Firstly, a MASSIVE thanks to all of you that have already bought your first edition signed copy of How To Be Rich and Happy. You’ve helped us ensure we put the book into the hands of a lot of people that couldn’t have otherwise afforded it. And for those of you that bought multiple copies, I could kiss you! I probably wont, but you know, just saying. If you haven’t bought one yet, stop messing around and get one bought now!
How To Lose Customers The AT&T Way
Depressed by my total inability to justify, even to myself, that I really do need an iPad, I changed tack this week and decided to upgrade my old iPhone even though there’s probably a new one due out this summer.
My current version is about 50 years old now and only has 8 Mbs of memory which means I’m forever messing about changing what I want it to download from iTunes. So off I trotted to the Mac store online to see what the cost would be.
When I entered my AT&T contract details it seemed the phone wasn’t quite as old as I thought it was, in fact I’d had it for just shy of 18 months.
No worries though, I spend $2,500 per year with AT&T so they’ll be keen to show me how much they love me and have me sign up for another 2 years, thus guaranteeing another $4k minimum of lovely profit and a happy customer prepared to spread the word.
They’d be fools not to, right? Er, not quite.
In fairness to AT&T they did start off by saying I was a valued customer and that I may qualify for a reduced upgrade price in October of this year. After those pleasantries were over with though they proceeded to try and rip the shirt off my back.
I was informed if I wanted to commit to staying with AT&T for another 2 years and change both phones, they’d require I give them $499 per phone as well as an $18 upgrade fee.
As I was staring at my computer screen in horror I was reminded of an interview I heard a couple of years ago with a guy that was head (or at least very high up) with one of the major US mobile carriers. I can’t remember which one, but to be honest, it doesn’t really matter.
He was asked a question about their high level of customer churn that invoked an answer similar to this one:
“When somebody signs up for a 2 year contract with us, we know in we will quite probably lose that customer at the end of the period and we don’t really mind as long as we don’t hear from them in the meantime”
I can’t remember what I was eating/drinking/playing with at the time, but I’m sure I would have choked/spat out/ceased playing with out of sheer surprise.
Was he being serious? Was he high? Was that gravy on my crotch?
What he was saying in essence was he didn’t mind churn as long as they didn’t have to invest more money in customer services to keep the people who paid his wages happy.
Churn is the process of customers moving from one carrier to another each time their contract expires and sometimes even before that time. It is a huge issue for a lot of industries such as the financial sector with credit cards and mortgages, the flight industry both short and long haul (although air miles have minimized this to some extent) and of course cheese manufacturers.
The reality is, churn is what you get when you don’t look after your customers properly, it’s not a fact of business life.
One of the reasons why US cell companies struggle to hold on to their customer base, is because every single one of the major carriers has a less than stellar record of customer service.
What happens is that after 2 years of being used and abused, many people go looking for another phone company tempted by the new sign-up deals and just hoping and praying their experience will be better moving forward.
Anybody that has worked in the corporate world for more than 6 hours knows that it’s cheaper to retain a current customer than attract a new one. We’re not talking fractions here either because depending on which set of stats you want to believe, that figure is between 5 and 9 times cheaper!
Bearing that in mind, what stops the CEO of one of the largest carriers standing up at the annual shareholders meeting and making an announcement like this?
“As from January 1st 2011 we’re going to bring all our customer service operations back in-house. We’re going to make a point of becoming a company that is known across North America and then Europe as the best for customer service.
We’re going to treat our customers with respect and we’re going to start to build life-long relationships with both private and corporate clients. We know that people don’t really want to move carriers and go through the grief of porting or even sometimes changing their number, being credit checked and changing payment details with their bank.
So we’re going to offer our very best deals to people that renew their contracts. We want to recognize their loyalty to us, not penalize it. That is how we feel we can grow the business by developing an actual win/win scenario rather than just talking about one.”
