Wednesday, December 21, 2011

The War on Loyal Customers

A friend I’ll call Jerry recently complained about his Maclean’s magazine subscription:
"I see via your magazine insert I can order a year's subscription for Ontario for $53.62 (tax included) whereas I just recently paid $70.86 to renew mine! While I can understand the ‘bonus gift’ difference, I am quite upset that you are gouging (over 30 %!) a long time subscribing customer (over 30 years)."
Jerry went on to demand a refund of the difference, and Maclean’s promised he would get it in 4 to 6 weeks. Of course, the other loyal customers who don’t bother to complain won’t get this refund. Most people believe that loyal customers deserve to be well-treated, but companies seek profits. Apparently, Maclean’s magazine has decided that the most profitable approach is to draw people in with low prices and hope they keep subscribing at higher prices. My guess is that they are right.

This doesn’t mean that I think loyal customers deserve poor treatment; I just don’t think that discussions of what we deserve are relevant (except as a way to extract a refund). Businesses must seek profits to survive. If enough Maclean’s customers stop subscribing because they don’t like paying more than new customers, then Maclean’s will change its practices. The same is true of Maclean’s parent company, Rogers. However, my guess is that more people are willing to give up a magazine for a principle than are willing to give up their television and internet.

Unless more people start to vote with their wallets, expect loyal customers of most businesses to continue to pay higher prices than fickle customers who pay attention to prices. In the mean time, people like Jerry can get lower prices by complaining.


  1. No doubt this is frustrating for loyal customers. It costs more to acquire a new customer than it does to keep an existing one.

    Subscription based companies can lure in new customers with agressive discounts and then slowly raise the price over time.

    Businesses that use Groupons, on the other hand, lure very price sensitive customers in once, but then they rarely return. It would make more sense for these businesses to focus on building loyalty and repeat visits from existing customers

    I shop around at least once a year for subscription services like cable and internet, as well as insurance. Even if I don't switch, I can still call my provider and ask for a better deal. 10 minutes on the phone saved me $300 on my cable and internet last year.

  2. Tom Bradley, founder of Steadyhand Investment Funds, was frustrated with this same issue regarding his Sports Illustrated subscription - 40 year loyal renewing reader - no reward!

    Its one of the reasons Steadyhand is, quite possibly, the only investment fund company in Canada to rebate 7% of MER fees to clients after 5 years and another 7% after 10 years (14% rebate after 10 years).

    We believe that clients, over that stretch of time, will become more efficient for us to serve, so we should share that benefit with them.

  3. @Echo: It sounds like you're in the same camp as Jerry, seeking the best deals you can get.

    @David: It's true that not all businesses use the model of enticing people with low prices and then raising them. My understanding is that Steadyhand rewards all loyal customers whether they ask for a discount or not. This seems like a more honest relationship.

  4. Cable companies are my bone of contention right now. Shaw is offered $300 in Visa cards if you sign up now for what I already have. Meanwhile, Telus is offering deep discounts for 6 months plus a Galaxy tablet...

    Hmmm ... I think I will call them today ...

  5. @RyanO: Let us know how your calls to Shaw and Telus go.

  6. Every time my contract expires with Bell I call them up and ask for the current offer. It has not failed yet. I did the same thing with my fido phone while I had it.

    My friend works for Telus and was explaining that they have been moving specials away from new customers and more towards those who are renewing their contracts.

  7. @James: It seems that the trend is toward price discrimination, which means extracting as much as possible from each customer. The wary customers get better deals and those who don't pay attention pay more.

  8. This is why I ONLY get gift subscriptions.
    They're cheaper, no hassle to cancel, and every year I have to decide if it's worth keeping that subscription going.

    Though I like several magazines, at my annual review, I only renew about 30% of the time