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Customer abandonment to improve ROI
Example: let say that airline ABC treats customers very well for the first 20,000 miles (new clients get window or aisle seats), but after that you get treated poorly (you always get a middle seat). As a result, some faithful clients switch to another airlines XYZ after a while. But XYZ plays the same game: window or aisle seat for the first 20,000 miles, then always a middle seat.
Is this a viable long-term business model? Essentially ABC and XYZ focus on stealing clients away from each other, and after a certain point (let's say that after 20,000 miles the cost of user acquisition is offset by gains from repeat business) they "drop" the faithful client and want to replace her with a new client.
Are there any analytical studies saying that this can be a good strategy, from a business viewpoint?
Is this a viable long-term business model? Essentially ABC and XYZ focus on stealing clients away from each other, and after a certain point (let's say that after 20,000 miles the cost of user acquisition is offset by gains from repeat business) they "drop" the faithful client and want to replace her with a new client.
Are there any analytical studies saying that this can be a good strategy, from a business viewpoint?
Comment
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Comment by Steffen Springer on April 7, 2010 at 9:40am
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I have seen a similar issue some time ago:
One the one side you want to attract new customers with fancy incentives, on the other side you want to keep loyal customers without giving them the feeling that they are less worthy than potential new customers, who got all the fancy stuff.
specific: subscription for a magazine
If I were not that lazy, I should skip the subscription after the first year and reapply to get the bonus (a expensive coffee machine) for a new (cough cough) subscription. What do companys think that they force you to play such a game ? Shouldnt they give me a gift for NOT canceling the subscription ?
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Comment by Jozo Kovac on April 7, 2010 at 6:48am
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If they play the same game (same services for newcomer) then how do they attract loyal customers?
Isn't it always better to come with something distinctive?
But yes, for marketing department rewarded for customers acquisition it's good to abandon loyal customer. Maybe he came back in future and they receive their bonus again :)
It is good strategy for overcrowded golf resort with high anual fee (pay, enjoy a while and leave). Not for airlines where revenue from each (first...100th) flight is nearly the same and loyal customers are company's diamonds.
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