Profit now from our customer drawbacks!

You would think that as a loyal customer you would enjoy some kind of benefits from choosing to continue to do business with that company? Or is that a crazy idea? And what do you do when you don't benefit by being a loyal customer?

The dialogue below is a telephone conversation between a customer and his mortgage lender. The situation is the following. The customer has to extend his mortgage as the fixed-rate period will expire soon. He has received a letter from the lender (a bank whose name we will not mention) with a new rate proposal for the coming five years.

Customer:    Hello, I'm one of your customers and I have received your letter with a proposal for the new interest rate.

Bank             Excellent! Shall I make everything in order, then?

Customer:    No, it's not quite excellent. You offer a rate of 4.9%, while your competitors are offering rates of around 4%.

Bank             But sir! Don't let these kinds of too-good-to-be-true offers confuse you! We are a reputable bank.

Customer:    I'm not an idiot. Your competitor is also a reputable bank, and your bank also runs offers with that same rate.

Bank             Is that so? Where have you seen that?

Customer:    On your website…

Bank             Let me see... Aha, there it is. So, that's good news?

Customer:    No, because I'd pay a lot more if I accepted the rate in your letter. Why wasn't I offered the lower rate then?

Bank             You're already one of our customers. The offer is only for potential new customers.

Customer:    On your site you are even offering a rate discount to new customers.

Bank             It's expensive to win new customers, you know!

Customer:    Yes, especially if you offer this kind of discount. Why wasn't I offered this rate?

Bank             I told you, we apply those lower rates only to new customers. Existing customers don't qualify for the discount rate.

Customer:    I want that rate too, as a loyal customer; shouldn't I be entitled to the best rate?

Bank             We've been taking good care of you for the past five years! That costs money…

Customer:    But you've been earning more. If I can't get that rate from you then I'll just shop around.

Bank             You won't be leaving us.

Customer:    Oh no? Why not?

Bank             It's too much trouble. I talk to customers like you all the time. They threaten to go somewhere else, but in fact they rarely do so.

Customer:    It's not about such facts, it's about the money!

Bank             You still have three weeks to approve the proposal in our letter...

Customer     …

After a lot of haggling, the customer eventually received a discount of half a percent. But did that customer feel satisfied with his lender after the negotiations? I don't think so.

I'm continually amazed over the fact that seducing new customers seems so much more important to managers and salespeople than holding on to existing ones. Customer orientation is still uncommon in call centres evaluated on a cost-per-call basis, and with direct marketers evaluated on the response to mailings and salespeople on their new business.

Who is responsible for customer retention in your organisation? What is your strategy?

The old economy is the economy of growth through chasing new customers. In a world of concepts such as new business, pipeline, prospecting, and market share... customers are trapped with long-term contracts that are often difficult to cancel. It's all about bringing in new customers, milking them and then moving on to newer challenges, such as finding more new customers. Not only mortgage lenders do this; publishers, gyms, telecom providers... everyone alike! Prospects are given priority. The old economy assumes that it is a zero-sum game with only one potential winner: the stockholder.

The new economy is the economy of growth through retention. Concepts like personal branding, customer behaviour, customer needs, and customer share... the interaction with customers and hammering out mutually beneficial deals, with more transparency and more customer influence on service, products and price. No more contracts based on time, but on performance: Service Level Agreements at the customer level. The new economy assumes everyone’s a winner; it gives the customer precedence.

Admittedly, in the end it is all about creating shareholder value for the company. But you can only really do so when you start to take your customer seriously. The customer is the one who builds your shareholder value, nobody else...

Egbert Jan van Bel