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Retention. What a Concept!
I remember the not-to-distant past when most wireless telecoms gave all their best deals and service to new customers and didn't pay much attention to existing customers. It was all about acquisition; achieving critical mass. But as churn rates grew, so did the recognition that retention might actually be a good idea. Most of the rest of us already seemed quite aware of the adage that it costs less to retain customers than to acquire new ones, understanding that companies need to balance acquisition and retention -- emphasizing each as appropriate over time, but not sacrificing one for the other.
As a T-Mobile customer I've noticed this change over time. I remember when I wanted to purchase a Treo, but the company wanted to charge me $300 more as a long-time customer than it was charging new customers. After an email to the head of marketing for the U.S., asking if he would be willing to spend $300 simply to keep his existing phone number, I received the "new customer" price within 24 hours. However, the pricing for the non-squeaky wheels did not change. What I noticed was that a new explanation of the pricing appeared on T-Mobile's site shortly after my experience. Fortunately, T-Mobile now has significantly more customer-friendly pricing that seems to recognize the value of its existing customers, which I happily discovered when opting up to a BlackBerry.
Verizon Wireless is also taking steps to be more customer-focused. In our INSIDE 1to1 newsletter we discuss how the company is loosening its grip on customers by prorating early termination fees and is adding a new loyalty plan to reward such behaviors as paying bills online. It seems that the new approaches aim to engender trust and build long-term loyalty. Industry watchers expect competitors to follow suit.
I say that this is just the beginning for an industry that, more than most, must continually strive to offer new and better products and services to customers to engage them, grow them, and keep them out of reach of the competition. What do you think of Verizon Wireless' approach?
Paul, Daniel,
You both make great points about why Cingular would choose a debit card over a check. Lower costs and get more customer data -- sounds like a win-win for Cingular. And, if it is cobranded, it might spur customers to use the debit card to buy accessories. When I purchased my BlackBerry, for example, the salesperson suggested I spend my rebate (in advance...) on a BlueTooth headset. I didn't that day, but I did once I got the rebate!
As for Verizon Wireless, Paul's point about pricing gives insight into what sounds like one-to-one: The company's contract and loyalty strategies seem to have elements of uncovering customer value that will allow it to find news ways to treat different customers differently.
The debit card approach is an outstanding demonstration of 1to1 marketing abilities... benefiting the supplier, and only marginally the consumer. When you use the debit card, your consumption (and then your preferences) become trackable, but not if you are given a check! They will know more about you, and they will be able to offer better service, better loyalty programs, and eventually deliver targeted advertising to your phone or e-mail. A 1to1 marketer's dream!
Regarding Verizon, it is a regular pricing issue, as described by Varian in Information Rules. Let's charge more to the ones that have higher switching costs, providers are saying. Unfortunately for the wireless carriers, now we can take the number with us, which minimizes our switching costs. Otherwise, Verizon and all others would keep insisting in us paying the full cost of the devices, as well as other full blown charges, and that is why they still keep the phones that work in a network, but not in another.
I do not believe that wireless companies will change significantly its pricing strategy, at least for the high end phones where, occassionally, the squeeky wheel may get some good grease. For the ones they buy in big quantities, we may see better offers, more minutes, and stuff like that where the provider leverages the low marginal cost of the calls.
Ginger - I would bet it's both. I'm not a Cingular customer, but I would imagine that it's a Cingular-branded Visa or Amex card. Another factor here is the breakage / redemption rate - a $30 check is, well, $30 (plus processing costs), but there are a lot of small amounts of $$ that remain unclaimed on gift cards. When there's only $1.95 left on the card, it gets pretty easy to forget to use it, then it expires. Across a year's phone sales, we're talking a lot of money.
Definitely some upsides for the business. I agree with Pete, below, I'd prefer an instantly-usable card to a check that has to be taken to the bank. But preferences vary.
I wonder if Cingular has a co-marketing arrangement of sorts with the debit card issuer, or if it's simply less costly to send the debit card rather than process a check.
Stan - I definitely feel your pain regarding the UPC code, but, personally, I would REALLY prefer the debit card to a paper check that I have to take to the bank.
I can use a card NOW, but a check requires me to go to the bank (which I almost never have to do nowadays), fill out paperwork, and wait in line. Just curious what the downside is of a debit card for consumers.
I don't know much about Verizon, but I do believe that customer service is something that every cell phone provider should work to improve. About four months ago, I purchased a new phone from Cingular. The price included a rebate of thirty dollars. After filling out an extensive rebate form, I was shocked to receive a form letter from Cingular denying my rebate, as I neglected to include a code from the box in which the new cell phone was packed! After calling Cingular and convincing the representative that I saw no space on the form to provide the box number, she consented, and I subsequently received my rebate. It was in the form of a debit card, when I expected a bank check. What kind of gimmick is this?