There has been quite a furore about certain online- retailers using differential prices in favour of new customers over loyal ones. In its simplest terms if you have the cookie to show you have bought from the site before, you get a different set of prices from a those presented to a new visitor.
The financial logic is quite straightforward and akin to new customer bonuses and loss leaders. Indeed, there have been various scenarios developed questioning the comparative values of brand-loyal customers who may spend small amounts compared to a disloyal customer who spends the occasional large sum. The arguments go back and forth, but there is also a psychological dimension that asks: ‘Why should I give my loyalty to a brand that values my loyalty less than the business of a new customer?’ Ultimately, any brand loyalty is devalued – but for the brand operator who has already made the decision that the ‘loyal’ customer is just a mug who buys for convenience and out of inertia, brand loyalty is obviously a low value commodity. They have already made that strategic decision, but it is naive to thing the customer will not arrive at similar conclusions.
The important factor here the cost of customer acquisition. It is a truism that it requires considerably less resource to get additional and on-going sales from a current customer than to acquire a new one. There should be a financial imperative to looking after loyal customers as well as a value driven one. Of course it makes sense to offer bonuses and inducements to new customers, but it makes little sense to penalise existing ones. We have seen the results in the financial sector of advantageous new products not available to existing customers. The outcome is a cynical churning of customers moving from one brand to another as soon as a more advantageous offer appears.
At least some of these other strategies are to a greater measure overt. What dismay’s me about the online etailers’ approach is its underhand nature – customers like me feel we are being taken for a ride. It is also sobering to note that some of those embroiled in this mess include names from the UK’s top brands list published just a few weeks ago. All of a sudden their perceived and hard-won brand values have been lost.
Well, I’m off to Tesco now – at least their points indicate that they value my on-going custom – oh, that’s after I have deleted some cookies.