Major Companies are Lighting Their Brand Equity on Fire

A growing number of companies appear to have lost sight of—or are willfully ignoring—the importance of loyalty economics. Recent experiences I’ve had with major organizations highlight a troubling trend that runs counter to customer-centricity and the principles of building and maintaining strong customer relationships.

Faced with pressure to reduce costs, many operations leaders are making deliberate choices to diminish the customer experience. They are removing phone numbers for contact centers and eliminating live chat options, replacing them with AI-driven virtual assistants. While these changes may cut short-term operating expenses, they raise important questions: How will this affect customer behavior and loyalty?

Real-World Examples of Customer Frustration

Three recent experiences with Fortune 50 companies demonstrate just how far this trend has gone—particularly when it comes to managing subscriptions or recurring services:

Case 1: I wanted to temporarily suspend a $99/month subscription. Previously, this was a one-click process online. Now, I had to send an email request to create a work order. It took six weeks to cancel the service, during which I was charged for two extra months. After a lengthy fight for refunds, I decided not to reactivate the service—or purchase any products from the company again.

Case 2: After being hit with a 65% price increase, I discovered the company was offering a better plan at a lower price. Forced to navigate a virtual assistant, I endured a frustrating process before reaching a live chat agent. While the agent resolved the issue, the interaction took 3–4 times longer than a phone call. Ironically, the company later called me—using a live agent—to upsell additional services. Clearly, the irony is lost on them.

Case 3: I found an annual charge for a service we no longer use. Contacting the company was a maze. Logging in required credentials tied to my child’s account. After regaining access, I could only request a callback—which came from an offshore agent unfamiliar with the service. Resolving the issue required four or five calls to reach the right person.

The Fallout: Eroding Loyalty and Brand Equity

These examples highlight a disturbing reality—companies are prioritizing short-term cost savings at the expense of customer satisfaction and loyalty. The shift to AI-driven care, while potentially cost-effective, is undermining customer relationships and exposing organizations to increased churn and weakened cross-sell and upsell potential.

What’s more, this approach reflects a failure to grasp lifetime value (LTV) economics. By making interactions harder and less personal, these companies are quite literally burning their brand equity.

The Paradox of Cost-Cutting vs. Customer Retention

This trend reveals a paradox: companies lavish resources to acquire new customers but cut corners when it comes to retaining existing ones.

• Sales teams are granted live agents to close deals, yet customer service is offshored or replaced by less effective AI tools.

• New customers often take time to become profitable due to acquisition costs, while existing customers are already delivering profits—profits companies risk losing.

Decision-makers may argue that slight increases in churn are a reasonable trade-off for cost savings. But this is deeply flawed logic. Let’s do the math:

Customer Lifetime Value Impact

Assume:

• Pre-AI churn rate: 7.1% (average customer tenure = 14 years).

• Post-AI churn rate: 8.3% (average customer tenure = 12 years).

This small increase in churn reduces customer tenure by 15%—directly cutting into the value of those relationships at approximately the same level, 15%. Oops.

I’m guessing that wasn’t factored into the operations leader’s cost benefit equation.

Rethinking the Customer Care Equation

AI tools will undoubtedly improve over time, but today’s implementations are far from ready for complex customer care needs. A hybrid approach—balancing AI efficiency with human expertise—offers a smarter path forward.

CEOs, CFOs, and boards must recognize that customer relationships are assets, not expenses. It’s time to shift focus from quarterly cost-cutting to long-term value creation. In doing so, businesses can avoid the costly mistake of sacrificing loyalty and profitability for short-term gains.