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Loyalty Penalty: Brands Profit as Customers Stick with Status Quo
28 Aug
Summary
- Longtime customers often pay more than new customers for same services
- Companies leverage switching costs and limited competition to retain customers
- Airline loyalty programs provide fewer perks as airlines prioritize revenue over loyalty
As of August 2025, a growing number of consumers are realizing they're paying a "loyalty penalty" by sticking with familiar brands and services. The article explains how companies often exploit customer loyalty, charging longtime patrons more than new customers for the same offerings.
Businesses leverage switching costs and limited competition to retain customers, even as loyalty programs like airline miles provide diminishing returns. For example, airline loyalty is no longer as rewarding, with points harder to redeem and fewer complimentary upgrades available. Similarly, internet, insurance, and streaming service prices often creep up over time for existing customers.
Experts say this dynamic reflects a shift where "consumer loyalty is on the way out." Companies prioritize acquiring new customers over rewarding longtime patrons. While some loyalty programs still provide value, the article suggests consumers should be wary of "fake loyalty" and actively negotiate better deals, rather than assuming their business will be appreciated.
