"Amazon assures me that I am a loyal customer. The same goes for Citibank, Apple, and my cable provider, Optimum. Sure, I've been with them for years, but the truth of the matter is not so much that I'm loyal ... I'm just lazy. I'd venture a guess they know that. You would think my loyalty - whether out of affection or indifference - would earn me some perks. You'd be very wrong."
"Marketers would like consumers to believe that it pays to be faithful to a brand. That's why people rack up frequent flyer miles, join all sorts of rewards programs, and repeatedly hand over their emails and phone numbers. As the logic goes, if you stick with company X for long enough, it will pay off via a discount or an upgrade or a perk."
"This is one of those things where once you see it, you start to see it everywhere. Your internet bill creeps steadily higher once that initial yearlong promotional offer ends. The same thing happens with car insurance and cellphone plans. Your credit card interest rate is probably higher than when you opened the account, and your bank account savings rate may be lower now, too. After a few adjustments to the reimbursement rate, those airline miles don't go as far as they used to, either."
Many companies reward new customers with promotional pricing while raising costs or reducing benefits for long-term customers. Common examples include internet bills increasing after introductory offers, higher insurance and cellphone premiums over time, rising credit-card interest rates, lower savings yields, and devalued airline miles. Companies exploit customer inertia, switching costs, and limited competition to extract more revenue from established customers. Loyalty programs and rewards can obscure diminishing value and hidden costs. As a result, apparent brand loyalty often reflects convenience or inertia rather than genuine preference, and long-term customers frequently pay a 'loyalty penalty' compared with newer customers.
Read at Business Insider
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