Marketers Need to Differentiate Loyalty vs. Preference Goals

Key loyalty KPIs are retention rate, repeat purchase, churn rate and customer lifetime value, compared to the key long-term preference KPIs of top-of-mind awareness, brand perception, purchase intent and brand engagement. Consistent messaging, quality customer service and product innovation are all strategies that build toward a long-term relationship with the customer. 

Short-term, transactional strategies—as measured by conversion rate, cost per click, cost per view and cost per conversion—do nothing to build loyalty as defined by the long-term KPIs above. 

The cost and value of preference versus loyalty 

Numerous studies, including one by the Harvard Business Review, underscore the resilience and profitability of long-term customer relationships over short-term transactions. Recent insights from the Edelman Trust Barometer shed light on the pivotal role of trust and authenticity in driving brand loyalty—a testament to the enduring power of consistent brand experiences built over years, not months. According to a report by Forbes and another by Bain & Company, increasing customer retention rates by 5% can lead to a profit increase of more than 25%. Yet, despite the empirical evidence, many brands persist in chasing short-term gains with long-term KPIs. 

It’s easy to see why: Short-term preference is easier to transact on, and long-term preference campaigns cost more in the long run, requiring you to have deeper consumer understanding, which tends to come with research costs or offer a rewards program, which is associated with higher investments. While there are strategies to reduce the marketing costs of local, one-to-few and one-to-one campaigns, these strategies tend to have a higher CPM than mass, one-to-many campaigns.

And have you seen consumer acquisition costs these days?! On average, CAC for a D2C brand is $25-35. If your average basket size is $50 through transactional strategies, your ROI is 2-2.5; ten years ago, D2C ROIs, even if driven by transactional strategies, were close to 4. 

The financial model for short-term preference is simply too weak in today’s marketing landscape given these acquisition costs. You can’t afford to run a business on short-term preference only—you must build actual loyalty by activating strategies aligned with Business One’s above, measuring churn rate, retention rate and other loyalty KPIs.