New vs. existing customers – who do you put your money on?

In business literature, we are used to reading about the costs of customer acquisition. And usually, these costs are pretty high, typically a lot higher than the costs for keeping an existing customer.

So, it is always pretty surprising to see how businesses treat existing versus new customers and what kind of incentives they offer. Usually, when signing up for a service for example, you get some kind of bonus, reduced cost, additional benefits etc. Once you are no longer “new”, your benefits are taken away. And only if these customers leave for another business are efforts made to win them back. Often at substantial costs once again. A lot of money spent to eventually get them, through marketing, promotion and sweet deals, then no money spent to keep them, and in the end no nice margins ever realized. It’s like sowing a field in the spring, watering it the whole summer, and when autumn comes, and it’s time to crop.. .. not being willing to do anything!?

Additionally, what does this do to current customers and their willingness to spread positive word of mouth? Not much. First of all, it doesn’t feel too good to know that new customers get a sweeter deal than the long time loyal ones. Rather, it encourages bargain hunters to constantly shift to new suppliers. Something that probably lowers margins and affects whole industries. Second, what is there to talk about? Average pricing? Average service levels? Average customer support?

Imagine instead a business that takes a cut in the substantial margins that long time customers often produce and give them piece of the pie? I bet they would get a feeling of being special. Wouldn’t that feeling, together with the unbeatable price, be something that these customers would be willing to talk about? Being a long time customer, who gets a great price, something that not everyone can get, is something people like to talk about. It’s scarce, and therefore valuable. We all want that. And if we have it, we are pretty keen on telling the world about it!

Or maybe give them a higher service level, more benefits, or priority in customer support? (sure, best of all, for all customers, is no phone queue or any other queue at all!)

A lot of businesses today are trying to fill a leaking bucket. The others.. .. a few… .. get this and just keep growing.

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