I love Verizon's wireless network. This will be my sixth year using their mobile services. Recently, I found myself in a pickle while talking to their customer service.
A few days ago, I spoke with Verizon Wireless' Customer service over my account, a family plan with four users. While on the phone with a customer service agent, I started crunching some numbers. Over the past five years, I have paid Verizon Wireless over $15,000! We'll come back to that in a bit, first, let me explain my situation.
My Verizon plan consists of four lines; mom, dad, sister, and me. Whats the problem?The family plan over the years has become somewhat disjointed. The lines are no longer in sync. Two of those lines are now out of contract, my mom's and dad's. The other two are tied to Verizon until March and April, respectively.
So why did I call Verizon? I was planning on upgrading my parent's phones. Before, I tied up the family for another two years with Verizon, I wanted to learn more about their current offerings. The customer service agent on the line was friendly. He let me know that if I upgraded two lines, there would be the standard upgrade fee. I thought to myself, "well if its standard, yeah, that's okay." But, then I remembered that in the past, I never payed a fee to upgrade...
I felt betrayed, it sounds silly, but I did. A company, I have given money on a monthly basis for over six years, was asking for $30 to retain me as a customer with a contract for two more years. That is interesting! Why would Verizon Wireless add a barrier to retain me? Let's look at some numbers. I pay about $218 per month. That equals to $2612 per year. I have been with them for over six years, lets make it an even 6, that is $15,672 I have paid Verizon. Okay, that’s a pretty fair amount of cash, for a service.
It makes sense for Verizon to keep me around, I am a great customer! Why would they make it harder for me to stay? Every business needs to acquire customers/users to fill its pipeline. Investopedia defines customer acquisition cost as,
"The cost of a business to acquire a new customer. The company recognizes costs, including marketing and incentives, to introduce new customers to the company's products and services. The customer acquisition cost is calculated by dividing total acquisition costs by total new customers over a set period of time."
This article, from Entrepreneur.com, states the customer acquisition cost is about $315 for Sprint. I am sure that Verizon's customer acquisition costs are higher than Sprint's, but we will use $315. To acquire four new customers it would cost Verizon $1,260. Not to mention the mobile market is nearing saturation, that makes it harder to acquire new customers thereby raising the cost of acquisition.
So, if I decided to leave Verizon, not only would they lose out on my money, but they would have to spend $1,260 to replace my family. Instead of lowering the resistance for staying with Verizon, they raised it by adding a fee. $30 times 4 is $120 worth of fees to stay with them.
Let's go back to my phone call. There I was crunching all these numbers in my head while I spoke to Verizon's customer service agent. I brought the numbers into the conversation, in hopes of no fees. The agent listened intently... What I was offered by my representative and his supervisor? No Fees! I let them him know I would think about it. Something felt wrong. The upgrade fee is not very old. If anything, all I got expunged was a tariff that Verizon uses to offset customer acquisition cost.
I have not upgraded any phone lines. It looks like in early Spring my relationship with Verizon will come to an end. It is not really the fees but the lack of customer service. After six years, I am not expecting free smartphones or deep discounts. But, I was expecting some sign that Verizon cares about its loyal customer base. Mostly, because it makes financial sense to keep us.
What I wanted to emphasize is the customer acquisition cost vs the cost of maintaining a customer. In this scenario Verizon loses money by losing me. Exceptional customer service has been a proven market strategy by companies like Zappos. I am not arguing for Verizon to adopt Zappos' vigor for making customers happy, because it would make them feel better. But, because it makes financial sense.