Why is it that although every marketing book / article I’ve ever read tells me with authority that it costs 5 (or more!) times as much to get a new customer as to sell to an existing one, so few companies understand this?
Do their executives and marketing people not read?
I know you’ll have many examples of such wasted opportunity, and I’d love to hear those that stand out in your mind, so to get the ball rolling, let me give you a couple of – to me – amazing ones…
Newsweek is top of mind at the moment as I have just received my annual renewal notice. This ongoing piece of optimism on their part really baffles me as the renewal fee is almost exactly TWICE what I would pay to take out a new gift subscription, and that excludes the (admittedly dubious) value of the little extras they send with gift subscriptions.
When I queried this with the “Customer Service” people at Newsweek a couple of years ago, all I got was a rather terse note saying that the renewal price is the best available offer for my country. This in spite of me providing them URLs to prove otherwise in my original query… So, each year for the past several years I’ve allowed a subscription to lapse and taken out a new gift one, saving myself a tidy sum in the process.
This is, of course, a lot more expensive for Newsweek: apart from the trinkets, they always allow a lapsing subscription to run on for a few issues while they send out several reminder letters.
Why not just give subscribers the same deal (without the trinkets) and save on the letters, too?
Another great example is that of Consumer Electronics stores – full disclosure: I love gadgets and electronics stores. The opportunities they miss to get steady repeat business are legion! Let’s face it: they have my information as I invariably pay by credit card and they could easily ask me to sign up for a “loyalty card” or just permission marketing.
But they don’t.
Each time I visit, I’m treated as a brand new customer (not a great experience in most cases to be honest). They miss opportunities to sell me upgrades or add-ons for products I’ve previously purchased (unless that’s the purpose of my visit). They don’t keep records of what sort of things attract me so I can be carefully guided by the marketing people to buy more. In fact, they have no idea who I am at all – and yet the company executives that I’ve come to know from some of these stores are searching for extra sales, especially in these tough economic times…
When are companies going to wake up to the real, lifetime value of their customers?
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Agree. But nowadays newspapers are in dire straits financially so they try to get people to pay as much as possible for subscriptions. What’s most important to you to read Newsweek or pay half the price for a subscription? We have to look at it from their point of view as well.
Certainly the print media are finding life difficult, but I’d say there’s a big difference between newspapers and magazines such as Newsweek. And yes, while they’re trying to extract as much cash as possible from consumers, this sort of behaviour is unlikely to endear them to people, especially those who, like Guy, notice the discrepancy.
It sounds a great deal like exactly the opposite of what we were taught in business school – getting new customers is great, but keeping existing customers is far, far better (particularly if they can help one find new customers), which is clever companies offer their existing customers good deals.
Thanks Catarina & Aimee – what’s important is for me to feel that a company sees value in me as a repeat customer.
By adopting the approach they do, Newsweek wastes a great deal of money – letters, additional copies of magazine and the trinkets they send with the “new” subscription.
Rather offer a deal – like most car-hire companies do nowadays – that guarantees you will always pay the lowest price available, saving time and money, while increasing customer satisfaction and loyalty.
Every time I have to go through this renewal process, I re-evaluate whether I want to contine receiving the magazine, or switch to another (like Time). Time lost my subscription for similar reasons a few years ago, but Newsweek could lose it in the future if they don’t make the renewal process more customer-focused.
It was an article published by the American Institute of CPAs titled The Root Cause of the Economic Crisis /Road to Recovery that inspired my rebuttal Ethical/Logical/Analytical Thinking.
As a CPA, I have specialized in accounting software implementations for over 25 plus years and I uncovered fraud in about 20% of my installations. My role as project manager ensures data integrity. As a CPA, I could not ignore the irregularities but my point, fraud exists from Wall Street to the lady running out of Ikea believing she scored on a mistake. The cost to our economy is the lack of trust and trust in the current or flow behind currency.
1. The world does not trust Wall Street
2. Bankers rightfully don’t even trust themselves
3. CEOs conspicuously over consume thus, common sense says they are not intuitively fair. 4. Without leadership, the wage earner unrewarded naturally loses interest in productivity.
Any sustaining economy requires trust; otherwise, like still water ceases to exist.
Trust starts with strong leadership then trickles down and requires virtues not vices and if not the good guys then who?
Marketing holds a leadership role for many reasons but to stay on point, our economy is in crisis with volumes of talented people enduring an idle day with no income; thus, no money to spend on your products.
In other words, marketing has a vested interest and a responsibility to promote virtues. If the US plans to lead with innovation, we must have a marketplace built on a sustaining foundation, no?
Thanks, Patricia – you raise an excellent point on the trust issue.
Isn’t this tied to the short-term “get rich quick” focus on business we’ve seen increasingly develop over the past couple of decades? Perhaps the return to a longer-term focus and the consequent lessening of the ability of senior officers of a business to make enormous sums of money quickly and leave before the rot becomes apparent will also enable trust to start being built up in companies again.
There was a time when being a “Captain of Industry” (and, especially, a Banker) was a position of respect. I fear this is no longer the case due to the huge number of fraudulent and/or – at best – ethically-dubious acts that have been perpetrated in recent years, leading to the loss of trust. Roll on the return to ethical business, and to businessmen – most of whom are ethical and trustworthy – being able to hold their heads high again.