalty categories experienced sustained growth over the last four years, 26% and 25%, respectively, and this tells us two things: One, marketers and brands are getting better at building relationships with individuals, and two, there is a significant shift towards sustainability and responsible shopping.

SAP Emarsys’ research offers a really interesting psychographical perspective on what drives customer loyalty and highlights how customer preferences have changed over the last four years.

However, the report goes on to highlight a series of new, emerging factors that are influencing customer loyalty, like a brand’s ability to create memorable experiences, how well they look after customer data and how hard they make it to speak to a human being.

Does this go some way to explaining why just over half of customers could be loyal to a brand after one transaction?

Possibly.

What it does, however, is offer a different perspective on customer loyalty and what is driving it.

For too long has loyalty been reduced to the dimensions of price, quality and service. However, customer preferences are shifting all of the time, and these reports should provide food for thought for marketers and CX professionals about what is driving their customers’ loyalty.