Is loyalty always a virtue?

How often have you seen a product or service you use advertised at a lower price, then discover that the savings are only available to new customers? 

It happens so often that the term “loyalty tax” has been coined to describe the phenomenon. 

Businesses do it to attract new and more customers. And they do it safe in the knowledge that you, a loyal customer over many years, may be peeved but will probably stick with them anyway. 

In 2023, the Australian Competition and Consumer Commission (ACCC) found 79% of households were paying more for electricity than they needed to. 

And a recent Canstar report revealed that householders who didn’t shop around for home and contents insurance missed out on saving an average $819 a year. 

Sally Tindall, Canstar data insights director, told the ABC Australians were “an incredibly loyal bunch and that’s probably to our detriment.” 

So, what should you do to get a good price, even if you decide you don’t want to change brands? 

Chris Barnes, from consumer group CHOICE, said it often paid to be a “tricky customer” and try to negotiate a better deal. 

“You may find that if you’re really willing to put in a bit of time on the phone, they might be able to pull out some discounts that are nowhere mentioned on their website,” he said.

Brand loyalty is a powerful force that drives consumer behaviour and it’s something many companies strive to cultivate. 

But why do we remain loyal to certain brands? The answer lies in a combination of emotional, psychological, and practical factors that shape our buying habits over time. 

• Emotional connection. Many of us associate brands with positive emotions, experiences, or memories. Brands that tap into our emotions often enjoy long-term customer relationships. 

• Trust and reliability. Consistency in quality is a key factor. When a brand delivers reliable products or services time and again, we begin to trust it.  

• Convenience and familiarity. Familiarity breeds comfort. Once we’re used to a brand’s product design or service experience, it becomes easier to continue choosing it. Changing brands means having to adjust – and that can take more effort than we’re willing to expend. 

• Social identity. Some brands become part of our identity. The clothes we wear, the car we drive, or the gadgets we use can signal something about our personality or values. When we identify with a brand’s image or message, it reinforces our loyalty because it aligns with who we are or aspire to be. 

• Customer rewards and incentives. Many brands offer loyalty programs, discounts, or exclusive perks for returning customers. These incentives can make it financially advantageous to stick with them. 

Ultimately, brand loyalty is a blend of emotional and rational factors that go beyond just the product or service itself. 

For the record, the Reader’s Digest top 20 trusted brands in Australia for 2024 were: Dettol, Band-Aid, Cadbury, Bunnings, Dulux, Cancer Council, Bridgestone, Panadol, Toyota, Bega, Weber, Royal Flying Doctor Service, Dairy Farmers, Glen 20, Selleys, Weet-Bix, Woolworths, Lipton, Finish, and Yates.  

Related reading: ABC, Trusted Brands