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Loyalty Is A Disease Of Dogs

Last week, I happened to meander into my bank (I had a check to deposit) and they had a big promotion going on -- some really cool gifts for for people who opened new accounts. Well, OK, not really cool gifts, but nice little trinkets. I asked the teller how an existing customer could get one of those.

"You could bring in a friend and have them open a new account, and then we'd give you both one."

Now, when I opened my accounts with this bank, they weren't offering any kind of promotion or giveaway or anything. I felt a little left out, and mentioned this to the manager. He repeated the "get a friend to sign up" line. I wondered if I closed out my account and then re-opened it, would that qualify me for it?

It was an empty threat; it would require me to fix my direct deposit from work and get all new checks.

But it brought up an interesting point: why do so many businesses bend over backwards to get new customers, while taking for granted the existing ones?

It's always been a tenet of business that an existing customer is more valuable than a new one. Keeping long-time customers happy and productive and spending is not only easier than landing all-new ones, but more profitable -- you've already achieved the hard part of convincing them to give you a whirl. Plus, really happy customers tend to be great sales tools, as they will cheerfully recommend you to their friends and associates.

Yet they tend to get the short end of the stick when it comes to promotions and special deals. How many times have you heard these phrases, or ones like them?

"This offer available to new customers only." (Comcast is a great one for that line.)

"This is a special offer for first-time buyers only." (This one is big among car dealers.)

"Special financing for first-time home buyers."

"10% off your first purchase when you apply for a new charge account."

Some times, if you really push it, you can get them to give you the same deal as a new customer. But you, a long-time customer who's given them plenty of money and business over years, have to fight to get the same treatment they'll give some schmuck who just wandered in off the street.

I understand the pragmatic message behind them. Yes, new customers are great, and a necessity. Yes, you need some kind of gimmick or reward to offer them to get them to give you a whirl. But by sending the message that you value them above your existing customers, you encourage your own regulars to take advantage of similar offers among your competitors, and bounce back and forth, collecting "new customer rewards" over and over.

I know I've considered, on several occasions, taking fifty bucks or so and just bouncing it from bank to bank, picking up whatever free gifts each bank offers and then closing out the account once my minimum obligation has been met and another bank has a new freebie I'd like. Fleece blanket here, tote bag there, pillow across the street... (But not toasters any more, it seems...)

And if they ask me why I'm closing out my account, I'd tell them straight to their face: you offered me some cheap trinket, and I took it. Now someone else is offering me another one, and you've made it clear that you're more interested in getting new accounts than keeping them, so I'm outta here. Maybe, when you offer me something else to come back, I will. For a little while, at least. Until someone else offers me something shiny again.

That's the logical conclusion of all these programs, after all. And I don't think I can change it, so why shouldn't I just join in and take advantage of it? Why shouldn't everyone?


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Comments (21)

This is one of those things... (Below threshold)

This is one of those things that has irked me for a long time. These "deals" are always for an introductory period too. After that they have no qualms about putting the screws to you.

But recently our bank actually had the presence of mind to reward us, long time customers. They had often offered low interest home equity loans to "new" customers, but someone in their ranks had the terrific idea that it might be a good practice to make some attempt to keep their long-time good customers. They actually called us at home and offered to lower our current HELOC rate with them. We were delighted and I told them that they were exactly 24 hours away from losing our loan to a bank who offered us a much lower rate as a "new" customer. We were merely awaiting the overnight loan package. To make doubly sure they kept us they offered to lower our rate to .5% under what the other bank offered.

I'm still in shock.

Your right and Comcast or D... (Below threshold)

Your right and Comcast or DSL are the worst for the 6, 12, or whatever month deal that only a new person can get.

I think you answered your own question though. They knows that in today's busy world it is a pain to switch so the reward is for making that effort. Your bank knows that and knows that, unless you do the $50 plan you mentioned, it really isn't worth it to switch if you don't have a problem with them.

[Oh, and I did check that Email address (mentioned in previous post) and I was getting a ton of spam so I tried to change to a new one but then I couldn't post here. The new comment editor said I should go back to the typekey login.]

check out how Lowes is keep... (Below threshold)

check out how Lowes is keeping current customers hsppy ... when you make a purchase they incluse a $10 off your next $50 purchase coupon on the receipt ... 20% off ... not bad ...

While I understand your poi... (Below threshold)

While I understand your point that many businesses court new business over old, car dealers often have special rates/offers returning buyers or loyal customers.

