New vs. Existing Customers

For the past six years I have enjoyed the excellent quality and service of my ADSL provider InterNLnet. My previous Internet provider, UPC, was outright horrible. Connections dropped, sometimes I had no connection at all. Clueless customer service representatives that took forever to get a hold of. And administratively it was a complete mess resulting in incorrect invoices that took me 18 months to have corrected! This all was a thing of the past with InterNLnet. Everything just worked. My connection to the Internet was speedy and always there. I had a fixed IP address allowing me to run my own FreeBSD server. And on the rare occasion when I had to contact their customer service department I got hold of someone pretty much directly without having to wait for 30 or more minutes. It was worth paying a premium for this kind of quality and service.

Being such a happy customer I never hesitated recommending InterNLnet to others. I persuaded my brother’s girlfriend and my father to sign up with them. A couple of years later when my brother’s girlfriend decided to move in with my brother she was presented with an unpleasant surprise. Though signing up was relatively cheap, canceling a subscription incurred a cancelation cost of € 74.95! At the time this was hidden somewhere deep in InterNLnet‘s Terms and Conditions and was nowhere to be found on their website. To InterNLnet‘s credit this has since changed; it is now clearly displayed on their website under the section “Tarieven” (Pricing Plan). However even though they don’t hide this cost anymore, cancelation costs for Internet providers are rare in The Netherlands.

Recently I have bought a house. In a couple of months I’ll be moving into this new house. Being a happy InterNLnet customer I planned on moving my ADSL subscription as well. However this turns out to be a rather expensive undertaking. According to InterNLnet‘s website this is going to cost me:

  • € 95.00 for moving the ADSL connection and any administrative costs
  • € 69.95 for a new ADSL2+ router as I currently only have an old ADSL router

Totaling € 164.95!

So what would I have to pay if I were a new customer? Only € 29.95! This includes whatever work they have to do in the telephone exchange, a brand new ADSL2+ router, and any administrative costs. Even that is a lot of money if you realize that most Internet providers let you sign up for free. This brings me to the topic of this post. Why do companies favor new customers over existing customers?

I can imagine a company’s drive to expand their customer base, especially in a very competitive market. However new customers become existing customers and these need to be kept happy as well. A happy and hence loyal customer base is arguably the best marketing a company can get. By providing me with a quality product and good service InterNLnet has gained two additional customers by means of my referral. Can you imagine how many people I have recommended UPC? Zero, or actually I have recommended many people to stay away from UPC if they value a working product, good service and do not feel like spending large amounts of their spare time on the almost futile effort to have invoice errors corrected.

I ran into another example of favoring new customers over existing ones when I was arranging a mortgage for my newly bought house. Many banks provide attractive discounts for the initial fixed interest rate period to persuade potential customers. Once you are their customer and the initial fixed interest rate period has ended (say after 10 years), the discount is lifted and any renewal of a fixed interest rate period is now much less favorable. At the same time new customers still do get the discount.

I am very skeptical of these kinds of practices. To me it demonstrates how a company values and hence treats its customers. It might be time to reconsider how I value InterNLnet giving how they value me as one of their existing and loyal customers.

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