Loyalty 3.0 — Chapter 1: May You Live in Interesting Times

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In chapter 1 of Loyalty 3.0, Rajat Paharia lays the foundation for the rest of the book by going in-depth on the concept of loyalty surrounding a brand. The chapter begins by introducing the three faces of loyalty in the context of business: customers, employees, and partners. Each of these faces are a crucial part of a company’s success, therefore it is important for a brand to have a strong relationship built upon trust.

The way in which a company builds loyalty with its customers, employees, and partners has evolved over the years. Paharia (2013) starts by explaining the concept of Loyalty 1.0 which includes reward programs that are transactional, focus on the customer, and do not foster lasting loyalty built upon an emotional relationship (para. 8). A huge problem with Loyalty 1.0 is that customers feel there is a high exit cost to leave a company for another, therefore the reason they stay is not that they are truly loyal to the brand, but rather to save money. With Loyalty 2.0, this begins to change. Through segmentation and personalization techniques, the loyalty experience was more direct to consumers through direct-mail and email marketing techniques (Paharia, 2013, para. 10). These were effective and sometimes still are, but consumers are not engaging with these tactics like they once were. This is largely due to a cluttered marketplace with individuals constantly being bombarded with advertisements. Not much has changed within the realm of customer loyalty strategies up until recent years with the rise of Loyalty 3.0. Motivation, big data, and gamification are what drive this third wave of loyalty (para. 12–14). Consumers are now looking for engagement and a deeper connection to a brand, two needs that traditional loyalty fails to satisfy. According to a study by Sprout Social, when customers feel a genuine connection to a brand they are 68% more likely to recommend a brand to a friend and 76% more likely to buy over a competitor (Sprout Social, 2021, para. 27). Seeing these numbers it is clear that genuine connection leads to loyalty between a brand and its consumers.

This chapter also covers the four tiers of loyalty beginning with inertia loyalty. This type of loyalty involves a barrier to exit making it inconvenient for an individual to leave a company for a competitor (para. 17). Mercenary loyalty involves a brand paying for consumers’ loyalty. An example of this would be a brand giving out freebies or large discounts compared to competitors, but these customers are operating on wanting to save money, not because they are loyal to the cheaper brand. Next is true loyalty, when a customer has, “an emotional steak in the brand” (para. 19). Lastly, there is cult loyalty. At this stage, consumers’ values begin to merge with the brand’s making it as if one was disowning their own values if they were to leave their brand for a competitor. The path to loyalty with customers, employees, and partners is engagement. People want to feel valued and connected in this world. The sooner a brand can understand this and tailor their communication strategies to meet these needs of consumers, the faster true affiliate loyalty will be established.


Paharia, R. (2013). May You Live in Interesting Times. In Loyalty 3.0: How Big Data and Gamification are Revolutionizing Customer and Employee Engagement. McGrawHill Education.

Sprout Social. (2021, September 7). #Brandsgetreal: What consumers want from brands in a divided society. Sprout Social. Retrieved August 28, 2022, from https://sproutsocial.com/insights/data/social-media-connection/.



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