Why Loyalty Is Too Important To Be Bought

Companies have spent years trying to buy loyalty through rewards, delight programmes, NPS and increasingly elaborate customer-experience initiatives. But loyalty isn’t something you buy. It is something the system earns.

LOYALTY, EFFORT AND THE STRANGE ECONOMICS OF STAYING

What organisations misunderstand about loyal customers—and why reducing effort matters more than rewards, delight or recommendation scores

By Stuart Corrigan, Descartes Consulting

Why do companies spend millions rewarding customers for staying—and then make those same customers work so hard to remain?

It is one of the stranger contradictions in business.

A customer is given points for buying a product, a card for visiting a store, a discount for renewing a policy and a survey asking whether they would recommend the company to a friend.

Then something goes wrong.

The customer searches for a telephone number, negotiates a chatbot, repeats the same information, changes channel, waits for an update and finally calls again because nothing appears to be happening.

The company has rewarded the transaction while punishing the relationship.

And then it wonders why loyalty is declining.

Peter Drucker famously argued that the purpose of a business is to “create and keep a customer.” That second verb matters. Creating a customer produces a sale. Keeping one produces an economic relationship.

The question is not whether loyalty matters. Most leaders already say that it does.

The more interesting question is why so many organisations pursue it in ways that have so little to do with the experience of being their customer.

The peculiar economics of staying

Loyalty is sometimes treated as a soft idea: pleasant to discuss, difficult to place on a balance sheet and less urgent than this quarter’s sales.

The economics suggest otherwise.

Frederick Reichheld’s work at Bain found that, depending on the industry, increasing customer retention by five percentage points could increase profits by between 25 and 95 per cent. This is not a universal promise that every company will achieve the same result. It illustrates the compounding economics that become possible when valuable customers stay longer.

Acquisition costs are spread over more years. Customers become easier to serve as both parties learn how to work together. They may buy more, become less expensive to support and introduce other customers.

As Reichheld put it, loyalty is “an economic necessity.”

The service-profit chain reached a related conclusion from a different direction. Heskett and his colleagues connected employee capability and satisfaction to service value, service value to customer satisfaction and loyalty, and loyalty to revenue growth and profitability.

This gives us a simple commercial sequence:

Low Effort → Confidence → Loyalty → Profit

Profit is the outcome. Loyalty is the bridge. Confidence is the psychological mechanism. The experience customers must navigate is the cause.

Yet organisations frequently start at the wrong end. They pursue the financial outcome directly—more sales, more renewals, more cross-selling—without examining whether the experience gives customers a reason to remain.

A loyalty card may create the opposite of loyalty

But before deciding how to create loyalty, we need to distinguish it from something that merely looks like loyalty.

The conventional logic is appealing.

If customers receive points, discounts or exclusive benefits for returning, they will return more often. Their repeat purchases will appear in the data. The programme will be declared a success.

But repeated behaviour and loyalty are not the same thing.

A commuter may repeatedly use the same railway because there is no practical alternative. A policyholder may renew because switching feels difficult. A shopper may return for points and disappear when a competitor offers twice as many.

These customers have repeated a behaviour. They have not necessarily formed a preference.

A loyalty programme can buy behaviour while the reward remains attractive. Genuine loyalty survives moments when the reward is absent, a competitor is cheaper or something has gone wrong.

This is the contradiction: the very mechanism designed to create loyalty can make customers more sensitive to rewards.

It teaches them to ask, “What will you give me if I stay?”

And that makes the relationship easier for a competitor to buy.

Rewards are not inherently bad. They can encourage trial, increase frequency and make a proposition more attractive. But they should not be mistaken for the relationship itself.

A loyalty card does not necessarily make a customer loyal. It may simply make them reward-sensitive.

Earned loyalty is different. It is built when the organisation repeatedly proves that it is dependable, fair and easy to deal with. It is less visible than a points balance, but more difficult for a competitor to copy.

