Are all customers worth it?

[bicker]

This question is one common element of many discussion thread that involve questioning some company's logic about how they interact with their customers. Another interesting example of this came up yesterday, while I was listening to CBS News. Cingular Wireless has decided to start charging their customers using older technology cellular telephone a $5 per month surcharge. They're specifically not taking any steps to try to retain these customers. Just like any new customer, of course, they can get a free, newer-technology telephone, but they'll still be subject to a new service commitment. These customers could just as well switch to another carrier, and get the same or perhaps an even better deal. So why would Cingular Wireless make such a move? Why would they make no moves to try to keep these customers?

For a very good reason: These customers are 12% of Cingular's customers but represent only 4% of Cingular's revenue. For whatever reason, customers holding onto older-technology telephones happen to be the ones who actually cost the company more to service than they generate in revenue. Cingular clearly would be better off if these customers left, and indeed, from one (evil) perspective, would be doubly-better off if these customers went to their competitors.

Whenever the issue comes up, where a customer says something like, "But I'm a customer," we should remember that not all customers are equal, nor should they be. Customers who wish to be valuable to a company (i.e., customers who feel that they are "loyal") need to recognize that business measures that in terms of how much of a premium they're willing to pay for the company's products and services, not in terms of how often or how long someone has been a customer.

 

[safetymom]

I left Cingular because of their policy. I lost a phone and stopped the service until I could find the phone. Cngular informed me that even if I found the phone I would have to get a new phone. I had an AT&T phone that wasn't 2 years old.

So I took my business to Nextel. I used to have 3 phones but they lost me because of their customer service.

 

[bicker]

I think we'll see more and more of this as companies get more and more information about the link between specialized demographics and revenue contribution -- call it "commerical profiling". I suspect we'll see Disney doing this more and more, since they are collecting up massive volumes of data about us. I could see them using the data to pick-and-choose which guests to provide discounts to even more strategically than they have up-to-now, or perhaps could be the basis on which FastPass priority privileges would be given.

 

[momof3disneyholics]

I hate Cingular. Their customer service is awful and it is even worse if you try to go into one of their stores and get help. Unfortunately, I have 4 lines and am stuck with them for another year.

 

[mickeyfan2]

I have Cingular and have no problem with them. The new phone I got stopped working after 6 weeks. There was a manufacturer's problem with it's phone software. When I called they overnighted me a new phone. That one worked for 4 weeks. It was supposed to have the fixed software. When I called back they overnighted me a Razr in it's place (cost more than my phone) and I have had not problem with the Razr since. They did fine by me.

 

[Planogirl]

I think we'll see more and more of this as companies get more and more information about the link between specialized demographics and revenue contribution -- call it "commerical profiling". I suspect we'll see Disney doing this more and more, since they are collecting up massive volumes of data about us. I could see them using the data to pick-and-choose which guests to provide discounts to even more strategically than they have up-to-now, or perhaps could be the basis on which FastPass priority privileges would be given.

Interesting concept. I wonder who they might provide discounts to; the regular customers that probably don't need the discounts or those who don't go to WDW because it costs too much or because they at least believe that it does? There's a notion that return customers deserve discounts because of their loyalty but in reality just the opposite may be true.

 

[SC Minnie]

The company I work for let many customer go this year. We shut down a mill and a couple of machines and had to choose which customers we wanted to continue to do business with. The customers that were a PITA and didn't pay top dollar for top dollar product and service were let go. Its business. Our shareholders expect us to make money. Wall Street Analyst are on our case constantly.

 

[Maleficent13]

Interesting concept. I wonder who they might provide discounts to; the regular customers that probably don't need the discounts or those who don't go to WDW because it costs too much or because they at least believe that it does? There's a notion that return customers deserve discounts because of their loyalty but in reality just the opposite may be true.

It's the returning customer who gets the discounts, not the "once in a lifetime" customer. Sure, offer a discount to a person who wouldn't usually go and you may make $500-1000 off of them, one time. Offer it to a returning customer, and you up their trip frequency from once to twice a year annually, and you stand to make considerably more for it.

In regards to Cingular...I get what they're doing. It makes sense. Not something I'd brag about doing, but there you are.

I wonder why it makes me feel uneasy to write the above paragraphs. It feels slightly crappy...but I can't figure out why.

 

[escape]

Cingular Wireless has decided to start charging their customers using older technology cellular telephone a $5 per month surcharge.

