Tag: customer loyalty

An “Intel Inside” Future of Branding

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What I am about to say is inspired by the discussion from my MBA Internet marketing class. I was showing examples of RSS and XML technology, when a student named Natalie raised the question of what all this could mean to a business. The ensuing discussion concluded that the meaning of brand and marketing will change dramatically from what it is now now.

With semantic-based XML and RSS technologies, it is infinitely easier to pull together information on a particular topic from all over the Web into one central location. Websites such as Kayak.com have already demonstrated this concept by “researching” across a wide range of websites to find its users the best deal in travel. The news panel on the right side of this page is another illustration of the concept. All of this information aggregation and (re)classification means that existing information and services provided by known brand names (e.g., CNN, Business Week) can be shuffled and repackaged to create a new service shaped by its own creator, with or without any new content being added. The outcome is potential “generification” of brand names into mass components that consumers and resellers can mix and match to create their own “product”.

The best analogy of this business model in the offline world is that of a concierge or a tour guide. The concierge does not necessarily create a new scenery but rather put together existing events, worthwhile sights, and palatable local eateries into an unforgettable experience for the visitor. The value added is the knowledge the concierge has about what is available in the area and about what the visitor is looking for.

What this traditional business model shows is the ultimate focus on value creation and need satisfaction. Whoever can satisfy a consumer’s idiosyncratic needs better than everyone else will win the consumer’s heart. While this focus on value creation is nothing new to business, the next decade of generic services will make this even more important. What we will see is information/service aggregators collaborating and competing with each other by pulling together various mass components to create the best value for the user; and traditional brand names, on the other hand, will excel by providing quality components for these aggregators in an “Intel Inside” fashion.

Wireless Companies Need to Update Their Marketing Strategy

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For those who use cell phones, it is a well-known fact that when you first join a wireless service provider, you can buy a phone at a very low price or even for free. But once you have used the company for a while, if you try to upgrade your phone to a newer model, you are charged a hefty price for it. Although some companies offer a discount on phones if you are willing to extend your contract, the discount is much smaller compared with what new customers get. Below is a comparison of the prices a new vs. existing T-mobile customer (i.e., me) would receive on the same phone models:

Phone | w/o Extension | w/ 2-year extension | New customers

Nokia 6103 | $149.99 | $49.99 | $0

Motorola W490 | $159.99 | $109.99 | $49.99

Dash | $399.99 | $267.99 | $149.99

One can envision the reason for charging a higher price to existing customers when, in old days, people were locked in to a company by their phone numbers. If you wanted to switch to a different wireless provider, you would lose your number. That was a significant switching cost for a consumer. Therefore, it took “sweeter” deals to lure people to switch. Now with the portability of phone numbers, such a switching barrier is no longer present. By still offering much lower prices to new signups, cell phone companies are essentially encouraging consumers to switch providers frequently rather than staying with one firm.

While firms do have a need to make a profit and should not give everything away, under the new business environment, it makes much more sense to reverse the pricing strategy and offer existing customers a deeper discount instead. From a customer relationship management perspective, it is much more economical and efficient to keep your existing customers rather than trying to chase after new ones. When a consumer’s existing contract is about to expire with a wireless provider, the provider should offer the consumer an incentive to happily stay rather than going back onto the market and starting to look for better deals from another provider.

In sum, wireless companies should adapt their existing pricing strategy to the new market environment and aim to build a more profitable business around a core group of loyal customers rather than “hoppers”.