01.12.08
“Deal only available to new customers” ?
I keep seeing adverts which are making great offers, mobile phone deals better than mine, bank accounts with higher interest rates, even home insurence which whoops mine. Home insurence is the most boring thing in the world, its so boring it makes watching Jeeves polish the gravel outside, so anything that gets me excited about home insurence must being properly exciting.
All of the offers above, which I saw in about 10 minutes of this evening tv, were only open to new customers. This makes perfect sense for many businesses, new customers bring in new money, and so long as you’re not completely screwing you existing customers too much, they probably won’t move on, so by offering short term deals which look very tasty you get some new blood, and so long as they don’t move on, your customer base is up.
The problem with this is two fold. Firstly, if your existing customers twig that you love them less that you love new blood, they’re going to be pissed off. They’ve given you X squillion pounds for donkey’s years and what do you do, you offer Joe Smo a better deal! They get pissed off, they spot another deal, and they move on.
Secondly, this process is getting easier! The Internet makes finding a better deal easier (moneysupermarket and moneysavingexpert are both well known), and your rivals are making it easier to switch. Halifax bank will apparently making moving banks as easy as one signiture, First Direct will even give you £100 to move to them.
So, if this cold war of cheap deals for new customers to steal them from your rivals continues, whats the problem? Your customers are getting a great new deal (this week) and movings so easy is not a problem for them to switch, and you’re getting new customers every day, and some of them won’t be bother to switch so hopefully you’re gaining right?
Wrong. Customer loyalty is worth so much more than the the sugar-high quick hit that are new customers. Loyal customers talk about you. Loyal customers will forgive you’re minor mistakes and if you handle them well they’ll even sing your praises. Loyal customers get their family to come to you. Loyal customers will drip feed you money over a massive period of time.
Why not offer your long term customers your better deals? I’m sure I’ve read of smaller banks only offering their higher interest bonds to existing customers, and O2 phone customers seem to be able to access deals that are advert, but apart from that I’ve not seen any thinking other than short term “smash and grab” techniques and this seems to be self defeating in my book.