It has been my experience, however, that the smart retailers will honor the new customer offer when I press them. Banks, it would appear, aren't that smart.

Jay Tea: The trinkets and i... (Below threshold)

Jay Tea: The trinkets and incentives could be "loss leaders" for the bank. In retail, a loss leader is some item priced at little to no profit,( or in some cases a small loss, to get people into the store, where presumably, they'll buy additional items to give the store a net profit.

To turn the loyalty meme around, why should you expect your bank to serve you at no profit every time they provide incentive to try to grow their business?

It is a given in the industry that it takes more time effort and cash to get new customers than retain the old. That's no excuse for neglecting the customers you have, but it's a little unrealistic to expect the bank to match every deal it makes to attract new customers, for their existing customers.

FYI: Last year, what is now... (Below threshold)

FYI: Last year, what is now my bank, offered $150 ipod nanos to new accounts. I really like mine! (It was also considered taxable interest.)
Does your bank make enough off the fees and interest it currently charges you to gift you with an ipod and still make a profit? If not, should they raise the fees and then give you the toys?

Multiply $150 (or the wholesale price) by the number of customers they have and figure out what services they have to curtail or fees they have to raise, to match the promotion and still keep the doors open.

Or maybe, they could afford to do that one time, if the account was profitable for them afterwards?

Jay, I have replied to y... (Below threshold)

Jay, I have replied to your comment here. It is way off topic on this post and it is not my intention to elevate any conflict, just FYI. Thank you.

Link didn't seem to work, s... (Below threshold)

Link didn't seem to work, sorry. Here is the link:

Well, the other way around,... (Below threshold)

Well, the other way around, in at least one case. Been with the bank 25 years. They offer an incentive on that anniversary. .5% off you next car loan or something else, I forget which. I was already gearing up to by a new car when that came in, so I did.

My husband sits on the boar... (Below threshold)

My husband sits on the board of a bank. New customers, old customers...it doesn't really matter how you get them or keep them. It only comes down to the bottom line...do anything to earn more money than last quarter!

Certainly businesses are "in business" to earn money, but when is enough, "enough"?

I don't know if great service is enough to attract customers any longer...or if it has been so many years since a company has really provided great service, today's customers don't know what it is to appreciate it?

When I was a teenager in th... (Below threshold)

When I was a teenager in the 1970s I used to do exactly what you describe, with a mail-order book club that offered a bunch of free books for first-time joiners, provided you bought a minimum number during the year. I joined under one version of my name (say, first-name last-name), bought the minimum number, cancelled, rejoined under a slightly different but still accurate version of the name (first-initial last-name) and same address, bought the minimum number, cancelled, rejoined under yet another different but accurate name (first-initial, middle-name, last-name), etc., etc., etc., all of it perfectly accurate, and kept on until I got tired of that subject, bought the minimum under the last membership, and cancelled.

In the early 90's I bounced... (Below threshold)

In the early 90's I bounced around with long distance providers. Everytime somebody would call with a better offer, I'd switch over. Kept my own phone number (only long distance changed) and picked up a little cash, and other sundry incentives. I don't think any of those companies truly made enough off of me to make it worth their offort. After a while I tired of the game and kept with one provider based on low overall cost and service.

Your right Jay. They should... (Below threshold)

Your right Jay. They should gift their existing customers at least the same as any new ones to be wise. Dont You just love those monogrammed pens and key chains that sit in the glove box and get all scratched and dirty?

I am a very long term Dish ... (Below threshold)
Ruth H:

I am a very long term Dish Network subscriber and I've been tempted to go to DirectTV for that reason. I get offers in the mail from Dish Network and DirectTV that are better than I am currently getting but I cannot get DishNetwork to honor any of those offers. I have used them for over 12 years, I live in the wilderness so that is my only television, or broadband option for computer use. I am really tired of the promotions I am not allowed to have.

Agree. I've been a Comcast ... (Below threshold)

Agree. I've been a Comcast internet subscriber for 6+ years (approx. $2500-$3000 total)...have been quite pleased, overall, with the service. Given the rampant Comcast-bashing that exists out there, one would think that my continued happiness and loyalty (FiOS is coming!) would be worth something. But no. While they've offered various 50%-off or better deals to new subscribers, I've been paying $45-ish per month, every month, since May 2002. When FiOS knocks on the doors of Comcast's customers, Comcast will have to either improve speeds, or reduce prices. Otherwise, I predict a "customer hemorrhage" to Verizon.

