Discoveries

Volume 16, 
#3, 
May, 2018

Tags: 

Avoid That Awful Snipping Sound
How Comcast might have kept my business, and how you can learn to keep your customers

by 

Sheila Mello

 

I recently went ahead and cut the cord.

Apparently, I’m in good company. Pay TV lost 405,000 net subscribers in the third quarter of 2017, part of a trend ongoing since 2010.[1]

Initially, cost drove the decision to flee my cable company’s offering. Honestly, I was sick of paying more than $400 every month for two accounts.

But would a lower price alone have kept me? Probably not. My experience with Comcast, both before and after the company lost me as a subscriber, is a study in how not to stay in tune with your customer’s changing needs.

After I dropped the service, I received a survey asking what problems I’d had. Unfortunately, the survey was not set up to help Comcast address the problem of disappearing customers, for several reasons.

  • The survey arrived after I was no longer a customer.
  • All the questions were closed-ended. Nobody probed deeper to follow up on the answers.
  • It offered no opportunity to express the problems I was having—not only with Comcast but with entertainment consumption in general.

There’s nothing wrong with asking former customers why they dropped your service. But this research can’t substitute for in-depth interaction with customers (and non-customers). Only ongoing, open-ended inquiry would have given Comcast a heads up that their user base was in danger of slipping away—and provided ideas for what to do about it.

Okay, so you’re not a major cable company with hundreds of millions of customers. All the more reason to keep the ones you have! So what can you learn from the Comcast experience?

Watch the sabotage

It’s no surprise that meaningful customer interaction must be integral to your company’s mission. Unfortunately, there are countless ways to sabotage your efforts in this area, even unintentionally. Does your company’s compensation structure provide incentives for paying attention to customers? Do your efforts, as Comcast’s seem to have done, focus only narrowly on customer needs? Do you have a company-wide commitment to innovation? (Comcast has been stumbling in the innovation and strategy department for years.) Do you reward risk-taking related to new ideas? Do you engage with customers at every step, or only when something goes wrong, or, worse, only after you lose them?

Operational excellence is a must

I had two Comcast accounts, each for a different location. Comcast seemed not to know that these two accounts belonged to the same person—even though I paid for them with the same credit card. I got no recognition, and Comcast not only missed an opportunity to serve me better but also left me with the impression that one hand didn’t know what the other was doing. The cure for this can be difficult, though not complex: a commitment to operational excellence. Communications, marketing, production, manufacturing, and other systems all must operate at best-in-class levels.

The market can shake you up—but you can regain your balance

Comcast’s current problem—losing ground to streaming services—had its roots during the 2008 recession. People don’t like paying for something they don’t use or value, especially not when a downturn puts the squeeze on their wallets. The rise of streaming services coincided with the recession, so consumers had a new option when they were ready to spend again. What could Comcast have done?

Careful, ongoing analysis of what was happening in the environment around entertainment consumption, not just with the company’s customers, could have revealed this shift. Then Comcast could have been ready with a new offering that better met their needs when customers began spending again.

A tale of two business models

By Wayne Mackey

Does your business treat its valuable existing customers better or worse than it treats new customers?In other words, are you more like a pay TV company or an airline?

Let’s contrast these two business models.  The pay TV business model rewards new customers, who get low monthly teaser rates and lots of free bundled services for the first year. After that, rates rise and customers have to fork over more for the same services.

Contrast this with airline frequent flyer programs. The more I fly with a particular airline, the more perks I receive and the better I am treated, from ticket purchase through landing. I accumulate points I can use for a future dream vacation. The airline makes money from me and I am incentivized to stay loyal to that airline, even when things go awry on a trip.

A common metric in B2C businesses is customer acquisition cost, which enumerates the marketing, sales, and other costs to add a customer. Successful companies are never complacent about their existing customers. Instead, they strive to build loyalty while tracking this metric to grow their businesses. Short-sighted companies—like many in the increasingly beleaguered pay TV market—focus mainly on customer acquisition to replace legions of lost customers.

What’s in your business model?

At the very least, Comcast (and other struggling cable companies) should not have spent time in denial of what was going on in the environment, as this analysis in Motherboard points out.

Never rest!

When the entertainment market shifted to favor streaming services, Comcast’s number-one position as a cable provider did it about as much good as being a top buggy-whip producer or the market-leading purveyor of ice-box ice.

Even when you lead your market, you can’t sit still, because sometimes the entire ecosystem shifts. You need to be ready to make the hard decision to redefine your business. Some companies do this well. It’s no surprise that many have become institutions:

  • Honeywell wouldn’t be where it is today if it had stuck to making the furnace regulator and alarm patented in 1885 by inventor Albert Butz. Instead, it evolved through generations of new technology, using strategic acquisitions to become a leader in smart home control products, including thermostats.
  • Home security company ADT, one of the U.S.’s oldest companies, didn’t rest on its reputation or earlier innovations when the home security market began to shift from centralized monitoring to connected DIY products. It partnered with Samsung SmartThings to join the smart home market and avoid being left behind.
  • Philips also began in the late 19th century. It was founded with the mission, according to the company history, of bringing “cost-effective, reliable electric incandescent light bulbs to everyone who needed them.” By the mid twentieth century, that mission had become almost unrecognizable as the company shifted its focus to transistors and integrated circuits and then on to compact discs and innovative X-ray systems. Today, lighting is one of the few Philips divisions that shares anything with its earliest offerings. Even that business, though, has moved beyond incandescent bulbs to other technology such as smart connected lighting.

Whether you embrace innovation from within or choose strategic partners, your attention to market shifts and consumer needs—the unarticulated ones, the ones that lead to breakthrough new products—must remain constant. That’s the only way to ensure that your customers don’t decide to snip the cord tying them to your product or service and take their business elsewhere.


[1] Leichtman Research Group findings reported in Fast Company, 11/15/17

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