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Author Topic: Staying Power  (Read 4418 times)

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« on: January 26, 2013, 15:33 »
-1
I don't know about anyone else, but I found some real parallels in this article in this weeks Time Magazine between the services described and those of us who might LIKE to bail on long-standing accounts with certain micros, but can't.

Staying Power
By Bill Saporito

My cable bill arrived the other day with an unexpected $20-a-month increase for the same package I've been getting for years. A cheery customer-service representative explained that my discount for bundled services had expired and, although she would truly like to, she couldn't restore it. When I mouthed off about hoofing it to another provider, her response fell into the category of "Good luck with that."
If she figured I wasn't going anywhere, she was right. Although I wasn't facing any exit fees, the idea of setting up a new account elsewhere--which involves not only waiting for the cable guy to swap out three cable boxes but also learning a different remote control and repopulating my DVR--proved too big a burden, despite the prospective savings of $240 a year.

I had become trapped by what economists call switching costs--the barriers, financial and otherwise, that prevent a customer from getting rid of an underperforming product or service provider. Given the rising volume of advertising for insurance, mobile phones, cable service and credit cards, it seems companies must be winning and losing customers as the struggle to grow revenue intensifies. They aren't. They're just tightening their grip on us. Verizon spent 21% more in the last quarter trying to reel in new subscribers and keep existing ones, even though fewer than 1% of its customers jumped ship. And that low churn rate is not unusual. Cell-phone industry consultant Chetan Sharma says that annually only 2% of U.S. subscribers change providers.

"The longer you stay with something, the less likely you are to switch," says marketing professor Vijay Mahajan of the University of Texas, who sorts switching costs into three buckets: financial, procedural and relational.
The first one is straightforward. Breaking a cell-phone contract, for instance, costs money. It's in the other two categories that companies have really been working hard to jack up switching costs in various ways. Bundling has raised the ante procedurally, in part by adding complexity to the equation. To switch Internet-service providers, you won't just need to get a different cable box; you'll need a new modem, and you'll have to adapt to a new system after having spent the time to master your current one. Going up the learning curve of a new provider is yet another switching cost. The reason cell-phone companies spend so much on advertising, says Sharma, is not necessarily to lure new customers but to upsell old ones from feature phones to smart phones to tablets, from a single data plan to multiple--leaving them tangled in a web of technology and family plans.

And the more deeply invested you are in a brand relationship, the higher the so-called relational cost of leaving it. If you break with Allstate, as some of its current advertising suggests, you risk getting lousy service somewhere else. So go ahead--put your loved ones at risk for a few bucks. It's a neat bit of marketing psychology, says Peter Fader, a marketing professor at the University of Pennsylvania's Wharton School: "The company is saying, 'We're not trying to hold you hostage.' Instead, you hold yourself hostage."

 http://www.time.com/time/magazine/article/0,9171,2134518,00.html#ixzz2J7CXsm4G


« Reply #1 on: January 26, 2013, 17:08 »
+1
Interesting. Thanks. But I'm not convinced the article is related to the growing problems we, as contributors, are facing.

In my country, Canada, two cable companies gobbled up the entire cable business: Shaw in western Canada and Bell in Eastern Canada. And frankly, I wish SS and IS would do the same in the MS world.

Currently there are far too many middle tier and bottom dwelling MS businesses that we, as contributors, have helped to create. Companies, like 123RF who feel the only way they can distinguish themselves from others and stay competitive in the MS world is by dropping their prices, allowing companies to freely distribute OUR images, and so on. A practice, if successful, that will mean lower and lower commissions for the contributors because its going to encourage others to do the same.

« Reply #2 on: January 26, 2013, 17:13 »
+2
I just found it applied closely to MY situation - after a decade at iStock, 10K images approved (although many now deactivated) all the time spent with disambiguation, etc - its simply too much to consider packing up and going elsewhere.

« Reply #3 on: January 26, 2013, 17:21 »
0
I think that for most decisions of this sort, there are the side effects of staying and the real or perceived side effects of leaving.

Even when we hate the cable company, bank or insurance company (or all three), as long as they keep the pain low enough, we hang around. The companies may mistake this for loyalty, but it's not at all. Knowing that the alternative banks or insurance companies are likely equally unpleasant is one reason we often stay.

Push hard enough - as some companies do, emboldened by what they see as their success with earlier moves - and they can tip the scales and make it easier for people to decide to deal with the pain of moving elsewhere.