New Customer Only offers ar... (Below threshold)
Dave A.:

New Customer Only offers are insulting. They communicate that the business prefers a pig-in-a-poke to a known, reliable, bill-paying customer.

A suggestion: Speak to the branch manager (or equivalent - someone with decision-making authority) and give him/her the opportunity to tell you why you shouldn't take your business elsewhere. You don't have to threaten to leave, just tell them you are considering your options. Then sit back and see how smart your bank is.

That worked for me with Time-Warner Cable when I was considering DirecTV. They magically found a Special Rate for me that was even slightly better than the rate for new customers.

With Scumcast (aka: Comcast... (Below threshold)

With Scumcast (aka: Comcast), we call them up every 4-6 months when they have some new customer offer and say, in so many words, 'give us the price for X service, or we're switching to DirecTV'. They've met our demands every time. (Sounds so sinister, doesn't it?) The wife is a master at negotiating them down.

In my company, we don't give new customer incentives precisely because it cheeses off the existing customers.

And Jay nailed it with this truism:

Plus, really happy customers tend to be great sales tools, as they will cheerfully recommend you to their friends and associates.

Newton's First Law... (Below threshold)

Newton's First Law


A customer will stay a customer unless acted upon by an outside force.

Jay, you answered your own ... (Below threshold)

Jay, you answered your own question.

"It was an empty threat; it would require me to fix my direct deposit from work and get all new checks.

But it brought up an interesting point: why do so many businesses bend over backwards to get new customers, while taking for granted the existing ones?"

Because it's such a pain to leave you will stay with them. It's a business concept called "Forced Loyalty" and there are strategies for employing it like any business. It's not entirely different from a "supply and demand" base economics.

The bank is looking at it from a the point of view of: "How much can we afford to give away to attract new customers and grow revenue without risking losing existing customers and revenue?"

Think of it as "How much can I charge for an item before the customer is lost to a competitor?"

My guess is the projected revenue lost by offering the same trinkets to existing customers was too great to justify it. They needed to grow customer base. There is a back handed appeal to existing customers by offering the same deal via a "bring a friend". The pure business decision was that they could afford to give the gifts to new customers because of the money brought in by the new customers--a loss leader as someone mentioned previously.

What would they gain by offering you the same thing? You were already a customer and it's not likely you would have increased your money or use of services by getting the trinkets. It was also too difficult for you to transfer your assets.

Let me ask it this way. Suppose the bank across the street offered you a new account with the exact same incentives as your bank offered--would you switch?

Suppose they offered adding an additional $100 to your account to switch? Worth the pain now? How about $250? Get my point?

It's not an issue that is right or wrong. It's just straight up business and market forces--something I've come to think you appreciate.

1) I would suspect that a ... (Below threshold)

1) I would suspect that a customer that can be "bought" by a cheap trinket is going to be a cheap (not particularly profitable in the long run) customer. If there's a need for increased growth numbers for a loan or sale offer, reason to placate shareholders, etc., someone to pad their resume with "increased customer base in two months by 15%" or a need to get a promotion, they'll waste the company's money and time on the gimmick.

2) I look beyond the immediate "I want it" response when something "free" is offered. Its never free. I try to look for businesses that DON'T use such gimmicks, looking to see if they use service and value as a customer draw and maintainer. It is too much of the "let big brother do it for me" mentality to try to plunder paraphernalia. I'm not going to whine about an offer for new customers for a service I'm using. I hope that their money will keep prices for me down, or at least from rising faster than they might otherwise go. In the case of Comcast, I use basic cable and internet access only, which rarely has a special so I don't feel left out, and only grin at all the suckers paying 2-3 x's the amount I do for entertainment.

3) If someone regularly does offer such goodies or breaks that offers a service I am going to use anyway, then I do try to time my actions to take advantage of the offers. If that cost is already built into their service, I might as well take advantage of it.

4) I grimace when an offer opens up right after I've bought something or signed on for a service. Its part of my Buy high, Sell low karma. However, if never hurts to go right to the top in customer service when this occurs. Its surprising the number of times you'll get grandfathered in to create goodwill. If not, C'est La Vie.

I've had the experience of ... (Below threshold)

I've had the experience of not being able to get through to tech support. I then hit the "open a new account" choice in telephone support hell and got straight through. I expressed my disappointment to the operator. I was not the only one because that choice disappeared after a while.






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