Why treat new customers better than “loyal” ones?

The issue has been around for some time but it is worth asking ourselves how much damage brands are doing to themselves by treating new customers better than old ones. The reason for the differential treatment is obvious — it is simply hard to attract new customers and so the offer needs to be better to cut-through (non-customers tend to (a) ignore your promotional material, and (b) look for information to reinforce their existing choices). That said, are companies making it easier for people to leave (e.g. stop acting loyal) by exposing them to messages aimed at non-customers?

Now it should be recognized that encouraging people to try or sign up for a product or service with a promotional price is a common practice in everything from airline seats, to hotel rooms, to personal services and some of these offers probably don’t offend existing customers. But some certainly do.

This was hammered home for me when considering my cell phone contract — a long three year one! That said, my provider has graciously offered to upgrade my hardware (for a fee) if I sign on for a new three year term (the old contract will be terminated). Since I have 6 months left on my contract this is intuitively a great way for me to get a better phone and for my provider to guarantee my service renewal.

The rub is that my fee for the upgraded phone is $100 and a new customer would get the same phone for $0. Why? It is the same phone. It is the same three year contract. It is the same service.

The customer experience with a brand is not just about the sales transaction and the product or service you receive, it is also about the broader relationship we have with the brand. Does it stand for something I believe? How would I feel about saying something positive about it? Does it treat me fairly?

In six months, I will likely become a statistic: an unrenewed contract. Someone, somewhere will wonder why I left. Was it the competition (e.g. price)? Was it unhappiness with the product or service? Was I looking for something else? It might not hit them, that they did not give me a reason to act loyally.