A fundamental tenet in marketing is that you should reward customer loyalty. In fact, loyalty programs are an important pillar of competitive advantage and profits for airlines, hotels, credit cards and retailers. The more you fly with an airline or the more nights you stay at a hotel, the better they treat you. This makes perfect sense.
But not in the telecom and utilities business, which has it all backwards. They reward customer disloyalty and their customer loyalty programs are customer hostage-taking programs! Let’s take a look at Comcast, a leading voice, data and video provider. They advertise their Starter XF Triple play bundle at an introductory rate for $99/month for the first 12 months. After 12 months, the monthly service charge jumps to $114.99 for months 13–24. After 24 months it jumps again to $129.99/month. So if you stay with Comcast for more than 24 months, you are rewarded with a $30/month penalty for the rest of your life! And the agreement comes with a handcuff of 24 months to ensure that you don’t run away. No worries, though. After 24 months, you can switch to AT&T U-Verse, which has a similar introductory offer only for new customers. And then you can switch back to Comcast! Wireless carriers have similar asinine pricing plans that reward hopping and switching. So the Belief Project from U.S. Cellular, which actually rewards you with points for doing more business with them, comes as a breath of fresh air.
I wonder when people at telecom companies will figure out the difference between a loyal customer and a hostage. And I also wonder when they will figure out that rewarding customers for leaving you will increase churn, especially when many of your loyal customers are really hostages. When will we see “old customer discounts” from Comcast or AT&T? I’m not holding my breath.
