Ending Enforced Customer Loyalty

There are a lot of ways to get your customers to stick with you. You can make sure that your service meets their needs at a good price, so they have no incentive to shop around. You can provide good customer service, so that if they have a problem, it's resolved quickly.

Or you can just shake them down. That's been the business model of US mobile phone carriers, who sign up new customers under contracts, renew the contracts every time a customer talks to them (You moved - you have a new contract! You changed your plan - you have a new contract!), and then charge exorbitant feeds to get out of the contract.

(In a really outrageous move, a few years ago AT&T Wireless (now part of Cingular) put me on a new contract without even telling me when I changed my number because I'd moved to a new state. I didn't even realize it until they sent me copy of the contract to sign. I called them and told them I wasn't going to sign it; they informed me that it didn't really matter, because I had agreed to the new contract by having a phone conversation with a service rep asking her to change my number. No contract was mentioned. I think that's called "fraud.")

There's a welcome sign that this might be changing: Verizon Wireless is planning to lower its early termination fees. (The actual reduction is unknown, so while the intent is good, we'll have to see if it really amounts to anything.)

There's a little gem of wisdom in the article about this:

Strigl said Verizon Wireless "ran numbers every which way" and decided it would be a smart financial move for the company. Existing customers are already loyal, he said, and the reduced obligations will probably appeal to new customers.

Customers are already loyal. Nobody really wants to change their wireless service; even without the fees, it's a pain in the neck. And even if they are happy, they are generally resentful of the contracts; nobody likes to be forced into anything.

I would like to see wireless carriers move away from their current model of givin g a discounted phone with handcuffs to make you stay with them. I'd rather just buy a GSM phone and sign up for service with no commitment. Of course, that requires the carriers to provide consistently good service to prevent defections - which is what worries them. (With GSM phones, leaving is as easy as popping a new SIM card in the phone. Except for that contract.)

I have no problem with my carrier (Cingular). I'm pleased with the service and have no desire to switch. But I still dislike them on principle, because of the contracts. I'd be a happier customer if they cut the nonsense out. Kudos for Verizon for taking a step in that direction; let's home competitors follow suit.