Thursday, May 30, 2013

New Customers or Existing? That's The Question!

I met my friend Deepak Chopra for coffee, couple of days back. A soft spoken Chartered Account, he often makes interesting observations. While discussing about a venture I was planning to be part of, he quipped, "Indian customers seek value for money. We don't buy products or service because they are low cost, we seek value. No wonder, that a Rs. 10 lac Renault Duster is selling like hot-cakes whereas Tata Nano, the world's cheapest car, has failed miserably."

Recently, I decided to upgrade our SD DTH connection to HD. Tata Sky is also running a seemingly good scheme for existing customers. At Rs. 1800, an existing customer could upgrade to HD. But I decided to upgrade to Tata Sky + HD, instead.

There was an online offers page on the Tata Sky website. Upon checking I found that there were interesting offers for a new customer. In fact, I realized to my disappointment that the offer for existing customer was not "as sweet as" the one for new customers.

Here are the details.

For existing customer

Cost: Rs. 4990/-
Value: Upgrade to Tata Sky + HD

For new customer

Cost: Rs. 6440
Value: Tata Sky + HD connection, 2 months of Grand Sports package free, 2 months HD fee waived, 2 Showcase movies plus Rs. 1000 Myntra gift voucher and 15% on purchases on another online ecommerce site.

How does this pan out?

Tata Sky + HD connection = Rs. 4990 (based on what is offered to existing customers)
2 months Grand Sports package: Rs. 820
2 months HD fee waiver: Rs. 200
2 showcase movies: Rs. 100
Gift voucher: Rs. 1000

Let's discount the 15% discount coupon for now.

The total value that a new customer gets from Tata Sky is Rs. 7110. Which would mean that a new customer gets an additional "value" of Rs. approximately Rs. 670.

I reached out to the customer support but as I had guessed the customer service support is not empowered to cross the line. Most of the time, they are dignified parrots, not only at Tata Sky but also other organizations. That will be another blog.

Anyway after some failed attempts, I felt a bit cheap to have done so much of calculations and trying to haggle for a paltry sum of Rs. 670.

It was then that I remembered an interview of CK Ranganathan of Cavin Kare making an interesting observation on the success of his Chik shampoo that catapulted a small shampoo company into one of the top FMCG companies in India, today.

He pointed out that customers in India are very diligent. He said customers didn't buy his sachets because they were affordable. He said that customers would calculate the cost of sachet shampoo and compare it with the cost of bottled shampoo before buying. Meaning, just because sachet was affordable at that point, customers would not buy it if the bottled shampoo was "cheaper" (read value for the money), overall.

But that is how we as customers are, I suppose.

Coming back to my DTH connection, I reached out to a top official at Tata Sky. After a small exchange, I realized that he also failed to understand the issue. Considering that my shift to Airtel would have to wait for six months and being impatient, I upgraded to Tata Sky + HD at a "not-so-sweet-deal" given to existing customers.

When I was doing MBA, I remember reading an interview of a Marketing Guru who urged companies to keep their existing customers happier than put all efforts to acquire new ones.

But I guess it is two in the bush is better than one in hand for many brands. 

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