Don'T Be Greedy By Taking Your Loyal Customers For Granted
Someone once told me that the cost of acquiring a new customer costs five to ten times more than retaining an existing one. So why do so many companies “chase the dollar”? My recent experience of brand switching not only highlights this but left me with a bad taste in my mouth.
I bet I am right in saying that the majority of customers of utilities, motor insurance and credit card businesses etc don’t shop around for a better deal. This would be described by the marketing teams as their brand loyalists. That might well be true, and there are a number of examples of great customer service or loyalty schemes that hook customers to repeat purchase. These customers are the organisation’s most profitable customers. So hang on to them, treat them with love and respect.
Then there is the promiscuous customer - the customer who switches year in and year out seeking the best deal with little or no brand loyalty. I would put myself in that camp. Why? Because I know I can get a better deal. Indeed I am amazed at the psychology and the business sense of utility companies who sign up to energy comparison sites in order to acquire new business. Only six months ago I received a phone call from an energy comparison site who basically informed me that I could save £200 over 12 months (when compared to my existing supplier) if I switched my dual fuel account. Of course I moved my business immediately. Last month the same energy comparison site contacted me again to let me know that I should move my custom from the energy supplier they had previously recommended six months ago as I could save £200 per annum when compared to my existing NEWISH supplier, (the one that they had “sold” to me in the first place!). Of course I moved again and I am now going through the switching process. I can guarantee that I will receive another call in a few months’ time letting me know that there is a better deal to be had. The major winners here are the comparison sites. It’s cut throat out there, dare I say unethical for the comparison site to acquire the utility company a new customer in one month and then steal them away six months later. It cannot be profitable for the utility companies. Can it? Why can’t my existing supplier remain roughly price competitive? I wouldn’t have switched if my supplier was say circa £30 more expensive. I wouldn’t want the hassle. Hanging on to me for a further 12 months would have enabled them more opportunities to upsell me boiler and heating cover and more.
This week our multi car insurance came up for renewal. As usual my existing insurer sent their renewal letter with a quote for insuring our cars for another year. They reassured me that I didn’t have to take any action as they already had my direct debit details and they would commence taking the new payments on the 1st of the month. However I was slightly alarmed that they would be taking significantly more over the next 12 months than I had paid for the previous 12 months. Were they hoping I would not bother to hunt around for a better deal? He’s a brand loyalist after all. He likes being ripped off!
So the process of hunting for an alternative quote began. Seeking car insurance is painful. I imagine circa 75% of those looking for car insurance use one of the four major comparison sites, enticed by a cuddly toy! I go through the lengthy process of answering all the required questions and then see which insurers pop up to the top of the list. I choose one and then I am redirected to the insurer’s website and then frustratingly go through the same exercise again! I eventually find me a great deal. I ring my current insurer to tell them the bad news. Can you believe their response? “What have you been quoted by the competitor? Let’s see if we can beat it!” Sorry, you mean to say your original quote was not your final quote but rather an over inflated quote trying your luck with me in the hope I am brand loyalist, or should I say "brand sucker”. Not only have they lost a good paying customer they have also damaged their brand reputation. Through the power of word of mouth marketing this poor customer experience will be amplified at dinner parties and down the rugby club. So the lesson today is don’t be greedy and take your customers for granted. Simples!