Why delight is an expensive distraction

So rewards may purchase repetition without creating preference.

But perhaps companies can create loyalty another way.

If rewards do not create loyalty, perhaps delight will.

This has become another article of faith. Companies are told to exceed expectations, create memorable moments and empower employees to surprise customers.

It sounds obviously right. Who would object to delight?

The problem is not that delight is unpleasant. The problem is that it may solve the wrong problem.

Imagine a company sending an unexpected gift after a customer has spent three weeks chasing a straightforward refund. The gift may be generous. It may also feel faintly ridiculous.

The customer did not need theatre. They needed the refund.

In their landmark Harvard Business Review article, Matthew Dixon, Karen Freeman and Nicholas Toman challenged the orthodoxy directly. Their conclusion was wonderfully unglamorous: “All customers really want is a simple, quick solution to their problem.”

Their research into service interactions found that exceeding expectations produced only marginal loyalty gains compared with simply meeting them. High effort, however, was strongly associated with disloyalty.

Among customers reporting a low-effort experience, 94 per cent said they intended to repurchase and 88 per cent said they would increase spending. Only 1 per cent intended to speak negatively about the company. Among customers who had struggled to resolve their problem, 81 per cent intended to spread negative word of mouth.

These figures describe stated intentions rather than guaranteed future behaviour, and they come from service interactions rather than every conceivable customer journey. But the asymmetry is still striking.

The latest UK claims data makes the same point rather less politely. In 2025, customers made 1,363,005 complaints directly to insurers. Around 45,330 insurance complaints then reached the Financial Ombudsman—roughly one for every thirty handled by firms themselves. Insurance complaints barely fell in a year when the ombudsman’s total caseload dropped by almost 30 per cent.

This is not evidence of customers who needed more delight. It is evidence of customers who needed less work.

Delight may create a pleasant memory.

Effort creates a reason to leave.

The managerial mistake is to treat them as equal and opposite. They are not. Removing frustration generally matters more than adding a flourish after the frustration has occurred.

Why a £20 mistake can cost more than a cancelled flight

But effort does more than determine whether a service interaction feels irritating.

It changes the emotional size of the failure itself.

Why will a customer forgive an airline for cancelling a flight yet remain furious with another company over a £20 billing error?

Logically, the flight is the larger failure. It can ruin a holiday, cost hundreds of pounds and leave someone stranded. The billing error is worth £20.

So the flight should be more difficult to forgive.

Now imagine the airline explains the cancellation immediately, places the customer on the next departure and sends meal vouchers to their phone.

The customer is disappointed, but may still trust the airline.

Now imagine recovering the incorrect £20 requires six menu options, three conversations, repeated evidence and fourteen days of chasing.

The financial error is small. The psychological message is enormous:

Your time does not matter to us.

Customers do not judge a failure only by what went wrong. They judge what the company makes them do next.

The same pattern appears elsewhere. A restaurant can recover an undercooked meal by replacing it quickly and apologising. Turn the same meal into an argument, a wait and a search for the manager, and the customer may tell the story for years.

A large failure followed by an easy recovery may be forgiven. A small failure followed by an exhausting recovery can become a lasting grudge.

The emotional size of a mistake is partly determined by the effort required to put it right.

There is now a useful price tag on that principle. In 2026/27, an insurance complaint referred to the Financial Ombudsman carries a £680 case fee, payable whether the insurer wins or loses. The average redress on an upheld insurance complaint in late 2025 was about £122. In other words, allowing the dispute to travel to the ombudsman can cost more than five times the money ultimately paid to the customer—before internal handling, rework or lost loyalty are counted.

The company may believe it is disputing £20. Economically, it may be purchasing a £680 grudge.

What the dashboard cannot see

And this is where the argument becomes commercially important.

This is where organisations create a further problem: they measure the event they can see rather than the experience the customer endured.

They count complaints, response times, completed tasks and recommendation scores. These measures may be useful, but none automatically reveals how much work was transferred to the customer.

