Customer Communication & LTV

It never ceases to amaze me how good companies do silly things when it comes to managing their customer relationships. In this case I refer to the folks who market and sell a popular brand of anti-virus software. Most of us have some form of antivirus software on our computers to help safeguard our information from the prying eyes of hackers. It seems the software is becoming a must for anyone that owns a device connected too the web.

Having said that, you never really know if it’s working or not. Occasionally you get a little pop-up that says it’s doing an idle scan but mostly it just works in the background. Regardless, it seems to ward off the bad guys so there is perceived value.

What I don’t understand is why Symantec, and other companies I’m sure, would choose to auto renew a subscription without any prior customer notification? I just happened to check my credit card statement and saw a charge on it for $90, not a small amount, for the renewal. My first reaction was “how dare they” reach in to my account and tap me for $90 without even bothering to send me a prior notification. What a missed opportunity to enhance a customer relationship. Instead of creating a “positive” customer experience they create a “negative” customer experience.

From the business I can hear two arguments. One argument says that informing customers prior to renewal would encourage customers to cancel their service. Hence, don’t notify them and we experience lower churn/higher revenue. This approach begs the question whether the product/service has sufficient perceived value.

The other argument is that informing customers is a courtesy and even though we experience an increase in churn, the customers that do renew are inclined to stay with our service longer. In this case the marketing manager needs to weigh the benefits of customer ‘long term value’ (LTV) versus the short-term revenue/profit targets for the company.

If a company is truly customer centric and aligned to the brand implications of its decision making then it will choose the LTV approach and notify customers prior to any billing/charges. If a company is focused on short-term financial metric then it will likely choose the stealth billing approach and slowly erode brand equity over time.

The bottom line is that one method creates a positive customer experience and the other doesn’t. How do you want to manage your customer relationships?

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