How to keep your customers? Use some common sense

September 21st, 2004

Hally Suitt writing in Worthwhile wrote a post on customer retention on 14 September this year.
This is what she said

I need a new cell phone — new hardware — and as I look at what my current wireless company has available in terms of phones and calling plans, I realize they provide absolutely no incentive to existing customers to stay with them and just get a new phone. They give all their incentives to new customers. And as I shop, it's clear, the best phone and best calling plan would be ANY other provider, not my own.
What ever happened to customer retention? Is it too quaint and passe? Isn't the cost of winning a new customer more than the cost of keeping an existing customer happy?

I am including all the comments to her posts as they are illuminating.
What we do know is that customer advocacy drives growth. Working to keep your exisitng customers is cheaper that acquisition.
Recently, I was offered a free upgrade by Orange. I specified my phone type. It was out of stock. "Perhaps I should ring back in a weeks time" Huh? Cutting to the chase, we eventually established 3 weeks later the phone was in stock, I rang in response to an SMS message. To be told the phone was going to cost ?30.00. I pointed out to the call person that I am probably in the highest ARPU category in the country and that they were insulting me by asking for ?30.00.
10 mins later a more senior person called to say that yes they were happy to give me the phone for free.

Great, but what a hassle. How about if Orange saw I was a significant customer, what if they sent me a phone to trial for 3 months?
What if that phone was the latest 3G device? And I was a highly connected Alpha user. Not only am I a suprised and happy customer, but I am also now using my new phone and showing it to all my friends. Being a customer advocate. We know customer advocacy drives growth.
A bit of common sense I'd say. The key for the operators is to learn to understand their customers in a new way. No longer is it enough to identify segments of user types, now the real power is discovering what are the communities we interact with, as Jouko Ahvenainen, the Chairman of Xtract Ltd the automated customer analytics solutions company says,

It is not enough for 3G operators to analyse individual customers behaviour, they must now learn to isolate the social networks among the customer base, and start to market to the most influential of the groups.

Through the power of the influential members of communities, can 3G operators efficiently target their marketing activities to deliver the holy grail of increased profits.
So its best not to piss them off, and deliver them to a competitor.

Tue, Sep 14, 2004, @ 10:34
1- anita
Halley,
Great observation! This also happens with magazines, new subscribers are enticed with low prices and the renewal invoice is often a different story. So I find myself letting subcriptions lapse for a few months so I can get the best rate. It's a crazy system and, to your point, not very cost-effective for any company in the long run.

Tue, Sep 14, 2004, @ 10:44
2- Tony Clark
I understand completely. I switched from my carrier, who I had been with for 2 years, to Verizon when I was told that the new phone I wanted wasn't available to existing customers. Although, the sales rep didn't put it that way. She said that the particular PDA phone I wanted was only available to someone starting a new plan. If they canceled my existing plan, I'd lose my number. Even though I was with the same carrier! (This was before the portability was available.) Her suggestion was to just sign up for a new plan and have 2 phones, one for calls and one for the wireless/PDA capability. I asked her then what is the point of a smart phone, if I have to carry another phone. She basically told me "that's the way it is" if you want the new phone. Since she obviously wasn't interested in my business, I took it elsewhere.
I couldn't imagine where my company would be without customer retention. Let alone, the way bad buzz tends to spread faster than good buzz.

Tue, Sep 14, 2004, @ 10:54
3- kate
I agree that this seems like Ye Biggeste No-Brainere for companies-especially since a lot of them probably spend a ton of money devising 'innovative customer retention initiatives.'
I have found that you can occasionally call the company and ask/demand that you get the same deal that newbies get, referencing your loyalty and the fact that you're shopping other options: this has worked with some magazines and my current cell company (T-Mobile), but it took some time and wheedling.

Tue, Sep 14, 2004, @ 11:09
4- Jeremy
I think this blind spot is rooted in a type of corporate arrogance ? the belief that "our customers love us" and "if we can get them on board, they'll stay". It certainly makes established companies vulnerable to innovative competitors?but will the innovative competitor develop the same blind spot as soon as they get some market share?

Tue, Sep 14, 2004, @ 13:51
5- Becca
I recently had the same problem. When I contacted Sprint, however, I found that I could get the same deal as a new customer by signing up for a new contract (comparable contract that I would've had to sign for changing companies). It made it worth it to get a new phone, but not have to make any other changes.
Someone above mentioned magazines – I've also gotten those beginner rates for renewal by contacting the company.
It is a pain that you have to go out of your way when they should make retention easy, but in the long run a few calls can save some $$!

Tue, Sep 14, 2004, @ 17:32
6- kurt
halley,
it's wacky,
loyal customers, have long since paid for themselves: the "cost of connection", the "truck roll" or the "provisioning".
loyal customers are nearly pure profit less some operational expenses.
yet, Providers just "give em up".
and chase the "more expensive" newbie. no incentives, no negotiating, poor customer loyalty support.
wierd, it makes no business sense.. give up your best customer?.

Tue, Sep 14, 2004, @ 18:27
7- Buzz
I have concluded that they have this big knowledge base that has all this information about you, and then they intentionally ignore it.

Wed, Sep 15, 2004, @ 1:53
8- Melanie
Verizon just lost me for this very reason. I couldn't even get an intro deal if I extended my contract. I was so angry, I cancelled my wireless, home phone (local, long distance, and international), and DSL. I figure they lost about $250 a month from me (approx. $3000 a year). Too bad for them!

Wed, Sep 15, 2004, @ 12:16
9- Gregory
Most of the cell companies I've been with have no problem with you changing what plan you are on. The one thing you can't always get in on are the cool deals for new phones (though, AT&T was willing to give me the deal if I'd just extend my contract for the period the new customers had to get).
Though I've definitely heard horror stories from other places.

Wed, Sep 15, 2004, @ 17:18
10- Wolf Larsen
There are a few answers here. Although all comments thus far have agreed that this is a stupid policy,
I believe that more people than you might think just stick with their current provider. These people (who will never speak up, much like those who buy from telemarketers) make it more profitable to not offer better deals to existing customers.
Another wrinkle might be that market-share charts track new subscribers as an industry metric which might create an artificial incentive to chase new customers over existing customers.
A third possibility is that the average user is so dissapointed with their service or have such phone envy that they actually would prefer to move to any other provider. (grass is greener and all). With number portability, there is no reason to stay with your current provider, so your current provider does not find it profitable to lure you.
Whatever the actual reason, I guarentee you that many, many smart people have analyzed the situation and pricing accordingly.

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