Old or new customers — who is more important?

WHAT’s the best solution if your organization is losing money due to lack of customers or losing continued patronage? Can we reverse the situation by lowering prices? Do a sales promotion? Improve productivity? Reduce operational costs? Enter new market? Develop new product or service?

One or a combination of two or more may help you improve profitability. But what if they’re not sufficient? We can experiment with new approaches like what Tokyo Disneyland and Tokyo Disney Sea are doing: reduce the number of visitors by 20 percent!

Many of us would think this as counterintuitive. Disney’s intention, however, is to remove congestion due to long visitor lines and reduce waiting times, especially during the pandemic. Another goal is for visitors to spend more time dining and shopping.

Another counterintuitive solution being done by Disney is to charge higher fees, with the Disney Premier Access allowing guests to reserve a designated time at some attractions for an additional Y2,000 ($15) so they avoid long lines and waiting times that average two hours during holidays.

Meanwhile, there is a strategic pricing mechanism aimed at interesting visitors to visit on ordinary days, via lower entrance fees, instead of the usual busy weekends and holidays.

All this are being done by Disney in response to an independent Japan Productivity Center survey that described the resort as a loser in “annual customer satisfaction rankings of corporate services and brands,” according to a Japan Times report.

Customer satisfaction

Another excellent customer

satisfaction model is that of Citibank, which offers free lifetime annual membership to credit card holders. That is something that is continuing to rock the boat, at least in the credit card industry. It’s revolutionary. I’ve been an active Citibank credit card holder since the mid-1980s and I must have spent more than $2,000 on annual fees over the past 37 years.

To some people, the annual fee is almost nothing but to me it’s a bounty. So the moment Citibank announced its free annual membership for life, I applied without delay. Within a week, the bank issued a replacement card, called Simplicity Plus with a blue design, and I even retained my platinum and “founder member” status without a change in credit limit.

Am I happy? So far, so good and I look forward to maintaining my loyalty to Citibank, regardless of its new owner at least insofar as its credit card is concerned.

Not everyone is happy, however. I know of a friend, a current Citibank card holder had application for a lifetime waiver of annual fee denied. In an email, he quoted Citibank’s reply: “To provide you with the most rewarding experiences, our thrust is to continuously improve the BENEfiTS OF YOUR CARD SO THAT IT IS worth the price you pay. As such, we hope you understand that we are unable to reverse the annual fee billed to your account.”

My friend can’t understand why existing customers and new customers are being treated differently. He said: “The bank’s reply IS DIFfiCULT TO COMPREHEND. IF THEY are willing to let go of annual membership fees, they should have done this across the board.”

This brings us to the question: Which is more important, old or new customers? The answer appears easy to understand: “Loyalty is by no means dead,” according to Frederick Reichheld, author of The Loyalty Effect (2001). “It remains one of the greatest engines of business success.”

“In fact, one of the principles of loyalty and the business strategy we call loyalty-based management are alive and well at the heart of every company with an enduring record of high productivity, solid profits and steady expansion.” If that’s the case, then what’s the point of Citibank making a distinction between old and new customers? My friend is now thinking of giving up his card in favor of another issuer.

Customer defection

If a customer becomes dissatisfied with a product or service, a familiar counteraction — to defect — is almost instant. That’s human nature. Reichheld, writing for the Harvard Business Review in 1996, said: “On average, the CEOs of US corporations lose half their customers every five years. This fact shocks most people. It shocks the CEOs themselves, most of whom have little insight into the causes of the customer exodus, let alone the cures.”

That’s “because they do not measure customer defections, make little effort to prevent them and fail to use defections as a guide to improvements. Yet customer defection is one of the most illuminating measures in business.”

I’m not sure how Citibank is measuring customer satisfaction and customer defection. But I’m sure it is somehow doing what’s best for Citibank, its customers and other related stakeholders. Now, what if my friend decides to finally let go of his Citibank card in favor of another issuer? I feel that this could be a game of chicken.

Rey Elbo is a business consultant specializing in human resources and total quality management. Send your comments or questions via Facebook, LinkedIn or Twitter or via https://reyelbo.com.