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New Customer Prices

May 5, 2006

By Jerry Osteryoung

“The purpose of a business is to create a mutually beneficial relationship between itself and those that it serves. When it does that well, it will be around tomorrow to do it some more.” ~John Woods

If you have been reading my columns for a while you know that I just love gadgets and technology.

One of my newest toys is a product called a Stress Eraser, which helps you slow down your breathing so that you can control stress levels and blood pressure. I bought this product about three months ago for the price of (I hope my wife does not read this column) $399. I just received a call from the manufacturer informing me that they had reduced the price by $100 and would I like a refund. (Can you guess my answer?)

This firm could have just kept my money because I would have never had known about the price reduction. They did the right thing, however, by letting their existing customers access a benefit that was being offered to new customers.

Businesses often forget that offering exclusive specials to new customers alienates the customers they already have. For example: I own a Treo 600 cell phone that allows me to read my e-mail on the fly, which is both a joy and curse. My cell phone provider is now offering a Treo 700 and is advertising the new model at half the price to new customers while I, a loyal customer, have to pay the full price.

Existing customers are clearly prohibited from accessing the lower price because we have to subsidize the benefit designed to attract the new customers. Attracting new customers is good business sense, but doing so at the expense of those you already have sends a horrible customer-service message.

Many folks will disagree with me. They believe that using price breaks to attract new accounts helps grow the business without cutting profitability on existing customers. I say hogwash.

If anything, businesses needs to do more to reward customer loyalty, because the current client base is what keeps a business going. If you start to alienate these customers (like my cell phone provider just did) they are going to switch to those of your competitors who respect and treat all customers equally well.

Now go out and make sure that you do not inadvertently punish existing customers so that you can score points with new customers.