I like that quote at the end - that we're holding ourselves hostage in some ways. The fact that economic times have been tough has been an added factor - people are afraid, not without reason, that it'll be hard to make up the income should they make a change. Certain micros make the decision easier when income levels are falling for those who stay - if they're going to fall anyway, why not risk the switch where there's at least a chance things will get better?

« Reply #4 on: January 26, 2013, 17:22 »
+1
I had exactly the same problem with my internet provider. My 2-year discount ended and the service almost doubled in cost. Except I refuse to be held hostage by ANY company. I asked once for some sort of consideration, and they refused. I escalated the call, and got the same answer. So I closed my account. I got a very bad attitude from the rep. She said I wouldn't be able to get the same service anywhere else for less and "good luck with that" as you said. Turns out, I did. It is not exactly the same internet service I had, but I'm OK with it. I added more data to my phone plan for $20 a month and I use my tablet as a wifi hotspot. In the end, I am saving about $10 a month. I spend most of my day at work anyway, and they have wifi. So it's all working out for me for now. And when my contract with the cell company is up, I will be looking for other less expensive alternatives. Companies can only get you by the 'nads if you let them.

I can see a parallel to your story, blackwaterimages, and exclusives at istockgetty. Some are in too deep to leave. Fortunately for the majority of contributors (who are independent), that isn't the case.

gillian vann

  • *Gillian*
« Reply #5 on: January 26, 2013, 17:50 »
+1
I have a secret weapon: my sth african husband. His arrogance and clipped accent seems to works wonders against service providers. :) I should almost hire him out he's that good at getting discounts and concessions.

« Reply #6 on: January 26, 2013, 18:08 »
0
I had exactly the same problem with my internet provider. My 2-year discount ended and the service almost doubled in cost. Except I refuse to be held hostage by ANY company. I asked once for some sort of consideration, and they refused. I escalated the call, and got the same answer. So I closed my account. I got a very bad attitude from the rep. She said I wouldn't be able to get the same service anywhere else for less and "good luck with that" as you said. Turns out, I did. It is not exactly the same internet service I had, but I'm OK with it. I added more data to my phone plan for $20 a month and I use my tablet as a wifi hotspot. In the end, I am saving about $10 a month. I spend most of my day at work anyway, and they have wifi. So it's all working out for me for now. And when my contract with the cell company is up, I will be looking for other less expensive alternatives. Companies can only get you by the 'nads if you let them.

I can see a parallel to your story, blackwaterimages, and exclusives at istockgetty. Some are in too deep to leave. Fortunately for the majority of contributors (who are independent), that isn't the case.

I recently told my phone and internet provider that I would be closing my account in response to some recent unreasonable charges.  Surprise they knocked those charges off both accounts, reduced my rates for both, gave me more features at those reduced rates and increased the speed of my internet cable connection.

If we let them take advantage of us they will be happy to comply. 

« Reply #7 on: January 26, 2013, 18:22 »
+2
Yes they call this "loyalty" and pat themselves on the back for their cleverness in slowly boiling that frog. But resentment is building.  There finally comes a day when we decide to switch, and after that, we have a strong dislike of the previous provider, would never consider going back, and make sure to bad-mouth that company to anyone who will listen.

ISPs in the US are building up a huge reservoir of ill will for their cr@ppy service, pitifully low bandwidth, and eye-gouging bundling and pricing.  We all know their success is due to lobbying, and the public is gradually putting pressure on elected officials to give us new options and/or force these providers to upgrade and un-bundle.

BTW, I've never had cable.  I get plenty of entertainment from an antenna.

« Reply #8 on: January 26, 2013, 19:29 »
0
I just found it applied closely to MY situation - after a decade at iStock, 10K images approved (although many now deactivated) all the time spent with disambiguation, etc - its simply too much to consider packing up and going elsewhere.

OMG, that's what most battered wives say too!

« Reply #9 on: January 26, 2013, 19:36 »
+2
I just found it applied closely to MY situation - after a decade at iStock, 10K images approved (although many now deactivated) all the time spent with disambiguation, etc - its simply too much to consider packing up and going elsewhere.

OMG, that's what most battered wives say too!

Well, the difference here is simply financial, but don't think I haven't thought of that same comparison years ago.  From where I am now, I'm just riding out the last breaths of the industry. (I know people will debate that that is not the case, but its how I see it).  Its WAY too much effort to restart and since I make a terrific living with a lot less effort through print sales and other work, I simply can't be bothered with jumping through hoops to start up again.


 

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