Irish consumers are being overwhelmed with switch campaigns. But what’s incentivising customers to stay once you land them? And how do you strike the balance between acquiring and holding onto customers?
Over the past few years, “switch” has become a ubiquitous word in Irish marketing. Early signs of a “switchernomics” epidemic were presaged by a National Consumer Agency (NCA) survey in 2014, and the trend has continued since then.
The NCA survey found that 43% of the 999 people questioned had switched at least one provider over the previous 12 months. Car insurance was changed the most often, followed by electricity and gas providers, and then gym membership.
The survey also confirmed the long-held belief that customers would rather stay than move. Even though most of those who did switch (76%) found the process easy, 38% said that while they ‘look around’ for other deals they are likely to stick with the companies they know.
But that was then.
The switching culture was only beginning back in 2014. The customer-baiting campaigns of that year were the tributaries that grew to the market flooding we see today.
Convincing Customers to Switch – an Obsession and Epidemic
The landscape of 2017, where the most recent statistics can be found, is vastly different from 2014. Faced with relentless switching campaigns, irresistible offers and user-friendly switching practices, Irish customers are getting increasingly comfortable with jumping ship. Businesses – both Irish and international – seem obsessed with switchernomics, and it is leading to a more transient customer base. Consumers have finally been conditioned to shop around.
To highlight a few examples, Ulster Bank are so invested in switchernomics that they recently launched “Switching Saturdays,” where they open 24 of their branches on Saturday mornings to facilitate (and of course poach) potential customers. This follows the bank’s decision to close down their “YourPoints” loyalty programme.
Elsewhere, the “One Big Switch” campaign, headed by entrepreneur Oliver Tattan, – helping consumers to shop around and switch utility providers – has amassed 150,000 members and counting. Now One Big Switch is looking at mortgage providers. And what about Sky who were even throwing in free high-end TVs to their new customers? This is happening while numerous digital providers (including Sky) are putting new customers who call through to their loyalty team!
Ireland, once a reticent country when it came to changing consumer habits, now leads the EU in changing electricity and gas providers. In fact, a report by the Commission for Energy Regulation shows almost 80,000 customers have switched electricity supplier and 25,000 customers have switched gas supplier since last year. Unsurprisingly, this has been a contributing factor to the drop in prices overall – great news for the customer, but is it for businesses?
Businesses are bought and sold on the size of the customer base – so it’s easy to appreciate why acquisition is important. But churn is also an important indicator – what’s the point of throwing money at a campaign (in offers and marketing spend) and enticing legions of customers to join a brand if we’ve trained them to leave when a better offer comes along?
Your organisation may not want to offer big discounts (or a free TV!) to your existing customers every year, but it’s important to make existing customers feel special too. The key is to find the equilibrium – offering enticements to new customers while not alienating existing ones.
Making it Public – Tell them you care
Switching advertising campaigns tend to garner a much higher profile than customer retention and loyalty initiatives, but companies should pride themselves on their customer retention. Any customer would want to do business with an organisation that values its customers in a meaningful, long-term, practical way.
In fact, it’s ironic that switching culture and customer loyalty are at odds so much because innovative loyalty strategies also work as an enticement to potential customers: People don’t enjoy the hassle of switching: Like moving house, you don’t want to do it too many times, and you’d like to think your new home will be welcoming and somewhat permanent.
You don’t have to alienate new customers to appeal to your existing base (or vice versa). South African insurance company OUTsurance provide a good example of how to do it right.
The company rewards loyal motor insurance customers with cash rewards. This is a direct refund (not to be confused with the traditional no-claims bonus, which they also provide). After three years, OUTsurance customers get 10% of what they paid back. And this isn’t in vouchers or money off subsequent payments– OUTsurance are happy to say that it’s a simple, cash-back offer. It’s a wonderfully straightforward and appealing way to entice and keep customers.
The company’s 10% cash “OUTbonus” is their defining attraction, and one that is cleverly designed to appeal to existing and new customers: it’s simple enough for new customers to understand; and tangible enough to appeal to those who have been with the company for years.
Catch and Keep – Not Catch and Release!
We hear a lot about “Growth” in the media these days, which goes some of the way to explaining the recent obsession with switching and customer acquisition. But what’s the point in acquiring new customers if you’re hemorrhaging existing ones?
Acquiring a customer and keeping them are two different skills – and it’s important to invest in both. Customers are people, at the end of the day, and every person likes to feel appreciated. And yet, the predilection among Irish business for acquisition and switching remains unabated, throwing offers at customers, often at the expense of customer retention.
Don’t take our word for it: Next time you’re watching TV or driving in your car, count the number of switcher ads you see and hear.
All of this begs other uncomfortable questions: Are businesses creating incentives for customers to move rather than stay? Is this fair to existing, long-term customers? And if not, why are we working harder to acquire customers than to keep them?