Customer loyalty drops as ‘essential spend’ now makes up 58% of household budgets

The cost of living is driving a dip in shopper loyalty as tighter budgets push consumers to prioritise essentials over discretionary spending – highlighting how reward-led engagement is becoming "a key growth driver".

That’s according to customer engagement and commerce media company Reward, using insights from over 1.4 billion transactions across 4,000 UK retailers and participating banking partners, published in its latest report: ‘Lessons in Loyalty: Turning Festive Peaks into Year-Round Engagement’.

Analysis based on anonymised transaction and merchant data, derived from Reward’s Customer Engagement programmes, has revealed that essential spend now makes up 58% of household budgets – up from 48% two years ago.

Meanwhile, only 61% of shoppers returned to the same retailer in 2025, down from 65% in 2024.

Paul Jones, SVP of Data & Insight at Reward, said: “Our data shows that consumers aren’t necessarily spending less – they’re spending smarter. In today’s environment loyalty is no longer guaranteed by habit but earned through relevance and value.

“The brands that understand changing motivations and can personalise their engagement are the ones best placed to retain customers.”

As consumers grow more discerning, loyalty programmes have become “one of the most effective levers for influencing spend and driving retention”.

During the Golden Quarter (October–December), reward engagement surges – with nearly a third (31%) of all annual rewards earned and over a quarter (28%) spent, representing a higher share typically seen across any other three-month period.

However, 56% of festive shoppers don’t re-engage with brands in the first quarter of a new year, underlining the challenge of converting peak season participation into lasting loyalty.

Jones added: “Commerce media is changing the loyalty landscape. It connects retailers and banks around a single, data-driven view of the customer – enabling brands to act with precision and relevance.

“The winners of the 2025 Golden Quarter will be those that move fastest to activate insight, deliver personalised value at scale, and use reward-led engagement to build loyalty that lasts long after the festive season.”