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Rewarding Brand Switchers at the Expense of Loyal Customers Will Ruin Your Business

05/30/2015 01:57 am ET | Updated May 29, 2016

Mobile service providers are doing it. Banks are doing it. Just about every company, run by people without marketing brains, is rewarding brand switchers at the expense of their loyal customers. That is what is happening under the guise of attracting new business.

Paying you to switch, but not giving you anything to stay.

AT&T gives prospects up to $450-per-line to switch to their service. What does it give the loyal customers to stay? The lucky ones get a mass produced "thank you" letter. In fact, if loyal customers grandfathered with unlimited data plans want to use their phone's capability to act as mobile hot spots, AT&T won't let them. Of course, nowadays, all the mobile phone providers will pay early termination fees and provide other lures to get new business. What about when you are a customer? If you are lucky, you will get the service and speed for which you are paying with a tolerable amount of dropped calls and internet service interruptions.

They're not alone.

One West bank sent out mailers to everyone within a certain radius of their branches advertising a one percent interest rate. When existing loyal customers called up to find out how they could get that rate, they were told that the rate only applies to people bringing in new money. Existing customers that were loyal to the bank after the financial meltdown should be the first ones to get that rate on the money they kept in the bank to keep it afloat. They are not. New customers are. Of course, if customers wanted to be sneaky they could move the money out of the bank, and bring it back to qualify. That would be very costly to the bank.

Prospects get courted as customers get slammed.

The same is true of cable TV companies and Internet service providers. They are great at offering deals to lure you to sign up with them. Once you become a customer, however, they slam the door in your face by changing your plan, increasing your price, requiring additional devices to use their service and charging you for them, and lowering the level of service when you need help. Some would call this the old bait and switch. They don't understand the relationship between trust and profits.

Your choice of bait and switch or overcharges and hidden fees

In April of 2011, as a result of a whistleblower lawsuit over allegations that Verizon overcharged the federal government for voice and data communication services as well as hidden surcharges, Verizon agreed to pay the federal government $93.5 million. This followed an FCC investigation into "mystery fees." Verizon charged 15 million cell phone customers for accidental Web access and data use charges. In October of 2010, Verizon agreed to $90 million in refunds to head off litigation with the FCC and numerous class action lawyers. Several months, later they were slapped with a class action lawsuit for charging customers hidden "Get It Now" fees.

Understanding the Lifetime value of a customer

Too bad these service providers don't understand the lifetime value of a customer. If they did, they would take better care of their existing customers rather than focus on acquiring new ones. They would do a better job of training customer service people who routinely "play dumb" during an outage or are rude to subscribers calling for service. They would not make it so difficult for subscribers to get credits for outages and other technical problems, and they would not need to play games with customers that want to cancel because there would be little need to cancel. The executives in these companies should understand that they exist and prosper because they satisfy the needs of their customers. If they think that their local monopolies will continue, they don't understand the disruptive potential of the Gang of Four --
Amazon, Apple, Facebook, and Google.

What businesses should do.

If businesses take care of customers, the money will follow. If they chase after the money by cutting customer service quality or charging for previously included items, they will end up losing the customers, their money, and the viral referral pyramids they would generate if they were satisfied. Most important of all, they should understand that actions that are viewed to be exploitative and insensitive only cause the buying public to no longer trust them. Once they lose the trust of the public, it is hard to get it back. Even if their marketing campaigns are exceptional (which they rarely are), they will not work unless customer service is significantly improved and prices are in line with what buyers are willing to pay. For too many, the wounds are too deep, the costs are too high, and the trust is long gone. For marketers, which tend to be optimistic by professional nature, we know that the negatives can be turned into positives, and broken relationships can be repaired. Hopefully, those that provide our communications, banking and entertainment will learn this sooner rather than later. If they do, more money is likely to flow into, rather than out of, their pockets. If they don't, there is a strong likelihood that companies known for disrupting industries, such as the Gang of Four, will take away their business.

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