Customer Retention vs. Growth

A good friend of mine worked as a teller for Key Bank for over 6 years. He has since left, yet maintains a bank account there because he still gets some good perks. A huge issue arose when myself and 4-5 friends all received iPod nanos from Key Bank for opening a free checking account. He was upset to say the least. He has been a loyal customer/employee for over 9 years and doesn't have a nano to show for it. He is now considering moving on.

A similar issue comes up for me each time my cell phone service contract ends. I usually want a new phone after a year or so (I seem to drop mine often) and the phone companies will only give me a small discount on a phone because I am an existing customer. If I were to switch companies, or a new customer of theirs, they would give me a new phone for free. This makes very little sense to me. I remember hearing over and over in college that new customers were much more expensive to get than keeping existing customers. So why do these companies work so hard to alienate their customers? I don't understand, but I believe that this is one of the most overlooked aspects of customer relationship management in most companies.

I believe that a major reason for this overlook is the increased importance that sales departments have become in companies over the last 20-30 years. I haven't done any real market research on the matter, but here is one example.

To put myself through college I sold pest control contracts door-to-door for three summers. I worked 50-60 hours a week but had plenty of money and flexibility to show for it. The offices I worked in usually had between 15-25 sales reps and 8-10 technicians. The technicians worked from 7am - 9pm six days a week. They were payed much less than Sales Reps but worked much harder. The technicians are the most direct point of contact that the company has with the customers, yet they are paid the least. There are many reasons for this, but how important is it to have great technicians? How much of their training is on customer interaction? This was overlooked for the most part when I worked in the industry. Technician turnover was high and as a result customer retention suffered.

I don't claim to have the solution for the issues, but it is something companies need to consider and take a look at. Especially my phone company. My contract is up, I want a new PDA, what are you going to offer me? Sad thing is, probably nothing much.