Two complaints can be recorded as resolved. In the first, the customer used an app and received an answer in five minutes. In the second, the customer made four calls and waited two weeks.

The spreadsheet records the same outcome.

The customers experienced two different companies.

The public claims data shows how much those experiences can differ. Across 85 UK insurers with published results, the ombudsman overturned just 9.8 per cent of decisions at the best-performing firm and 59.6 per cent at the worst. The middle of the market sat at 34 per cent—roughly one decision in three changed after referral.

A six-fold gap between organisations doing essentially the same job is unlikely to be explained by customer temperament. It points to the design of the journey: what customers are asked to prove, repeat, chase and escalate.

This is why a recommendation score should not become the operating model. It records an answer to a hypothetical question. Loyalty is revealed by what the customer actually does next—and customer effort helps explain why.

There is also a darker operational consequence.

When customers must chase, repeat information or seek clarification, their effort returns to the organisation as additional demand. More calls create more tasks. More tasks create more queues. More queues create more delay. More delay creates more calls.

In systems thinking, this is called failure demand: demand caused because something was not done, or was not done correctly, for the customer.

In one claims operation examined by Descartes Consulting, nearly two-thirds of incoming work had been created by the operation itself. When the work was redesigned to reduce elapsed time and ambiguity, failure demand fell by two-thirds.

The national picture is similarly revealing. Insurers agreed with the customer in 56 per cent of the complaints they closed in 2025. At the median buildings insurer, one claim in eight became a complaint; at the worst firms, it was one in three. A complaint is often not a separate event after the claim. It is effort generated by the claim and returned to the organisation through another door.

Customer effort is therefore not merely a customer-experience problem.

It is often an operating-cost problem wearing a customer-experience disguise.

What happened when an insurer removed the effort

But a persuasive idea still has to survive contact with reality.

The strongest test of an idea is not whether it sounds persuasive. It is whether the system behaves differently when the idea is applied.

In one global insurer, complex claims were taking 508 days to settle. Customers waited while work moved through queues, referrals and legal hand-offs. The organisation was busy, but busyness was not producing flow.

The insurer redesigned the work around Low Effort principles: clearer ownership, fewer hand-offs, faster end-to-end flow and decisions made closer to the customer.

The result was not a small improvement in a survey score.

Settlement time fell from 508 days to 35 days.

Throughput tripled.

Failure demand—the calls, chasing and additional work created by the system’s earlier failures—fell by 61 per cent.

Lawyer involvement was halved.

The same claims did not suddenly become simple. The rules did not disappear. The organisation changed how much of its complexity it asked customers to carry.

That is the commercial power of Low Effort. The customer experiences less waiting, chasing and uncertainty. The insurer experiences less repeat demand, fewer hand-offs, faster flow and lower cost.

The interests of the customer and the organisation are not in conflict. Poorly designed work makes them appear to be.

Ease is evidence about the future

The operational results are clear.

But they still leave one important question.

Why does ease have such a powerful effect?

Because every interaction provides evidence about the future.

A low-effort experience tells the customer:

This company is competent. It remembers me. It will take responsibility. If something goes wrong, I will not be left alone with the consequences.

A high-effort experience communicates the opposite.

This makes loyalty less mysterious. It is not affection in the abstract. It is confidence about what will happen next.

Customers remain loyal when the expected psychological and practical cost of staying is lower than the uncertainty and inconvenience of leaving.

Ease creates confidence because it reduces that expected cost.

That confidence is the missing bridge.

Low effort tells customers what they can expect next. Confidence makes remaining feel safe. Repeated evidence of that safety becomes loyalty. And loyalty creates the conditions for lower acquisition costs, longer relationships and greater profit.

What low-effort leaders do differently

Once the mechanism is understood, the practical implications become clearer.

Not more theatre. Less unnecessary work.

Low Effort does not mean removing every human interaction, forcing every customer into self-service or making the organisation faster at saying no.

