The rule of thumb says that it is 6-10 times more expensive to win new customers than it is to retain existing customers (more at Wikipedia). So you’d think that any sensible company would make sure there existing customers don’t get disgruntled, annoyed, or even begin to consider that better options may lie elsewhere.
My favourite company (!) Virgin Mobile has just released a Free to V service. As you’ll no doubt guess from the catchy name, the service gives you free calls to other Virgin Mobile customers. As someone who’s recently joined Virgin’s service (and someone who’s always up for a bargain), I thought I’d call and enquire as to how I can get in on this deal.
Upon calling the lovely Virgin Mobile call centre, I was informed that this “great deal” is only available to new customers. Surely a strategy that encourages new customers (who are 6-10 times more expensive to attract) and at the same time annoys existing customers is the work of a very special mind.
If Free to V is a loss leader to attract new customers, and if the loss is so prohibitively high that they don’t want to offer it to existing customers, this strikes me as a risky short-termist strategy. Maybe new customers will increase, but the retention rate for existing customers will surely go down.
I can understand how a strategy like this got signed off, but I hope that a strategy based on frustrating your existing customers gets them what they deserve.
I want to state that I have nothing against Virgin Mobile per se – and I actually kind of like the general Virgin brand and the way it has expanded and follows me around the world. But come on Virgin Mobile Australia – this isn’t a joined up customer experience strategy.