You’re our customer! We hate you!
It is axiomatic in modern American life: the longer you are a customer, the more some of our most common, everyday corporations come to disdain you.
Over the last couple of decades, there has been a steady slide toward monthly contracts for things in American Life. Phone. Cell Phone. Cable. Gym. Daycare. Banking Services. The list goes on and on. Think about how many recurring monthly charges you have. It can be … daunting.
Now, I am not here to make value judgments regarding what you are paying for in your life. Go forth and consume, as you wish. Rather, I want to examine the odd way companies treat their long-term customers.
Now, I’m a bit of a Comcast fan. I live in a pretty rural area with a less-than-ten-year-old Comcast installation. I get great network connectivity (16 down/6 up), lots of HD channels, and the phone works. I freely admit my experience may be atypical; that is not the point.
My wife and I have been a Comcast customer, across two houses, for sixteen years. Cable-modem internet was the first broadband experience I ever had, and it was a game-changer for me. Sixteen years is a long time, a very comfortable, regular time Comcast has been receiving a check from us. Has to make them feel good. They don’t hesitate to cash it, I note.
But everyday, I glimpse Comcast commercials. Commercials for Comcast, touting this deal or that. Triple Play, for $99; free Showtime for six months; etc. Great Deals! For new customers only.
Because those potential new customers are soooo much nicer than us crusty old customers. I guess we current, long-standing, reliable, loyal customers must smell bad; whereas those folks who are paying Comcast’s competitors are exactly the happy, shiny folks Comcast craves. At least that is the impression Comcast’s endless chasing after them gives me.
Cable companies worry endlessly about churn. Churn (attrition) is the amount of customers a cable company (or any contract-based company) loses in a given period. Contract-based companies hate churn, because it costs them money. Churn means people leave after only a year or two. And the real gravy for Comcast is found in the later years of the relationship. An example:
The first year of your triple-play with Comcast costs $99 a month (ignoring the pain of charges, taxes, fees, and bits of your soul unmentioned in the ad). So, $1200 for the year. After that, it jumps to somewhere around $140 a month, so $1680 a year. Check it out: Comcast is willing to pay you almost $500 to be their brand new customer! That is awesome, isn’t it!
Well, it is awesome in your first year.
Stick around awhile, and picture the situation ten years in. After ten years, assuming all the costs stay the same, you get to pay Comcast over $4000 to be their loyal customer! Ten year cost: just over $16,000. Sweet deal. For them. So they hate churn, they want you to stay put. Too bad they don’t make it attractive to stay put.
Every time I see a Comcast ad “For New Customers Only” I have the same thought: why don’t I get a break for being a loyal customer? If they really value my business, how about, oh, a discount based on how long I’ve been with them? Screw new customers, they are likely to leave (churn!) anyway. Golden-handcuff me with a really sweet deal based on my longevity. To counter the above example, say I had started at $125 a month. Starting in year 3 I got a got a 5% discount each year, up to 30%. Not compounded, additive. So after nine years, I am at a capped at a 30% discount, for a monthly bill of $88.
So my cost for 10 years?
- 3 years @ $125 ($4500).
- Year 4 at $119 ($1428; 5% discount)
- Year 5 at $113 ($1356; 10% discount)
- Year 6 at $105 ($1260; 15% discount)
- Year 7 at $100 ($1200; 20% discount)
- Year 8 at $94 ($1128; 25% discount)
- Year 9 & 10 at $88 ($2112; 30% discount)
For a total of just under $13,000 for ten years. Oh nos! Comcast loses money!
Please. The difference is that at ten years you’d have to pry my Comcast contract from my cold dead fingers. Doesn’t matter if Verizon FIOS will give me free unicorns and daily rainbows; DirectTV could offer me 100 free TV’s; I’m not giving up my long-term relationship with Comcast. I’m invested. I’m all in. Never leaving. Wouldn’t Comcast love to be able to count on that kind of customer loyalty? To be able to project that kind of future cash flow with such surety?
I left Verizon with nary a twinge to get an iPhone; likewise Comcast, and all the other contract-based service companies, will never build customer loyalty until they treat their current customers as if they are more valuable than prospective customers.
Fat chance of that happening.