At this stage my guess would be that all the shareholders are nodding in agreement and looking excited at the thought of owning stock in a company that is about to rule the world, or at least the telecoms world. Then the statement would continue:
“We understand that to carry through on this ambitious and worthwhile plan there will be some short-term pain. We’ll have to invest in people and infrastructure like never before”
Audience: Murmur, murmur.
“That may well mean that there will be no dividends…”
Audience: MURMUR, MURMUR.
“..for the next 2 years and we may actually see a drop off in stock value as we go through some difficult restructuring”
Audience: String the bastard up. Kill him! Who’s got the rope?
At this point the stockholders and investors storm the stage, insert a spike up the arse of the CEO and march triumphantly down the street holding aloft a rather uncomfortable, distressed and red-faced CEO.
So what went wrong? It seemed like everything was going swimmingly until the CEO announced a short-term hit.
And there you have it in a nutshell: A short-term hit.
It seems to me that businesses are driven, or more accurately paralyzed by short-termism. They want results now because stockholders and investors want results now. They’re desperate to keep their stockholders and shareholders happy because they have the power to take away the jobs of ambitious, brave and long-sighted CEO’s.
Consequently, ambitious, brave and long-sighted CEO’s are about as widespread as original quotes on Twitter.
I understand that short-termism is a difficult cycle to break, especially for large publicly owned companies. It often requires a change of mindset, investment and the willingness to ride out a storm.
However, as we (hopefully) start to emerge from a worldwide recession is there a more sensible long-term option? In fact, is there any other option whatsoever for big business?
It’s easy to say twas ever thus and it will remain so and maybe that is the reality, but I doubt it. Perhaps I’m just a naïve fool, but I think there are signs that subtle changes are occurring with the balance of power starting to shift back toward the consumer.
Bloggers and Twitterers like Jeff Jarvis, Chris Brogan, Gary Vaynerchuk et al wield real power and exert genuine influence. Whether it’s enough to alter the course of behemoths like AT&T at this point in time is unclear. If it isn’t, then I see their short-termism as guaranteeing only one thing, a dubious long-term future.
If I’m being honest, I’ll probably stay with AT&T because I like my iPhone and they have the monopoly for the time being, but if/when that changes I’m outta here.
I’d love to know if you have any examples of big business’s other than the new guys on the block like Google, Amazon and Zappos adopting a long-term approach.
Tim Brownson is a Certified Life Coach and has been unsticking people and helping them reach their true potential since 2005. If you would like to know how he can help you
A couple of businesses that come to mind (and for full disclosure, I’m an investor in both).
1 – Berkshire Hathaway (Warren Buffet). His annual reports basically embody what you wrote above.
2 – Netflix. From what I know of the company, they have a long-term approach with both their customers AND their employees. Although technically, this is a new kid on the block as well.
And to a certain extent, Texas Instruments also has a semi-long term approach (not an investor in this).
As to whether things will change, I doubt it. As Sir John Templeton once said, “The four most dangerous words in investing are ‘This time it’s different.’”
@ M – Interesting you mention Netflix. I used to love them, but recently have got so fed up with waiting long periods for in-demand moves and also the fact that they don’t keep their new movie section updated. I often go to Blockbuster to see what’s out and then back to Netflix to order!
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While you did list them as “new,” Amazon has proven to have amazing customer service for me, sending me not one but two replacement Kindles when mine had a problem, before I even had shipped the other one back.
A more long term company that embodies this is the Ken Blanchard Company. Not only do they invest in people and customers, they empower their employees to take care of their customers without having to go up the chain to get an answer. That has always impressed me with them.
@ Kathy – That’s really awesome and I’m glad you mentioned it. I’m not keen as an author on the way that Amazon treats me, but as a customer I am delighted with their service.
I’d expect nothing less from Ken Blanchard after all the guy literally wrote the book on a lot of this stuff!
