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Telecoms: Confusing Customer Retention With “Detention”


Telecoms in the United States just don’t get it.

A friend recently bought a new iPhone 5S. He loves it. Unfortunately, he regularly travels overseas. More unfortunately, he’s been a loyal customer of a large US telecom for the past five years running. He wanted to use a local SIM card on his upcoming trip, so he calls his provider to ask whether it’s possible. What do you think they said? Take a guess.

“I’m sorry sir, you need to be off contract before we can unlock a phone for you.” Surely, they would do something for such a long-standing customer? “I’m sorry sir, I really wish I could, but it’s against our policy.”
At first blush, locking in customers like this might make sense. When a company thinks about margins and growing their business, it’s widely accepted that keeping a current customer is cheaper than bringing in a new one. It’s why retention is such a hot topic, and it’s why board rooms, marketers, and customer experience professionals alike all obsess about it.

Now, there’s the traditional way to drive retention. And that has been to deliver a great customer experience. High-churn industries like Telecom, however, have discovered another way: and that is, to make exit a physical impossibility. If a customer can’t leave, you retain them — right?

But this isn’t retention at all. It’s making them temporary captives.

You’re not practicing customer retention; you’re practicing customer detention.
Telcos are willing to spend billions of dollars on advertising budgets to paint how wonderful an experience you’ll get once you’re their customer. Once they’ve got you, though, all that changes. They create an inescapable experience that is almost universally loathed. From the outside, it looks like a 5 star resort; on the inside, you’re in jail. Take a moment to think about some of the contracts you’ve signed. Shawshank Redemption-esque words like “lockup” and “termination” probably come to mind. The smart — the hard — thing for telcos to do would be to focus on the root causes of why churn happens. But that’s not what they ask their legions of high-IQ mathematicians to do. Instead, they focus on stopping customers leaving when they have a terrible experience. They make us sign ridiculous, handcuffing contracts with frightening early termination fees (a.k.a. ETF’s). They advertise unlimited data plans to us… that aren’t unlimited at all. And they’ll charge us $80-a-minute the minute we put one foot over the border.

They’re too wily to create a great experience. So they work to create the appearance of one. And then lock us in instead.

Not retention. Detention.

From the perspective of keeping your customers in the short run, these look the same. But in the long run, they’re very, very different. As much as you’d like to, you can’t lock a customer in forever. The moment a viable alternative appears, all you’ll hear is the whooshing noise of them escaping out the door. On the other hand, organizations that focus on providing people with a customer experience they actually want — those are the ones that are going to keep their customers come hell or high water.

And wouldn’t you know it, they’ve started to emerge — even in telco. The “anti-telco.” T-Mobile’s stock price nearly doubled in 2013, and they added enough subscribers in the last quarter (1.65 million) for it to be their best in 8 years. How did they do it? They listened to customers. They got over their laziness. They abolished 2-year contracts, got rid of roaming, freed up data, and let people churn however they like. Through this, T-Mobile’s forever young CEO, John Legere, hopes to be the “uncarrier,” and it’s likely he’s taken a page out of ruddy Richard Branson’s Virgin Mobile book. And his latest move is to “uncarrier” his rivals. He announced last month that they’ll pay competitors’ early termination fees for people who switch to T-Mobile. Guess what they called it? A “Get Out of Jail Free Card.” Here’s a guy who knows his retention from his detention.

Some pundits are worrying he’s about to create a price war. But I think they’re underestimating peoples’ willingness to pay for a great experience. It’s not a price war he’s about to start — it’s a jailbreak.

Photo credit: Casey Konstantín