Customer retention

While I was over at PhoneScoop.com I looked at their user forum to see if anyone else had bitched about 1800Mobiles.com I noticed then a post by someone who clearly worked for a cellular carrier and was complaining about customer who phone to get a better deal on their service. They reasoned that since no one tries this in WalMart so why do they have to put up with cheap customers trying to get a deal day-in and day-out?

Okay, I'll give you two good reasons why people do this and why phone companies should listen.

The first reason is that in the USA calling service providers to get a deal is standard practice. You do it with your landline company and you're a fool not to because their standard rates are exhorbitant. You do it with your credit card company and they give you a deal. You do it with your bank to get fees waived, etc. etc. So why not do it with your cellular carrier?

The second rason is that almost everyone knows someone or is someone, that called to get a deal and was told "No". That person then called and said "I have new phone with XYZ and I want to disconnect my service". At that point you are flipped to the "customer retention department" and offered all kinds of deals to stay. I have one friend who got offered twice the normal anytime minutes as normal, a new phone for almost free AND got four months of *free* service to think about it. Literally they called him every month for three months and asked him to reconsider and wouldn't stop his service. He ended up giving his old phone to a friend to use until they finally disconnected it. So who wouldn't try asking for a better deal? You're almost stupid not to.

Both these scenarios are a consequence of a well know fact - its costs service companies a very significant amount of money to acquire a new customer, and those costs are increasing especially in the cellular business. Current estimates are $300 per customer and rising. That's why you get a hugely discounted phone and that's why carriers did everything they possibly could to stop number portability.

So a customer is actually doing carriers a favor to offer them a chance to avoid paying another $300 to acquire a new customer to replace them and keep their revenue up. The last thing a carrier should do is just tell them to get lost because you know what, they will.

Regular stores like WalMart don't spend anything like the amount service companies do to acquire companies. Having a more physical prescence they often have a more captive market of customers. Also people shop for their daily needs at multiple stores and aren't stuck in a service agreement. Imagine if WalMart wanted you to sign a one or two year agreement to shop only at their store, with a $200 early termination fee? Are you kidding that would never work!

Big retail stores prefer schemes like discount cards and coupons to reward their customers. These actually cost those stores quite a bit to operate but are more effective. Also instead of on-request discounts they have have frequent sales and specials. The wise customer waits for the next sale which stores will frequently tell you about if you ask.

Small retail stores typically don't spend a lot on advertising and discount schemes. Their margins and volume is just not high enough. But they will give discounts to loyal customers and valuable customers. Often this happens without the customer even asking and that's the best way. Such a customer truely knows they are valued, and doesn't feel like they are begging for something, and the retailer doesn't feel like they are on the spot if they really can't afford to give a discount.

Think of a discount like getting a raise at work. If you get given one without asking that's great - you were appreciated, someone was doing their job and noticed and you got rewarded. If you were appreciated then you have to ask then someone wasn't doing their job, and you feel unappreciated for having to ask. If you're not appreciated and you get a no then you'll be disgruntled and likely as not move on.

So to summarize, your customer who asks for a discount is not necessarily a tight wad. Quite likely they are just giving you a chance to show that you value their custom and indicating that probably you are neglecting a loyal customer. Often times, even small discount or deal is more than enough to make them happy. Otherwise by all means turn them down, if you're not making money from them then you're a fool not to. But do it with a smile and expect them to go elsewhere for the very best deal, because they can and will. That's how a free-market works.