Well, all the nagging paid off, Tim!! I placed my order for 3 copies (one for each of my adult kids) PLUS I have the ebook (mine!!)… purchase, printed and already dog-eared, underlined, highlighted, wept over, smiled through, coffee marked – and life-changing. Thanks!!
Hey Tim, you’l be saddened to know that it is not only US telecoms that have this mentality (and really crappy customer service).
I know a few local businesses that are big on the long term relationship issues (and consequently get repeat business… including going back to them even if they are on occasions slightly more expensive than a competitor for an item I want, because I know that the value extends beyond the item)
I would love to be at an AGM where a CEO delivered that speech… and I would throw my hard earned dollars at the company knowing that in the medium to long term they would deliver far greater ROI.
Go get em TIM
There are a lot of good companies out there who do take a long term approach. Sadly the utility companies, with very often overly powerful positions, or even monopolies, are less inclined to play along. I think the situation with utility companies in the UK right now is one of legalized, daylight robbery. The watchdog has no teeth, the government seems powerless, and meanwhile people are being ripped off on a massive scale. E.g. waiting until after the worst of the Winter before bringing their prices down, when by rights those prices should have come down much earlier in line with drops in wholesale prices of gas. Unfortunately the whole system is worsened by lack of information, clarity and transparency in the process. The phone companies are not much better as you’ve alluded to. BT is often a nightmare to deal with. I’ve also tried working with Talk-Talk, but never got to actually switching to their service due to their staggering incompetence. But honestly, I cannot wait for the day I can ring BT up and tell them to take a hike. I am praying for a decent alternative in my area!
There I feel better now! :)
@ Roz – A big cyber kiss and hug coming your way ;-) Thanks a lot.
Check out the next post on HTBRAH later today because there is something for people that have bought the ebook. Going to see if I can get 4 to you if they’ll fit in the damn evelopes.
@ Mick – I’m not saddened as I’m an old cynic. A tad surprised that you guys aren’t ahead of the curve somewhat. May it’s just human nature?
@ Tony – You can’t beat a good rant can you? ;-)
But isn’t ATT losing its monopoly soon? Like the end of the year? If they don’t do something now to retain their iPhone customers, they will surely lose them as soon as Verizon starts stocking iPhones, because Verizon has much better coverage. If I was an exec at ATT, I’d be giving you a free upgrade.
Oh, let’s see, you want an iPad for business. Here’s how this is going to work. You load How to Be Rich and Happy onto your iPad. You take your iPad with you everywhere you go… coffee shops, the library, the dog park, the local strip joint, etc. You play with it. People gather around you and ask questions like, “Is THAT the iPad?” You say, “Well, as a matter of fact it is. Would you like to see what it’s like to read a book on the iPad?” They say, “Yes! Demo! Please!” You pull up your book. You show them. It’s a part of your marketing plan, sir. A total business expense (ie TAX DEDUCTIBLE).
Although, “it will make me seem cool” is a great reason, too.
Perhaps you should think about the strategic implications and ask the question – did the CEO have a long term strategy which was going to work. I could re-phrase the strategy as ‘I am going to build the most expensive infrastructure in the industry and then charge the lowest prices’.
The real question is how to compete in a market with little product differentiation, which is highly price sensitive and although people say they want service their behavior suggests that this is not the case – not sure you addressed this – obviously we all have ideas.
I am as frustrated as you at the extremely poor service levels; your blog sounds like me on a bad Telco day.
That’s exactly why big corporations are useless – they dominate their part and have sooo many customer that they don’t have to give a crap about them.
It would be so easier rocking this business if you actually CARE about your customers and offering them special services, especially if they’re long time customers.
May the vanish into oblivion ;)
@ Alisa – I had heard they might but didn’t know it was confirmed. I sure will be holding fire if that is the case. You see I could already be signed up again for 2 years instead I’m looking forward to the end of my contract.
I’ll get the iPad ordered as that makes perfect business sense. Where do I send the invoice?
