Encourage your customers to desert you … why don’t you?

Last week’s debate on energy costs and the recommendations by Chris Huhne [UK Secretary of State for Energy and Climate Change] for us to switch users really got me mad – why on earth would any sane business encourage its loyal customers to take their business elsewhere. When I’m helping my clients with customer care, I always start out with a recommendation that they work on customer retention.

All the evidence I’ve ever seen says that it costs more to get a new customer than it does to retain an existing one and even more to recruit one who has defected to a rival. Yet the strategy of the major energy providers [aided and abetted by the Energy Secretary] is to penalise loyal customers and reward those who defect.

I’ve just seen exactly the same strategy in play with my car insurance providers – my policy was due for renewal at the weekend. Last year my insurer quoted a renewal premium which was eye-watering! So I visited a price comparison site and I eventually got a deal with a reputable insurer for just over a third of the quoted cost. This year, my insurer’s renewal quote was higher than last year’s premium but the increase was less than I had expected from stories in the press.

I got a reminder from the price comparison site so I submitted a request and got three surprises:

  1. My renewal quote was about 15% over the lowest
  2. The company I was then with offered me a lower priced deal via the price comparison site!
  3. My previous insurer offered the third lowest price [and included an introductory bonus!]

All this with no changes to the conditions, same car, same record, same job etc.

My next surprise was when I phoned my insurer to ask if they would do the renewal at the price I’d obtained over the internet – but they wouldn’t honour the offer, so I’ve got a new insurer now!

So three questions for the insurance and energy companies:

  1. Why don’t you just offer your current customers the best possible deal?
  2. Why do you encourage them to check out your competitors’ offers?
  3. How much does it cost you to process all of these changes?

When I work with customers I recommend that they focus their attention on the “3Rs”:

  • Repeat Business
  • Referrals
  • References

Give it a try! Building customer loyalty works for me and my customers and is the theme of this upcoming conference: Loyalty Beyond Reason

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