6 Ways Brand Loyalty Costs You Money

By Kentin Waits on 8 October 2018 0 comments

Loyalty is usually considered a virtue. In romance, in friendships, in business — loyalty typically wins. But when it comes to brands, blind loyalty can actually be a bad thing. Stand by your brand? Always and forever? I don't think so. Here are six ways brand loyalty costs you money. (See also: How We Brainwash Ourselves Into Brand Loyalty)

1. It prevents you from discovering new products

Consumers who rigidly stick to one particular brand never discover what else it out there (and let's face it, there's always something else out there). With that degree of loyalty, you may miss out on new products or more efficient options that can save you money in the long run. (See also: 7 Grocery Store Habits That Are Making You Broke)

2. It discourages price comparison

From cellphone carriers to bulk cereal, brand loyalty discourages objective price comparison. If you never consider other options, you miss out on special promotions, deep discounts, and other money-saving opportunities.

Venture beyond your go-to brands. In the grocery store, compare the unit price of products and the value that generics and store brands offer. For services such as cable, internet, and phone, check out new providers who may have more flexible pricing options. (See also: 7 Generic Beauty Buys Better Than the Expensive Originals)

3. It limits flexibility

Though brand loyalty works best when it's voluntary, many companies prefer something a bit more binding. Think about brand-specific software, tech accessories that aren't universally compatible with other devices, and smartphones that lock out all carriers but one. Are the manufacturers nurturing loyalty by supplying a superior product or service, or are they simply benefiting from a captive consumer base? Remember, when a brand limits your flexibility, it limits your opportunity to save. (See also: 5 Smart Ways to Save on Smartphones)

4. Store brand credit cards may not offer the best terms

Store cards or co-branded credit cards may make you feel like you're part of an exclusive club, but they don't always offer customers the best terms. Many charge an annual fee, impose higher than average interest rates, and offer limited options for reward redemption. Unless you shop frequently at a particular retailer, store cards can't beat cards with more flexible rewards programs. Instead, choose a general cash-back credit card with a competitive interest rate and no annual fee. (See also: 5 Store Card Pitfalls to Watch Out for)

5. Loyalty and reward programs trade nominal savings for big data

Loyalty plans and retail reward programs don't give you discounts out of the goodness of their hearts; they trade it for detailed data on your buying habits. In turn, that data is analyzed to cross-sell similar products, suggest accessories and upgrades, and predict what you'll buy in the future. Once you sign up, you become part of an alarmingly sophisticated marketing machine — one that's designed to sell you more products more often. Where's the savings in that?

6. Many membership benefits don't last

Building brand loyalty is an expensive endeavor. Perks, upgrades, and discounts are used strategically to draw new customers into rewards programs. However, those benefits cost money and don't always last. Once your loyalty is firmly in place, privileges have a way of gradually disappearing. In fact, new customers often get far better deals than those who've stuck around for years.

 

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