Loyalty Truth

One of the toughest business models from which to create customer loyalty has to be the subscription model. Let’s place a caveat here by noting that there’s nothing wrong with subscription models in general, just those that are framed in contracts which extend over time and carry heavy penalties for early cancellation.

Poll a group of your friends, colleagues, or even random people walking though a mall. Ask them which brand that commands a significant chunk of their monthly income and they’ll probably mention their wireless or cable company. No matter the reason cited, whether service, connectivity, or price, the underlying reason for discontent is the contract. As a breed, humans don’t like being confined. Restricted movement and limited options breed resentment and wireless and cable contracts effectively build that cage around customers.

Unless you’re one of the few consumers I know who has succumbed to the wireless or cable version of the Stockholm Syndrome , you know just what I mean.

I understand the need for a contract, principally to defray the cost of expensive mobile handsets, routers and DVR’s given to customers at the outset of a contract. The provider needs time to recover some of this capital investment in the relationship, and I’m guessing that even with the griping, that most consumers would prefer the current model to one which requires a payment of $500 or more to accompany the start up of a wireless or cable contract.

The trouble is, the providers only think about acquisition.  Filling the funnel is important, but if they turned their focus to building customer satisfaction during the term of contract leading to lower churn rates and reducing cost of maintaining their portfolio, they would add tremendous efficiency and profitability to their business. If you want an easy read on the basics of building a loyalty program, you can find it here.

I’m an advocate of using the contract to the provider’s advantage. Why not give credit to customers for their annual value and factor in their bill payment habits and use of handset insurance to create a customer score as a proxy for value. Customers with a specified score could be exempted from punitive aspects of the standard contract and exceptions could be justified on their behalf. You wouldn’t have to name this initiative a loyalty program is you choose, but loyalty is exactly what it would produce.

ATT’s UVerse division got my attention with an offer last month that earned it a few mental loyalty points in my opinion. A bit of surprise and delight arrived in the mail offering a $15 Visa gift card just for being a customer over the past two years and also included a credit for a free rental movie.  You might say that a cumulative value of $21 isn’t much, but as Hallmark would say, “sometimes it’s the thought that counts”. If you’re a regular reader here, I don’t need to explain the value of surprise and delight strategies. I also can’t validate that the offer from UVerse was based on any data other than the length of time in contract.

Either way, the surprise was delightful and came in stark contrast to a renewal letter from a local storage company notifying me of a 26% rate increase. That letter came from a group who was aware of several key data points in my contract, most importantly the length of time I had been a customer and the fact that I was on auto-pay, making me a low-maintenance renter.

The result of these two unexpected interactions with companies I have paid money to consistently over the past 3-4 years? I’m willing to stick it out with UVerse despite the occasional service interruption and am currently shopping for alternate storage space.