The customer loyalty conundrum

Last month, Cisco rolled out its CRS-1 router in an effort to win back customers that had migrated to Juniper. The product’s main attraction: a streamlined version of IOS. But it was IOS that had won the hearts, minds and pocketbooks of the original customers. Never mind that there had been so many patches on IOS that it was now unwieldy. Here’s the problem: While some customers will love the new switch, current customers get nervous at even a hint that their older products might see a lessening of support. So Cisco is in a bind; it must keep existing customers from becoming mutinous while attracting new customers. For Juniper, the role is easier – it can keep aiming at the high end because it doesn’t have Cisco’s installed base.

This is the classic dilemma of the communications industry – keeping customers loyal while aiming for new customers. It’s a balancing act of epic proportions.

What can companies do to retain customer loyalty? One method that used to work is to keep the same sales and service employees who have always dealt with a particular customer assigned to that customer’s account. But the sales guys are attracted to either the hot new box, where the commissions are greatest, or to the new customer, where opportunities are more evident. When firms such as Verizon do employee buyouts, those with seniority – and those customer contacts – are the first to leave. So then, to whom am I loyal? James Earl Jones, the spokesman for Verizon? I like his voice, but he wasn’t the guy who installed my DSL.

Another way that companies used to encourage loyalty was the annual users meeting – a rah-rah session where senior management told customers how good things were going to be next year. A great way to blow through a million bucks or so, but doesn’t quite hack it anymore. Another way was bundling – if a customer bought more and more services, the cost would go down. That worked until the competition could match and then beat the price of selling the individual elements à la carte. Am I really to believe that Verizon’s service is better than AT&T’s when I know that AT&T uses the exact same infrastructure as Verizon – and in fact is buying wholesale from Verizon and then selling to me at a discount from the Verizon price?

My son is loyal to Virgin Wireless, which is a Sprint reseller. Why? Because he thinks Richard Branson is cool and because he hopes to have neat-o features such as ring tones that play Phish favorites and games that he can play while he pretends to study. But how deep is that loyalty? “Cool” is hardly a rock upon which to build a Loyalty Church.

By now we know one truth: There is no loyalty in communications – anywhere. I am loyal to the last company that didn’t screw with me. On any given day, I am swearing never to do business with (pick one) Comcast, Verizon, AT&T Wireless, Nextel… the only real issue is who has screwed with me lately. Verizon has 35 million local phone customers and on any given day, 34 million of them are enticed by the promises of at least a dozen other competent firms – six landline, six wireless.

So to whom am I loyal? To whom are you loyal? Cisco? Juniper? Oracle? Nextel? Do you have different criteria for business or consumer products? Have you gotten so cynical that it doesn’t matter? I used to fly United and American and U.S. Air – today I don’t care, and the airline affiliation rewards programs cancel each other out. My PC? Don’t care if it’s an HP, IBM, Dell or Sony – all are acceptable. I am happy with my DirecTV this week – but I have no other choice in Vermont and am gratified that it works at all. And thanks for reading Network World this week – please redeem your copy for 10% off your next Latte SuperMochaGrandeVente at Starbucks.