Why Do Cellphone Companies Pay So Much To Get Me, But Not To Keep Me?

It’s been often said that it costs several times more to acquire a new customer than to keep a loyal one around.

So why is that cellphone companies will splooge all over themselves to earn new customers, but do jack to actually retain them?

Opine in the comments, or tips at consumerist dot com.

Question spurred by ““I’m just an unfrozen caveman–your “cellular telephones” scare and confuse me” [Pocket Change]

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  1. AcilletaM says:

    You could expand this to just about any company. Companies, especially public ones, are measured on growth, not retention. Higher stock price, better stock options, bigger bonuses. Nobody gets rewarded for 100% retention and 0% growth.

  2. Greg L says:

    What Acilleta said; although it really does boggle the mind given how acquisition costs are so high for a new subscriber — and what is even more frustrating is that if you are out of a contract with a cell phone provider, that doesn’t automatically make you eligible for ‘new customer’ deals again. A contract is a contract and if I am signing one then I should get whatever anybody else that signs one gets.

    It would make more sense for companies to report to Wall Street how many new contracts they got, rather than ‘new customers’.

    The cellular market is getting saturated as it is. I don’t know very many people that could possibly afford a cell phone that don’t already have one. At some point there aren’t going to BE any new customers to get, and the carriers are going to HAVE to put some effort into stopping the customers they do have from moving to the hot carrier of the moment.

  3. Mike_ says:

    Their policies and attitudes are shaped by years of operating in an environment where their customers were all but prevented from leaving. Until relatively recently, switching carriers meant losing your phone number. Now that we’ve got Wireless Number Portability, we have the freedom to tell our cell phone providers to take their crappy service and shove it.

    I think their culture will change eventually. It won’t happen overnight, though.

  4. Trai_Dep says:

    Basic psychology as well.

    Remember in middle school there was that TOTALLY hot lil tamale that got you all flushed and stammering? For whom you connived your friends to talk to their friends until you were introduced? Somehow you didn’t come off as a complete imbicile. You got a conversation on. Things clicked. Warm cookies were eaten, a carton of milk was shared and pecks on the cheeks were traded. The two of you, miraculously became “steady”.

    Or, for you Lacrosse boys, remember dropping a roofie in their chocolate milk, “helping” them to the boy’s room so you and the team could take turns banging her (or him? …OWW!) until the second bell?

    Where was I? Oh yeah, so you’re steady. That nymph that had you tongue-tied and stammering became your soulmate who completed your sentences. Together forever.

    Until a new hot tamale walked by. Instantly you were smitten. Your steady changed into the JERK choking the life from you. That you had to flee.

    Same thing with cell phone companies. Except less making out, no sex and the only thing you’ll be embarressed about doing prematurely is dropping a call. Rather than roofies and a roomful of friends, they use 5-page contracts in 8pt font and a floorful of lawyers to steal your virtue.

    And obviously, no matter if you’re the boy or girl, the top or bottom, THIS time? You’re the one that’s getting f*cked.

  5. rainrunner87 says:

    Another thing: They’ve already got us in soul-stealing contracts. They can put absurdly high (moreso than we already have) Early Termination Fees into the contracts, and just forget about us. Are we going to spend 500 dollars to leave?

  6. ckilgore says:

    Like what rainrunner said – they don’t have to try to keep you, because they know how hard it is to leave. They can screw you over as much as they want knowing full well most people can’t afford to pull the trigger and cancel.

  7. RumorsDaily says:

    TMobile’s contracts are only one year long, I don’t understand when people sign up for two year contracts. Seems horrible.

  8. My husband and I were talking about this the other day while buying cell phones. The market is still expanding fast enough they don’t give a rat’s ass whether or not they retain you. There are still enough new customers that they don’t need you.

    Hopefully now that the market is saturating we’ll start to see some actual customer service, and more niches in phones (I. do. not. want. a. camera. phone!). When they’ve run out of new contracts to acquire, they’ll have to start providing better services and more marketing to niches in order to retain us all.