My FIL will be affected by this. He refuses to upgrade his phone because the deal he has now is better than what he would have to go to. Even with the $5 surcharge, I think he will still come out better. However, his phone is a piece of crap and not very reliable. At Alltel, I can upgrade my phone and keep the same service plan.

I think we'll see more and more of this as companies get more and more information about the link between specialized demographics and revenue contribution -- call it "commerical profiling". I suspect we'll see Disney doing this more and more, since they are collecting up massive volumes of data about us. I could see them using the data to pick-and-choose which guests to provide discounts to even more strategically than they have up-to-now, or perhaps could be the basis on which FastPass priority privileges would be given.

Yep. I worked for a company that did this "profiling" for other companies.

 

[mrsltg]

You're right, Bicker. I can only hope that Disney will do this. We will have spent three seperate vacations at WDW this calendar year - I'd love to see them reward the loyalty id only to entice me to spend even more...

 

[DisneyMommyMichelle]

It's the returning customer who gets the discounts, not the "once in a lifetime" customer. Sure, offer a discount to a person who wouldn't usually go and you may make $500-1000 off of them, one time. Offer it to a returning customer, and you up their trip frequency from once to twice a year annually, and you stand to make considerably more for it.

In regards to Cingular...I get what they're doing. It makes sense. Not something I'd brag about doing, but there you are.

I wonder why it makes me feel uneasy to write the above paragraphs. It feels slightly crappy...but I can't figure out why.

so very true!

 

[Planogirl]

It's the returning customer who gets the discounts, not the "once in a lifetime" customer. Sure, offer a discount to a person who wouldn't usually go and you may make $500-1000 off of them, one time. Offer it to a returning customer, and you up their trip frequency from once to twice a year annually, and you stand to make considerably more for it.

But wouldn't the returning customer go anyway? Wouldn't it be wise to lure those who have never been in an attempt to get them "hooked" too?

Believe me, I'd prefer for the regular consumer to get the discounts but I'm just mulling over who the better target might be.

 

[ead79]

I agree that as tracking capabilities continue to improve, we'll see more personalized marketing and loyalty programs. As with anything, this has advantages and disadvantages.

For instance, I like the possibility that Disney could use guest habits to offer targeted discounts to repeat visitors (with the goal of trying to increase visit frequency). Similarly, grocery stores could offer coupons based on previous buying habits. However, it could be difficult when it comes to services we don't use often to receive quality customer service. For example, we are good Comcast customers, as we have both digital cable and high speed internet through them. Theoretically we should get good customer service from them. We aren't very high-revenue Bellsouth customers, as we only have a land line through them. I would hate to be on hold forever if I had a problem just because we're not major revenue generators. I think there is something to be said for a company that treats you well whether or not you're the biggest revenue generator they have. You never know when today's low money generator will become tomorrow's best client.

 

[ead79]

But wouldn't the returning customer go anyway? Wouldn't it be wise to lure those who have never been in an attempt to get them "hooked" too?

Believe me, I'd prefer for the regular consumer to get the discounts but I'm just mulling over who the better target might be.

I think it depends on what the company's goal for the marketing campaign is at the moment as well as on their revenue figures. If Disney has statistics that indicate that one-time visitors spend an average of $2000 per trip, and that repeat visitors spend an average of $3000 per trip, it would make sense for Disney to market more to the higher margin repeat visitors. I would guess that this is the case based on Disney's discount patterns. They have virtually stopped offering room-only discounts for the general public (which would include first time visitors) and have continued to offer annual passholder discounts aimed at repeat visitors. Obviously, if Disney can get you to take more frequent trips, it's a win for them. Clearly, in reality, Disney markets to both repeat and first-time visitors. I think it's in their best interest to keep their bread and butter repeat visitors happy though.

 

[Planogirl]

Clearly, in reality, Disney markets to both repeat and first-time visitors. I think it's in their best interest to keep their bread and butter repeat visitors happy though.

I agree. I suspect that heaviest marketing would go to both repeat customers and newbies with the population in the middle receiving the least attention. Those of us who haven't been able to go as frequently and might even stay offsite would be the most ignored, cheapskates that we are.

I like the idea of marketing to frequent customers though. I haven't seen any sign of it from any industry just yet though.

 

[Maleficent13]

But wouldn't the returning customer go anyway? Wouldn't it be wise to lure those who have never been in an attempt to get them "hooked" too?

