Substitute the word “customers” for friends in this song, and you have the key to successful business growth – Make new customers but keep the old. One is silver; the other is gold. It’s not just a balance between the two but a recognition that there is greater value in the old customers, as the numbers showing the CLTV (customer lifetime value) would prove.
While successful businesses must know this fact of business, they fail to implement it. When they push for marketing and sales, they tend to focus solely on new customer acquisition, allowing special incentives only for new customers with no loyalty rewards for the customers they’ve acquired in the past.
More from PostFunnel on customer churn:
9 Ways Subscription Marketers Can Reduce Churn
Take Notes: This Is What Retail Marketers Can Teach Us About Subscription Churn
7 New Strategies to Reduce Customer Churn
Case In Point
Where I live in New York State, there are only two choices for internet service: Verizon FIOS and Optimum. For my first upgrade from AOL to high speed internet, I went with FIOS. There was some promotion for new customers at the time that kept the price fairly reasonable, and so for that period of time, it was a fair deal.
However, at the end of that time, the rates rose substantially. At the same time, Optimum was offering attractive incentives for new customers. I did let Verizon know that it would lose me as a customer if it would not be able to come down in price when I have the other option.
But I was wasting my breath because the customer service reps were not empowered to take action to retain customers even when the customers made it very clear why they would take their business elsewhere. Oh, they did finally offer a better deal, but only after the service was terminated.
So Optimum gained a new customer through its special bundled price that delivered internet and phone service for less than Verizon would have charged me just for internet service. That promotion ended, so I found another phone provider, though I did keep the internet service with Optimum.
Showing Your Customers You Don’t Value Them
Over time, Optimum raised its rates slightly a couple of times but not enough to warrant my switching back to Verizon until this month when the bill increased. I saw that Optimum’s charge for just internet jumped by over 20 percent!
I called to ask about it and was given a song and dance about the costs rising and the fact that the company itself is absorbing a lot of the increase itself, etc. As a customer, though, I’m not really interested in what you may regard as mitigating circumstances.
From my perspective, I was just slammed with a huge increase in cost with no change in service and no clear warning other than the general emails that tell me to see the site for more information. This is not the way to treat a customer who has been with you for a number of years now.
I explained this clearly and told the rep that if Optimum does not adjust the rates for me to a more modest increase, I would abandon them as a customer in favor of Verizon. I even explain that they offer promotional deals for new customers with more speed at a lower price. The rep claimed he couldn’t budge on that, so that settled the matter for me.
The Multiplier Effect
It may not really be a big deal for large companies to lose a single customer, but I happen to be one among many. Anyone who pays attention to what the monthly outlay is will not just be content to accept a huge spike in pricing.
That is why quite a few people have accepted that they will not just pick one provider and stick with it but will have to switch back and forth every year or two to keep taking advantage of promotional rates that are offered only to new customers. They may as well use the system to their advantage when the companies show they’ll take no action to keep customers from leaving over prices increases.
Actions Speak Louder Than Words
Both internet providers are obviously only incentivizing acquiring new customers and not keeping the old ones. That means they’re only looking at the easy metric of additional customers and not calculating the losses of not just the years of service lost each time the customer switches to the competition for the current deal but to the loss of loyalty that the system fosters.
All the warm, fuzzy emails they may send about valuing customers ring hollow when their actions indicate otherwise. The only thing that keeps the two companies afloat in this area is that they both fall into exactly the same error. If one of them would wake up to the necessity of customer retention, it would have a huge competitive advantage.
Winning your customers over is not just a matter of acquiring their business. It’s also about keeping their business through a relationship built on service and trust.