Buying Customer Loyalty?

Are things getting tough at AT&T and Comcast? Are they missing their subscriber targets or are they experiencing higher than usual churn? Hopefully, some of these questions will be answered with their earnings calls later this month. In the meantime, all signs point to YES, as AT&T launches a number of cash incentives to get customers to try (and hopefully keep) an AT&T service, while Comcast provides 12-months of basic cable for free, if you take one of their other services.

The big bonanza is with U-Verse. AT&T is offering a $200 cash rebate (via a check, rather than its standard Visa Rewards Card), for customers choosing the U-verse 200 package ($59.99/month). Switching your broadband from a cable operator will bag you up to $125 depending on which DSL package you take, but you also have to take your DSL fully clothed in local telephone service – no naked DSL.

Both cash back deals require no term commitments, but customers are required to have the service a minimum of 30 days and at time processing of reward is completed – so I expect this is about 8-10 weeks. Is this a smart move? Probably not, since without a term commitment, customers are likely to take the money and run – in all probability, right back into the arms of their previous provider. Perhaps AT&T should have put a disclaimer in its terms and conditions stating “only one offer per household per 12 month period.” In addition, this type of promotion tool rarely results in loyal users. Instead it tends generate short-term gains but little permanent market share gain.

In the case of Comcast, they are positioning the promotion as part of its digital broadcast transition (DTV) program, even going so far as to offer customers basic cable for just $10/month, if they don’t wish to purchase any other products. The promotion requires a 12-month commitment, so at least Comcast is covering its bases, which in all likelihood will result in longer term commitment from customers who find that they like what they are getting.

Either way, desperate times call for desperate measures and with today’s economic climate people will do just about anything for a little extra cash.

Teresa Mastrangelo
Principal Analyst, broadbandtrends