Personal example from a year or two ago: A returning customer offered no incentive will go once a year. But then, hey, here's a coupon for $75/night. Well, February's a slow time, wouldn't be too much, let's book a week!

The February trip would never even have been conceived of had the incentive not been received. So Disney would have gotten our $$ once, but not twice. Even though we went the second time because of the great room rate, we still ate/spent just as we would have on any other vacation, and they made out. And I know I am FAR from the only person who does this. There is a lot of money to be sucked out of those of us addicted to the magic. They know we'll cave. Keeping the customer is a lot easier and more lucrative than making new ones. Plus, they are pretty much guaranteeing a whole new crop of addicts in our kids.

JMHO, YMMV.

 

[cardaway]

Not sure where the OP was going with the whole post, but do think I agree with one part. I don't see any problem with a company basically not trying to please some customers.

I see this as an extension of the many recent "comp" posts. IMO some managers should just tell some people not to come back and not give them anything. It isn't going to help their business enough to try and make them happy, and given the crazy complaints in some cases, do they even want them back?

One of the grea things and computers and databases is there could come a time when a customer goes to complain and the manager could say - we have you on record receiving a comp for this last year. Please stop trying to milk us with false complaints.

 

[barkley]

what gets to me with this issue is offerings or enhancements to services that are promoted as 'cost saving' to customers when in reality it has the negative effect. a good example is a recent issue that is being hotly debated on cruise boards. many lines are touting the fact that they have new systems in place that allow cellular phone users to use their cell phones on board. they claim it's convenient for bsns travelers as well as individuals who want to stay in touch with family and not incur the high ship to shore phone rates. they also point to the fact that most cells phones only work within a short distance of some ports and this will prevent dropped calls and lack of service.

what they don't advertise is that the trade off is that the minute you step foot into their port area your cell phone comes under their coverage-so if you call home to advise the kids you have arrived at the port and are awaiting embarkation-you are being charged $3.00 per minute (and it's billed to the carrier who passes it on to you). get off the ship and call for a taxi-$3.00 per minute.

people who have no relationship with a cruiseline but have reason to go to their portage areas have been hit with huge bills because of these 'enhanced' services. and trying to get a charge dropped by a company you have no connection to is next to impossible (the cell phone companies that have been affected say they are middle men in the situation and simply refer the consumer on to the billing office for the lines).

very deceptive-very shortsited. i can see it turning away potential customers.

 

[bicker]

I think we'll see more and more of this as companies get more and more information about the link between specialized demographics and revenue contribution -- call it "commerical profiling".

Interesting concept. I wonder who they might provide discounts to; the regular customers that probably don't need the discounts or those who don't go to WDW because it costs too much or because they at least believe that it does?

Ideally: You offer discounts only to customers who wouldn't otherwise patronize your products or services. On top of that, you target the discounts to the customers who will represent the most additional revenue (i.e., additional purchases -- in the case of WDW, it would be the customers for whom your data indicates they spend the most on alcoholic beverages, souvenirs, behind-the-scenes tours, etc.).

There's a notion that return customers deserve discounts because of their loyalty but in reality just the opposite may be true.

Correct. "Returning" isn't loyalty. "Returning" while paying top-dollar -- now that's loyalty.

But wouldn't the returning customer go anyway? Wouldn't it be wise to lure those who have never been in an attempt to get them "hooked" too?

Yes, returning versus first-time shouldn't matter, as long as you have the information on which to base a determination that a prospective customer will be a high-revenue customer. In the case of a first-time customer, that information could come from other sources: Disney could see who orders DVDs of Lost and Desparate Housewives, and cross-reference that with a marketing research database that department stores might contribute customer purchases information to. Many folks sign up for free services through their credit card (insurance and such) and in return authorize the credit card to cross-reference them with their purchases and make that information available to companies trying to find the folks for whom they'd make the most profit on.

 

[bicker]

I think there is something to be said for a company that treats you well whether or not you're the biggest revenue generator they have.

Something to be said, yes: Perhaps "violating fiduciary responsibility." There is nothing good about a company that ignores what's best for its owners -- that's how we got Enron, eh?

You never know when today's low money generator will become tomorrow's best client.

The point is, yes there is. The science is becoming advanced and developed enough to be able to start making very accurate predictions about which customers warrant special priority and which don't.