Especially service providers invest a lot of money in customer loyalty programs, assuming that long-term customers are good for the company. Because of that myth, customer churn and customer retention have become key performance indicators with service providers; budgets and resources are allocated based on those figures and most marketing campaigns are set with the goal to keep customers as long as possible with the company’s services. This paradigm is so strong and unchallenged, it seems worthwhile to have a look at how well all this loyalty money is really spent. While it is certainly important to keep paying customers that contribute revenues to your company, this post focuses on the profitability that long-term customers generate compared to not so loyal customers. We also look at this mainly for settings where a service provider has … Read more
Customer satisfaction is valued highly in almost every commercial organization. Especially large firms spend an enormous amount of money on customer satisfaction programs. Therefore, an important question is: What are the benefits of customer satisfaction for the supplying company? A common assumption is that satisfied customers are more loyal in the sense that they stay in a longer relationship with the supplier. However, marketing research has proven that this linkage is not always so strong and that it largely varies by customer segment and industry. Therefore, vendors and service providers should not rely on such effect, also because the stand-alone value of customer loyalty is not very clear as I will outline in one of my future posts. A much clearer benefit of customer satisfaction seems to be a positive effect on willingness to pay … Read more
Customers typically use reference prices when making purchase decisions. It is very hard, if not impossible, for anyone to assess the absolute value of a product, service or solution. Therefore, customers compare the price with alternatives. Such alternatives can be other methods of solving the same problem or they can be competitive solutions from other vendors. But customers also compare prices with previous prices, special prices or standard list prices. Therefore, once you set the right pricing based on the value of your product, the question is if new customers can be won and revenue can be increased by offering price promotions (also called price frames). There is an interesting study by the US Office of Fair Trading, conducted by the University College London. They investigated how customers react to various promotions. Even though it … Read more
As rumored this week, Google and Verizon are close to reach an agreement that would allow Google web traffic to be prioritized by Verizon. Since carriers and network operators have been re-enforcing their activities to get Internet content providers like Google, Yahoo, etc. to pay for the usage of their network, the discussion on the so-called Net Neutrality has risen again. In general, Net Neutrality means that carriers, network operators or in general Internet access providers (and not, as often stated, mere service providers), which provide users access to the Internet, should treat all content equally in terms of access speed and load performance. (Note: To make my point clear, I will use the term Internet access providers in this article, commonly they are called Internet Service Providers). This concept is mainly related to web … Read more
