Last month, I wrote about problems with the phone company that provides service to our home in the woods of Maine. If you don’t remember, the service is terrible and the process to get problems resolved is awful. In any case, we were in Maine recently, and saw a truck for a competitive phone company. I couldn't wait to call them. Though the call was quick and to the point, the customer service representative gave me the options and informed me that it was going to be at least a month before the service became available. When it is available, we will be switching to the new phone provider. Why? Because over time, I have come to absolutely hate dealing with the current telephone provider.
First, a historical point—30 years ago, the theory of customer relationships was, if you wanted customers for life, you needed to build in a high cost of switching. Then, you’d put your customers into a "gilded cage" where they would have no choices. That may have worked in the 1980's, but the companies that did that (IBM for example) have struggled to compete in the current world of new alternatives in technology and service. This once-strong telephone company has had 20 straight quarters of revenue loss and the stock is down 22% over the past five years.
Any time you rely on high cost of switching or lack of choices to lock in customers and charge them what you want, it will eventually backfire and it will hurt. Even if you are able to hold on to them, it will be the result of a “desperation play.” Your salespeople will be so desperate to hold onto the customers, especially the bigger B2B customers that they'll discount heavily to keep the business. The executives will wring their hands saying that their market is too tough for them to hold onto both revenue and profits. They will start sacrificing profit to hold onto revenue.
In the communications industry, the phone companies view their customers in the hinterlands of the country as guaranteed business. They feel as though they can charge whatever price they want and provide service at their leisure. Because historically, there has been no competition, they know those customers are locked in for life. But are they? In today's world of rapidly evolving technologies, alternatives for even the most remote customers are appearing.
Here's my bottom line: any time your customers hate you enough to leave, you are in trouble as a business. Your job as an executive is to back up and understand why they hate you and fix it as soon as you can. If you don't, you're whistling past the graveyard.
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