It means designing the experience so the customer can achieve their purpose with the least unnecessary physical, cognitive and emotional work.

Seven principles follow.

1. Begin with the customer’s purpose

Design around what the customer is trying to achieve—not the company’s departments, channels or reporting lines. A claimant wants their life restored. They do not want to navigate the boundaries between notification, validation, assessment and settlement.

2. Make the organisation own the work

If information or another team is required, the case should remain owned. Complexity should be supported, not transferred. The customer should not become the unpaid project manager of the company’s process.

3. Resolve the whole need

Completing a call, sending an email or meeting a response-time target is not the same as resolving the customer’s need. A task can be green while the customer’s life remains on hold.

4. Ask once and remember

In a 2025 Which? study, 25 per cent of recent home and travel claimants said they had to repeat information or resend documents. Stop making customers reconstruct the company’s memory.

5. Prevent the next avoidable contact

Good service answers today’s question. Low-effort service anticipates the next one. Yet 22 per cent of claimants had to chase for an update, while 29 per cent finished their first contact no clearer about what would happen next.

6. Create clarity, ownership and predictability

Tell customers what is happening, who owns it and when they should expect movement—and keep the promise. Sixty-two per cent of claimants encountered problems when a third party took part, compared with 40 per cent when one did not. A hand-off may look like workflow inside the company. To the customer, it can feel like abandonment.

7. Measure effort where it is created

Study real cases. Find the repetition, chasing, hand-offs, channel switching, delays, rework and unnecessary proof. Customer Effort Score can be useful, but the objective is not to improve a score. It is to remove the conditions that made the effort necessary.

Stop trying to manufacture loyalty

Which brings us back to the original contradiction.

The most valuable implication is also the most uncomfortable.

Loyalty cannot be installed as a programme alongside an experience that continually erodes it.

It cannot be inferred from points collected, complaints closed or willingness to recommend. Nor can it be rescued reliably through occasional moments of delight.

It must be earned in the ordinary moments when customers discover whether the organisation will remember, explain, own and resolve.

The practical escape is not another loyalty campaign.

It is to study the work customers currently perform on the organisation’s behalf and redesign the experience so that work disappears.

Ask:

· Where must customers chase us?

· Where do they repeat themselves?

· Where do we transfer our internal complexity to them?

· Where do our targets reward activity rather than resolution?

· Where does customer effort return as avoidable cost?

Then ask the question that matters most:

How easy are we to remain loyal to?

Loyalty is not created by asking customers to promise they will stay.

It is created by giving them fewer reasons to leave.

If you'd like to get your low effort score in around 5-7 mins, go here:

www.loweffort.com

Sources

1. Peter F. Drucker, cited in Are You Undervaluing Your Customers?, Harvard Business Review, 2020: https://hbr.org/2020/01/are-you-undervaluing-your-customers

2. Frederick F. Reichheld, Loyalty Rules! and Bain & Company research on retention economics: https://www.bain.com/contentassets/29f74ec417fa4e36a1d7d7e7479badc5/loyalty_rules_chapter_one.pdf

3. James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr. and Leonard A. Schlesinger, Putting the Service-Profit Chain to Work, Harvard Business Review: https://hbr.org/2008/07/putting-the-service-profit-chain-to-work

4. Matthew Dixon, Karen Freeman and Nicholas Toman, Stop Trying to Delight Your Customers, Harvard Business Review, 2010: https://hbr.org/2010/07/stop-trying-to-delight-your-customers

5. Stuart Corrigan, Claims ER, 2026.

6. Stuart Corrigan, The State of Claims Effort 2026, Descartes Consulting, August 2026. Based on public data from the Financial Conduct Authority, Financial Ombudsman Service, Association of British Insurers, Which? and other cited sources.

7. Descartes Consulting, insurer Low Effort transformation case results: settlement time reduced from 508 days to 35 days; throughput tripled; failure demand reduced by 61 per cent; lawyer involvement halved. Published at www.loweffort.com and in Claims ER.