By The TV Answer Man team
TV Answer Man, can you explain something to me? Why does DIRECTV and other companies like Dish give new customers a bunch of benefits to sign up? What about their subscribers who have already signed up? Shouldn’t we get something for our loyalty and to keep us as customers? This really seem unfair and stupid. DIRECTV just gave the NFL Sunday Ticket for free to new customers but squat for us current customers! — Hal, Los Angeles.
Hal, that’s a great question. DIRECTV and Dish, and many other companies in and outside the TV industry, offer incentives for new customers to sign up. For example, DIRECTV is offering $400 in Visa cards to offset the cost of an NFL Sunday Ticket subscription and Dish provides a three-year price lock to new subscribers. But the two satcasters did not give the same benefits to existing customers. They do occasionally provide retention perks to loyal customers, but it’s more random and far fewer than what’s given to new subscribers. Why is that? Why do companies provide the best benefits to their new customers instead of their loyal existing ones? Four reasons:
1. Acquiring vs. Retaining
The fundamental difference between new and existing customers lies in the stage of the customer lifecycle. Acquiring new customers is often more challenging and costly than retaining existing ones. Therefore, companies invest heavily in incentives for newcomers to overcome this initial hurdle. These incentives are designed to make the first purchase or experience with the company as appealing as possible.
On the other hand, existing customers have already overcome this initial barrier. They have demonstrated their loyalty and trust by making repeat purchases. Companies believe that they can afford to allocate fewer resources to retain existing customers since they are already in the fold.
2. Cost Considerations
Companies have finite resources, and offering incentives to every customer, new and existing, can be financially unsustainable. New customer incentives are typically seen as a necessary expense to build a customer base, while existing customers are considered a stable source of revenue, often taken for granted.
Moreover, it’s often less expensive to retain a customer than to acquire a new one. Existing customers are familiar with the company’s products or services, reducing the need for expensive marketing campaigns or discounts. Consequently, companies may feel that investing in incentives for existing customers is less urgent.
3. Perception of Fairness
One of the key reasons companies offer incentives to new customers but not existing ones is the perception of fairness. Existing customers might feel slighted if they see new customers receiving better deals. This perception can lead to frustration and even defection to competitors.
Companies often aim to strike a balance between attracting new customers and maintaining the loyalty of existing ones. While new customer incentives might seem more generous, they are typically a one-time offer designed to capture attention. Existing customers benefit from a longer-term relationship with the company and might receive different types of rewards, such as loyalty programs, personalized offers, or early access to new products.
4. Long-Term Profitability
Companies also prioritize long-term profitability. While new customers are essential for growth, the real value often comes from retaining and nurturing existing customers. A loyal customer is more likely to make repeated purchases over time, potentially generating more revenue than a one-time purchaser enticed by an introductory offer.
Companies understand that the lifetime value of an existing customer can far surpass the cost of retaining them through non-monetary incentives, like excellent customer service, personalized recommendations, and a seamless user experience.
While it may seem unfair that companies offer enticing incentives to new customers but not existing ones, this practice is often rooted in practical considerations. Acquiring new customers is expensive and requires significant investment, while existing customers are seen as a stable revenue source.
Have a question about new TV technologies? Send it to The TV Answer Man at firstname.lastname@example.org Please include your first name and hometown in your message.