@ Andy – I think it’s exactly the reason that there is so little differentiation that means a cell company with outstanding customer service could hammer their rivals. I understand I could be being naive, but I don’t think so.
Just reading these comments I feel that I should be asking you guys to walk a mile in their shoes. A lot of moaning, but no real ideas (except ‘love your customer’ which is a bit shallow).
The reality you have to think about is what your customers really want (which may be different to you) and actually test and research it.
I feel your pain; actually probably a fair bit more that you guys have; but don’t share your optimism that given ‘a free i-phone to shove’ you won’t all go with the free i-phone.
Have a moan, feel a bit better, however it would be nice to get some fresh ideas………………but don’t look at me.
Actually looking again I think that Tim just proved my point – crap service and he ordered again (because it made perfect sense) and then suggested that great customer service (whatever that means and whatever the cost implications) could be a great strategy.
I think we should get real about things and (if we are smart) work out how to have a balanced competitive strategy.
Great chat………
@ Mars – As new companies rise to the top that are customer focused I think they will although maybe not any time soon.
@ Andy – Actually I didn’t order because of crap service and if they lose the Apple contract I WILL move, so not sure what you’re saying.
Where I live I only have one source of electricity. I either buy from Progress or sit in the dark. I only have one source for the iPhone at the moment and that is AT&T.
Things change and as Alisa said they may be losing that contract and along with it hundreds of thousands of pissed off customers.
The solution is don’t treat your customers like shit or take them for granted.
That is a solution that has made Zappos the fast growing company in the world. It’s a solution that has me buying from Amazon even though as an author I’d rather not, and a solution that means I never even check other car insurance company rates when it’s renewal time because of the awesome CS I get from Progressive.
Unfortunately your story doesn’t surprise me – I’ve had similar experiences with AT&T, Verizon, and many other companies large and small.
What does surprise me is how these guys still survive. If you follow Seth Godin or Gary V or Tony Hsieh, you’d think that if you are great with your customers you’ll be rolling in money. And if you aren’t, you’ll be out of business – especially with the intense level of competition that exists in the world today. BUT IT JUST AIN’T SO. Companies seem to make money while treating their customers like shit quite regularly. And I run into plenty of businesses (in the small business space where I work) that kill themselves for their customers and struggle to make ends meet. As both a customer and as a business owner and consultant, it is frustrating but true in my experience. Marketing, sales, market positioning, pricing power, and other business/market factors seem to often be more important than how you treat your customer.
On a positive note, INGDirect is a great company that I’m always happen after dealing with their customer service – which is infrequently because they’re so clear about their service and it is so well designed (I have savings and a checking account with them).
@Andy . . . it’s called a MONOPOLY! It’ the ONLY reason AT&T is doing as well as they are. “Crap service” is the only choice if you want an iPhone. And BTW — AT&T’s crappy service extends WAY beyond their cell service. I’ve logged over 21hours in the last 6mos on the phone with AT&T as they have REPEATEDLY screwed up my internet service. Oh — and the ONLY reason I’m still with them is I live in a neighborhood where no other company has run fiber of cable.
Re: Apple & AT&T — it’s really funny how Apple is known for great support and AT&T the opposite. Can’t wait for Verizon to open up the competition. Enough of the AT&T “exclusive deal” already.
@ Shaun – I think it’s somewhere in the middle to be honest. Companies that are firmly established are always going to be difficult to usurp, but I think we are seeing a higher level of customer support on the whole from new emerging business’s.
There will always be those that are crap and succeed and brilliant and fail, it’s just how it is I’m afraid.
@ John-Paul – Agreed!
If AT&T must have to take some actions about this issue otherwise day by day amount of customers of i phone will be decreased.
Hey Tim,
Fabulous post- as usual. I want to recommend that you read Slow Money by Woody Tasch, if you haven’t already. it takes the long-term approach to a whole ‘nother level. One badly needed in our broken, dysfunctional, dying economy.
Just to be cheerful on a Wednesday morning, y’know?