Is AT&T destroying valuable customer realtionships one iPhone at a time?
The new iPhone is a great product and I have waited until now to buy a G3 iPhone with some features I wanted. Thankfully, I am not the type to stand in line for 5 hours to buy anything, so I didn’t. I did however try to order a phone (to be delivered whenever) but was told that my contract was not up until August 21st so if I wanted one I had to pay $399.00. That is $399 for a $199 phone!
Now, a new customer to AT&T gets the $199.00 price and de facto is treated better than a long-term customer. I have three phones and have been with Cingular (AT&T) for a number of years.
(you can read my entire blog on this at http://www.octanecorp.com/blog/tabid/249/EntryID/352/Default.aspx )
How could you have done a better job with existing customers, if you were an AT&T executive?
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Pierre D
Founder, Zimana / Marketing ● Finance ● Website Analytics ● Entrepreneurship
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Harry, hello!
I am not sure that AT&T intended to diss you or its customers who bought an iPhone in its first year. Many electronic items are highly priced when demand and marketing reflect the interest of the early adopters. Apple indeed has a loyal customer base than any electronics/computer manufacturer would envy. I do believe that Apple may have priced the phone a bit too high. Sometimes adding features and attributes to a memorable product can create new associations of value in the customers mind. $399 may have put the iPhone at a premium position above the iPods, but adding calling feature placed the association in most customers mind as an expensive phone rather than a premium iPod.
Cutting the price was also unavoidable, in that the Apple was entering a new competitive field with a new product. The best way to expand your product/service is by cutting the price and extending the affordability to the sideline customers who are interest but at a lower price. Apple could have kept the price high for a bit longer in time, but not by much IMHO.
As an AT&T executive, I would use some form of business intelligence to determine the best customers in terms of low cost to maintain and examine the usage of out services to provide a way to retain their patronage for the long term. In Competing on Analytics (Tom Davenport/Jeanne Harris) the authors state Netflix as an example of business intelligence applied that keeps the most profitable customer satisfied and loyal. Netflix “throttles” speedy delivery to customers who are using their services occasionally. Why? These customers are Netflix’s most profitable (shipping is free; Customers are paying for the service throughout the life of the contract), so ensuring that they have their order keeps them in the fold.
In your example, I would have had some initial analysis of the customers who are valuable and determine how to best service them. I don’t know if a new iPhone would have been the answer – a year on market gives some data but not the insight on every aspect. But special pricing on services – discount on renewal with AT&T for example. In a Harvard Business Review podcast, Steve Singer suggested that Apple should have given some sort of loyalty rebate to the first purchasers. He asserts that by cutting the price, the Apple first movers do not feel as special if now everyone can afford one. The cut made Apple less “authentic” in its customers eyes.
Plus there is a difference in channel (Apple store has great retail, while AT&T is not as amazing an experience) as well as offering an unique or technologically advantage (Apple has it in its industry, while AT&T does not). This may have affected the pricing decision as well.
Ultimately every business has key customers who need to be catered to. May the business gods of karma find a balance for your pricing diss!
Great question. Thanks for reading my response.
Pierre
JOSH D
LION - Satellite Broadband Optimization Specialist at netArtera
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you do market research, how many will leave if... how many will we gain if. Take % that leaves against % gained. What's Greater. Most people might get pissed but won't leave or are in a contract, so yea your pissed now but give it a few months (contract durration) and then they either forget about how pissed they were or just don't want to put in the effort to change.
Links:
Steve G
Strategic Brand Consultant / Technology, Regulated and Retailing Industries
Well Harry, if I was an ATT C-Level exec, I'd be so consumed by all the projections of cash coming in from the breadth of monthly service options, I'd give the iPhone away to both existing and new customers! That said, I understand that ATT is taking a hit on the phone at $199. But customer acquisition (as you noted in your full posting) is obviously more costly – so chumming the consumer waters w/ maximized G3 at a giveaway price is a good tactic when co-branding for service contracts w/ a reputable manufacturer .
However, I agree w/ you that the existing customer should've been given a slight window of opportunity to get the product at a reduced rate. A $299 price point and a new 2 yr. contract as opposed to waiting for a traditional upgrade period would've pleased all.
As always I appreciate your perspective.
Steve Gorges
Mirek P
INDEPENDENT e-Strategist, e-Consultant; OPEN4net's owner [ LION: mpolyniakATgmail.com ] focused on pharma!
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I think corporations esp. in the US are still mad about growth so they prefer acquire new customers instead of taking care about existent ones
During my studies I was taught that existing customers are much more profitable but it wasn't an Ivy League MBA ;)
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James H
Owner of Friends of Ireland group
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Do on too AT&T as they do onto you. buy a phone from some one else.
james hayes
