customer loyalty, switching cost and a successful business

In recent months, i have been faced with the challenge of always buying a new data plan (N10,000-25G) every two & a half weeks. For some reason, It never completes the 4 weeks. Therefore, i made a decision that when my data plan finishes i shall switch user.

In my quest for an alternative reliable mobile broadband provider, some friends recommended the ‘UNLIMITED DATA PLAN PROVIDERS’. ‘They are cheap and it is UNLIMITED’ those were their statements.

With excitement I drove to their office. Whilst driving there, i couldn’t help but think ‘cant wait to ditch my present mobile boradband provider and begin to experience UNLIMITED affordable data plan’ . Yay!!

Upon arrival at their office, I was astonished by the initial purchasing cost. About N36,000 for a router and about N23,000 for a mi fi. On top of that, I would have to pay N10,000 for data plan (one month). I was even advised that they can crack my present router, which technically is cheating (are there effective property right laws on that?)

I asked my self some sincere questions, ‘what really is wrong with my present provider’? Data plan speed? honestly, fantastic! Data Usage? ok so i expend it in 2 & a half weeks instead of 4weeks. I can begin to monitor and wisely use my DATA. On the spot i decided to not switch. However, if the cost of switching was lower, i would have definitely switched loyalty.

NEW ENTRANT STRATEGY

For a new business entering the market and providing service or product that is readily available in the market (not a new technology or invention- as the case of APPLE) must:

  1. ensure that cost for customers switching loyalty must be very low

The cost of switching in my earlier mentioned ordeal was very high. If you reckon that your service is far better than that of competitors, why not reduce switching cost. Thereby, more people will easily switch loyalty and subscribe to your network as it is an UNLIMITED DATA plan anyway.

In the long run, you gather subscribers who repeatedly subscribe for your service, make profit and become sustainable. As the case was for GLO ( per second billing) vs MTN ( per minute billing).

If one switches because of UNLIMITED data at that high cost:

  1. what is the guarantee that service is excellent or better than present service provider?
  2. if it is better, what guarantee do i have as a consumer that service wont drop after several months?

But at a low cost of switching, most of these questions will not come to mind. Unlimited Data Plan is enough attraction to lure customers.

My conclusion, whatever kind of business- small, large scale the strategy utilised is focal towards how profitable and sustainable the business becomes.

 



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