It never ceases to amaze me how organizations pour money into attracting new Customers, but comparatively spend little on retaining them. Everyone knows it costs far less to retain an existing customer than acquire a new one, some say it is 5 times more cost effective. Why then is there an obsession withacquiring new Customers and such scant regard given to existing customers? In this article we’ll get to the root cause of this dichotomy.
To illustrate the issue let me share with you an example of a current experience. A bit of context first. Beyond Philosophy started life in London, England, but quickly received a high demand from the US and thus I quickly qualified for a frequent flyer Gold card from my preferred carrier, Virgin Atlantic.
As our US business expanded rapidly in 2005 we opened an office in Atlanta, Georgia. This caused a change in my flight patterns as Virgin did not offer a direct service.
I switched and now travel with British Airways to Atlanta. I considered staying with Virgin and using an inter-connecting flight but decided the additional time it would take was not worth it. I guess Virgin hadn’t built enough loyalty with me to justify the additional travel time. As a result Virgin has lost one of their most highly profitable ‘Upper Class’ (Business Class) Customers.
But here is the strange thing. I expected something to happen, some type of contact, but so far nothing! No letter asking me why I am not flying Virgin any more, no automated email saying that they had noticed a change of flight patterns, no phone call from the Goldmember’s team, nothing. For all they know I could be dead!
If they looked at my statement it would show them I haven’t flown anywhere, nothing at all in over a year. So why haven’t they even bothered to find out why? Here the irony, I used to be a big Virgin fan, but as each month slips past in which I am ignored I lose faith in them. I now realize I am not as important as I through I was. Here’s the rub; if a gold card member is not important to them, who is?
Essentially by their lack of action they are saying “we don’t care”. Despite having all the data they can’t be bothered to look at it. I am sure I am a statistic somewhere on gold card member behavior. Some marketing person has probably completed some wonderful presentations on this “flights are upor down on last year, blah blah blah…”. But in the trenches, they don’t do anything. The devil is always in the detail.
Virgin has been spending $$$ running on marketing their Upper Class, however they have not looked at how they can retain their existing customers. How crazy is that!