FacebookFacebook icon TwitterTwitter icon LinkedInLinkedIn icon Email
Customer loyalty is a myth, just ask my taxi driver


Customer loyalty is a myth, just ask my taxi driver

Published 9 January 2023 in Competitiveness • 6 min read

In his new book The Human Experience, John Sills explains why the ‘usefulness of a retailer or service provider is far more important than any misplaced notions of fidelity.

I loved my local taxi firm – low prices, lots of cars and easy to book. Sure, the car was often “just round the corner” and it was a bit annoying that I had to call if I wanted to pay by card, but overall they were great. I used them all the time.  

Then Uber came along with its one-tap ordering, cashless payment, and map of where your car actually was. So I switched. Immediately. Years of using the same taxi firm meant nothing to me when this new service appeared on my phone screen.  

That’s because, for most organizations, customer loyalty is a myth. Loyalty is a particularly personal thing, driven by association with other humans. It’s a feeling that links people together under some common purpose or relationship, “a strong feeling of support or allegiance” as the Oxford English Dictionary puts it. It’s a feeling of emotional connection, not functional transaction.  

Many of these connections will be with individual people, political parties or athletic affiliations. It’s (sadly) become a frequent sight at English lower-league football grounds to see long-time fans collecting money to try to rescue their club from collapse – something that I don’t recall seeing outside the boarded-up windows of Woolworths HQ. If customer loyalty does exist, then it tends to be with smaller, local companies – those that are a crucial part of the community or where the owner is personally known and regularly visible. Therefore, in a world where bigger organizations are focusing on the functional experience, loyalty is just shorthand for usefulness – or, more specifically, staying more useful than the alternatives. 

The last 20 years has provided plenty of evidence of this as much-loved institutions such as Woolworths, Blockbuster, and British Home Stores (BHS) – as well as entire industries – have found their customers to be anything but loyal. Shiny, new, more useful alternatives appeared on the digital horizon, causing customers to sprint towards the light, only stopping to swap memories of their misspent youth in the pick-and-mix aisle. 

Usefulness comes in many forms. For some customers, it’s a more “useful” price while for others it’s ease of use, with anything that requires leaving the sofa an insult to customer experience. It could even be status: why do people queue for days outside the Apple Store to be the first to buy a phone they could order online and have delivered? Not always because of the useful price or the useful product, but the useful status marks them out as “Someone Who Buys New Apple Things As Soon As They’re Available” and is therefore a) rich, b) trendy, and c) very much in control of their time management. 

But as customer experience has become more faceless, so loyalty has become more transient, with a better, more useful proposition just a tap away (and the ability to find out about that offer only needing a few more taps, or a well-worded question to Alexa). If you don’t believe me, think about a company that you use a lot. Now imagine they’ve tripled their prices or halved the quality of whatever it is you’re buying. Still feeling loyal? 

This mistaken belief in customer loyalty has a real-world impact on organizations. It encourages an over-weighting of focus onto acquisition and onboarding, believing that once the customer has been attained, they’ll be likely to stay for good. Attention quickly shifts to attracting the next customer, rather than keeping the existing ones happy. It also creates a laziness in design, with loyalty schemes and reward points used to artificially inflate an organization’s usefulness. But these loyalty schemes are not, as their name suggests, anything to do with loyalty. If they were, it’s unlikely customers would have the audacity to stand in front of the cashier at Costa Coffee while removing their Starbucks, Caffè Nero and Coffee #1 cards to find the right one to stamp. (Of course, such cards are extremely useful tools for companies to collect behavioral data on their customers.) 

This isn’t a good situation for organizations to be faced with, leading to a death spiral of new customer offers and discounted prices alongside a proposition that is quickly copied by new entrants and incumbents alike.  

The only way for organizations to get closer to genuine loyalty from customers is to act in a human way – to create a personal connection through colleagues who are allowed to throw off corporate shackles and show genuine care, not just regulatory compliance. Focusing on creating this emotional connection can create deep relationships, ones that outlast any bumps in the road. This will mean more customers joining off the back of genuine recommendations and word-of-mouth marketing, and more customers remaining as contented customers.  

“This mistaken belief in customer loyalty has a real-world impact on organizations. It encourages an over-weighting of focus onto acquisition and onboarding, believing that once the customer has been attained, they’ll be likely to stay for good”

However, over the past decades, organizations have focused on perfecting the functional experience at the expense of this human, emotional one. We can do more things in more ways and in more places than ever before with a world of information at our fingertips. Yet as this convenience has taken hold, the humanity has ebbed away, with strict processes and a reliance on technology meaning that organizations are increasingly full of people that aren’t allowed to act in a human way. With it has gone many of the reasons why a customer would ever be truly loyal to an organization, replaced by quick deals and transient offers that are costly for the company and replaceable by the customer. 

For my new book, The Human Experience, I wanted to explore this situation further: a situation that is leading to unhappy customers and unsustainable organizations. As well as exploring three myths that drive behavior in management today (of which The Myth of Loyalty is one), I interviewed the CEOs of companies who still do trailblaze on behalf of the customers they serve. Each of them has the same five cultural enablers, the internal attitudes and ways of working that underpin what customers experience on a daily basis. And each have the same seven frontline behaviors that manage to create happy customers, happy colleagues, and a healthy balance sheet. In my book, I delve into each of these crucial factors in detail and, in my next I by IMD article (to be published 16 January), I’ll explore one enabler in greater depth as an example. 

As for my taxi company, after a few months under pressure from Uber they decided to release their own app. Instant booking, automatic card payments, and a map to show exactly which corner their car was round. You could pre-book, without a penalty for cancellation, and without the need to rate or be rated by your driver. So, of course, I immediately switched back again. 

Relying on loyalty as an alternative to adapting and staying useful generally only has one outcome. As the poster in a window at a soon-to-be-closed branch of the camera-equipment store Jessops put it, “Thank you to our loyal customers. To everyone else, thanks for shopping at” 

Customer loyalty is a myth. Staying useful is what matters. And if in doubt, remember that nobody cares about your business as much as you do. 

The Human Experience, out in the UK in February and available to pre-order now.


John Sills

John Sills

Managing Partner at the customer-led growth company, The Foundation

John Sills is Managing Partner at the customer-led growth company, The Foundation. He’s been in front-line teams delivering the experience, innovation teams designing the propositions, and global HQ teams creating the strategy. He's been a bank manager during the financial crisis (not fun), launched a mobile app to millions of people (very fun), and regularly visits strangers’ houses to ask very personal questions (incredible fun).


Learn Brain Circuits

Join us for daily exercises focusing on issues from team building to developing an actionable sustainability plan to personal development. Go on - they only take five minutes.
Read more 

Explore Leadership

What makes a great leader? Do you need charisma? How do you inspire your team? Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk.
Read more

Join Membership

Log in here to join in the conversation with the I by IMD community. Your subscription grants you access to the quarterly magazine plus daily articles, videos, podcasts and learning exercises.
Sign up

You have 4 of 5 articles left to read.