Ahhh, AT&T. Masters of Customer Retention… not. As Lily Tomlin used to say, “We don’t care; we don’t have to care. We’re the phone company!” – and in case you’re still not convinced that the AT&T logo is in fact the “Death Star” from Star Wars, allow me to relate the following cautionary tale of anti-marketing from the Evil Empire as it relates to customer non-retention…

First, a quick step over to the quasi-academic soapbox. Let’s talk about customer costs. Yes, sad to say, but customers cost you money as well as paying you money. Support calls, billing, renewals, and (of course) the basic costs of goods and services provided must be weighed against the value the customer brings. So keeping a customer may not always make sense. If, for example, you can only serve ten clients, ten hours a day, you’d rather have the one that pays you $100/day but never calls you for support than the one that pays you $110/day… but takes up an hour a day of your time in support calls.

That said, it usually makes sense to keep customers. If you consider the total advertising, marketing, paperwork, competitive etc costs that are spent, and work out how many customers you acquire, it’s clear that it can cost a lot up front to get a customer. So keeping them around lets them “pay back” those costs over time.

Which is what makes AT&T’s situation particularly ironic.

Here’s a company that is fighting incursion on many fronts – cable, wireless, DSL, phone, a thousand cuts.

But apparently their philosophy is “we prefer the rush of getting a new customer to keeping the ones we have”. I’ve heard from many folks (and verified myself) that if you call in to attempt to get the same promotional rate on DSL as a new customer ($144/year, vs the $216/year charged to existing customers), AT&T will effectively tell you to go use a competitor for better rates. Really! The “DSL Retention Line” thanked me for being a loyal customer, but was unable to get me $72 in credit. The rep and supervisor wanted to, but were handcuffed… and admitted “it’s a stupid policy”.

I have to agree. It is a stupid policy. These are customers who are going the extra mile – they’re calling in because they’re loyal, and want to stay with AT&T. Being unable to spend the extra $72 (which has got to be lower than the acquisition cost of a 10-year customer, come on!) is absurd.

So what’s the marketing moral of the story?

Marketing doesn’t end at the sale. In fact, I believe marketers should be measured on total customer ROI – not only the ratio of acquisition cost to sale, but the ratio of acquisition and retention cost to lifetime value. Like an annuity.

I’m implementing that directly in situations where I can. As far as others, like AT&T, well, I can only advocate with my spend. So I’m off to switch carriers, per the guidance of the AT&T “DSL Retention” (!) Rep. Have a nice day, guys.

[ps: Please buy my book. http://buynow.stupidmarketing.com -- and tell your friends!]