  9. Ingen:

    We’re on our second two-year with Verizon Wireless, which company we hate, because it’s the only carrier with reasonable coverage in our area. Not all of us live in major urban areas with competitive coverage by several carriers. If I drive 10 miles out of town, on every service but Verizon I’m roaming.

    We were hoping that T-Mobile would have improved regional coverage enough for us to switch to them when our renewal came up, but not yet.

    (Interestingly, our lack of choice in carriers has driven several of our family and friends in other parts of the country to Verizon so that we can all use the “In” network free calling. I’ve noticed more people, when their contracts come up, asking relatives and close friends they call frequently which service they’re on so they can get the “In”-type calling.)

  10. georgeh says:

    I dealt with this a little while ago. Amazon was selling the T-Mobile MDA for free with new activation, I was an existing T-Mobile customer out of contract. I called them up and told them I wanted the same deal, they said they couldn’t do it and quoted me $300 for the phone, the same price on their website.

    So I told them I planned to cancel my service, transfer my number to a pay-as-you-go service, wait a couple months, and then get the deal on Amazon. I pointed out that it would save both them and me a lot of hassle if they could just give me the Amazon price.

    I got bumped up to a higher rep and bumped up again (probably retainment reps) and kept telling them the price I wanted to pay ($0) and what I planned to do if I couldn’t get it from them.

    They claimed the best they could do was $160, so I asked if there was any other way to make up the difference in price. They were able to take $20 off my bill, so I took the deal. After 8 months I’ll have saved that $160 and after that it’s even better than the Amazon deal.

    Like Mike_ said, number portability is a wonderful thing.

  11. RandomHookup says:

    A few years ago, the Boston Globe consumer reporter asked what companies give great come-ons to new customers, but don’t offer the same rates/promos to existing customers.

    The overwhelming response was….the Boston Globe.

  12. emjsea says:

    I’m probably jinxing myself, but I’m on my third two year contract with Verizon. I get great coverage, never had a billing problem, never had a cell phone break (except the one I dropped in a toilet– my bad), never get marketing phone calls from them, and I’ve probably had two dropped calls that I can remember. It’s been a long time and i couldn’t be happier with them. Am I the only person in America that doesn’t have a problem with his cellphone?

  13. AcilletaM says:

    Acquistion costs are higher because you need sales people and marketing and things like that.

    When I upgraded my phone, T-Mobile gave me the same discount as a new customer. I’m also not under contract with them.

  14. bambino says:

    emjsea: yes.

  15. UASteph says:

    emjsea: Maybe not. I’ve been with Verizon for over eight years, and I’ve never had a problem with them. Good coverage, etc. (It doesn’t hurt that they have a deal with my current employer – 20% off all calling plans.)

  16. Raindropp says:

    We had an awful experience with Verizon. Moved from FL to WA and it was hell to get everything transferred. Changed to Cingular when Verizon contract was up, and only had to pay an extra $50 per phone ($100 total) to get a one year contract. That was the only difference between the one and two year contract. Well worth it!

  17. XopherMV says:

    Companies do this because the fact is that most customers pay their bills on time and don’t complain. Most customers either won’t have a problem or they won’t cancel when they do have a problem. It’s very few people that habitually call up with complaints, wasting company money on customer service and bribes to retain the problem customer.

    So, it’s in the companies’ best interest to just let their problem customers go and replace them with other customers that don’t have any issues. Then, the companies spend less on customer service calls and less for customer retention. At that point, the customer is just a cash cow for the company to milk.

  18. Kangarara says:

    What Mike_ said. I was gonna, but.. he covered it.

  19. MeOhMy says:

    T-mobile says they will give you the same deal as a new customer, but it’s only half-true – they will give you the same deal that they will give to any other stooge stupid enough to walk into a B&M retail outlet. You can almost always find the same phone available for less for a new customer from a 3rd-party channel partner. There are sensible reasons for this (i.e. the channel partner gets commission and can pass some of that to the customer), but at the end of the day it is indeed absurd that the churn-happy customer seems to get a better deal than a faithful customer.

    Of course the flipside is that if you are out of contract with your existing provider, you can get loyalty bonuses. Since these are recurring, they are often worth more in the long run than a discounted handset.