Missed Calls – Customer Disloyalty Programs from Telecom Companies
A fundamental tenet in marketing is that you should reward customer loyalty. In fact, loyalty programs are an important pillar of competitive advantage and profits for airlines, hotels, credit cards and retailers. The more you fly with an airline or the more nights you stay at a hotel, the better they treat you. This makes perfect sense.
But not in the telecom and utilities business, which has it all backwards. They reward customer disloyalty and their customer loyalty programs are customer hostage-taking programs! Let’s take a look at Comcast, a leading voice, data and video provider. They advertise their Starter XF Triple play bundle at an introductory rate for $99/month for the first 12 months. After 12 months, the monthly service charge jumps to $114.99 for months 13–24. After 24 months it jumps again to $129.99/month. So if you stay with Comcast for more than 24 months, you are rewarded with a $30/month penalty for the rest of your life! And the agreement comes with a handcuff of 24 months to ensure that you don’t run away. No worries, though. After 24 months, you can switch to AT&T U-Verse, which has a similar introductory offer only for new customers. And then you can switch back to Comcast! Wireless carriers have similar asinine pricing plans that reward hopping and switching. So the Belief Project from U.S. Cellular, which actually rewards you with points for doing more business with them, comes as a breath of fresh air.
I wonder when people at telecom companies will figure out the difference between a loyal customer and a hostage. And I also wonder when they will figure out that rewarding customers for leaving you will increase churn, especially when many of your loyal customers are really hostages. When will we see “old customer discounts” from Comcast or AT&T? I’m not holding my breath.
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The iPad: In the middle (of nowhere)
Not even 24 hours since the announcement of the much-hyped iPad and much real and virtual ink has already been spilt. Here is my two cents. I think the iPad is aimed squarely at the center – of nowhere. I’m trying to understand the scenarios where the iPad does something that other devices we own (including Apple’s own iPod Touch and iPhone) don’t do well enough to justify the price of the iPad. Further, I struggle to come up with scenarios where the iPad will be a complete substitute for either a laptop or a netbook or a smartphone. And I’m forced to make a heretical statement – I’m sorry, Mr. Jobs, I think you messed up on this one. The iPad, in the final analysis is either a) an oversized and overpriced iPod Touch; or b) a Netbook/laptop substitute wannabe that is marvelous at content consumption but is nowhere as good at content creation. Maybe Apple will conjure up a market of people who don’t own iPhones or iPods or iMacs or Netbooks or laptops, and are willing to pay a hefty price for an admittedly gorgeous browsing experience. I’m not sure there are too many people like this left. When Apple did the iPod and the iPhone, they created truly breathrough performance, design and usability that reinvented the categories these devices participated in. But with the iPad, Apple is trying to create a new category, a much more difficult task. There is a hole in the market between smartphones and netbooks, and it is a hole for a reason.
And then there is the TCO (Total Cost of Ownership). If I take the median hardware device (32GB) and add in the 3G coverage (without which the mobile value proposition of the iPad is seriously compromised), I am out $729. If I add the umlimited data plan from AT&T (the 250MB/month plan isn’t enough if I want to watch movies), that’s $30/month additional. Over a 24 month period, that’s a TCO of almost $1,500. I’m sorry, Mr. Jobs, did you realize that 10% of Americans don’t have jobs? Apple is trying to make money on ALL three elements of the business – the hardware, the connectivity and the content. Amazon swallows the connectivity fees, and the iPod Touch doesn’t require a data plan.
What’s the outlook for the iPad? There will be long lines on the day it becomes available, because a million or so die-hard Apple fanatics will buy anything Apple puts out, even if it is a brick. Seduction and lust is a powerful emotion and it will drive sales for a while. Once the early adopters have forked over their money, the rest of us will start to ask difficult and incovenient questions about the value relative to the price. And Apple will be forced to make some drastic adjustments to the pricing and the connectivity fees. The iPad won’t be a failure, but Mr. Jobs, this is no iPhone.
Then again, as Richard Bach notes in the last page of Illusions - “everything in this book may be wrong”. And so may everything I have said. After all, Jobs is the brilliant billionare, and I’m just a modestly-paid academic!
The Death of Fidelity
As I survey the landscape of digital media, I find an interesting paradox. Digital technologies have revolutionized the convenience and cost of listening to music, watching videos, and keeping in touch with people. Digital music, digital video, digital mobile devices and digital social networks have become part of the fabric of our lives. We live in a world that is immersed in iPods, iPhones, BlackBerries, Facebook , Twitter and text messages. But for every step we have taken forward in convenience, we have taken a step back in quality and fidelity of our experiences.
Consider music. We began listening to music on amplifiers that used vacuum tubes and media that were recorded on vinyl. It was a hassle, it was expensive. But the quality of sound was superb. Even today, the purists swear by LPs and valves in their search for the perfect listening experience. Then we “progressed” to CDs that compressed the music, with a loss of quality. And then there was the iPod. It offered superb convenience and a massive 10,000 songs capacity, but only if you compressed the music into a poor facsimile of its original quality.
The same story applies to video. On the one hand, we have higher and higher quality of video recording and playback devices available. And yet, much of the video we consume today is the highly compressed videos on web sites and the grainy and poorly-shot stuff that passes for video on YouTube.
Our mobile phones are the same. We can take them anywhere and we can talk to anyone around the world. But give me a corded phone on a landline any day over the lousy sound quality and dropped calls that we take for granted with a mobile phone.
And so it goes for friendships. In the old days (“BF” – Before FaceBook – pre-2004), we had a few friends who we talked with, met face to face, had coffee with and hung out with. These were “high-fidelity” friendships – inconvenient and time-consuming, but rich and deep. And now, friends are like philately – we collect them as if they are stamps! My kids boast that they have hundreds of friends on FaceBook, and that they are in touch with many of them all the time, often many at a time. But I have to wonder about the depth and the quality of these connections. Do 100 text messages a day equal an hour of face-to-face conversation with a friend?
Don’t get me wrong. I’m far from a luddite. I welcome the advances of digital technology and the convenience it brings to our lives. But a part of me is saddened by the loss of fidelity that the march of technology has caused in our lives.
Now excuse me as I squint and try to read the Wall Street Journal on my tiny BlackBerry screen!
