Tag Archives: Automobile Association

“The Lifetime Value of Customer” Concept

AA vintage sidecar (date unknown) at the Great...
Is the AA’s approach to customers old-fashioned?
Image via Wikipedia

Well, we survived October unscathed (although it remains to be seen if Ireland will drag the whole of Europe down) and am now pretty well settled in England so will be able to write more frequently again.

An issue that has really been highlighted during my move is that so many companies here seem to have little or no understanding of “The Lifetime Value of Customer” concept. And I’m not just talking about SMEs here – in fact, many of them understand it far better than the big ones.

Let me illustrate this – apart from Newsweek, that troubled publication that continues to make it far more attractive to take out a new subscription each year than renew (see “Is There Value in a Repeat Customer”), an excellent example of this is the AA (Automobile Association) here – an organisation that is clearly confused by policies and customers.

Having been a member of its sister organisation in South Africa for some 20 years I joined the AA in England as soon as I was no longer using hire cars, and had bought my own. It’s just a piece of mind thing for me as I’ve only had a very few occasions to need their help in all the years. Well, as luck would have it, a few weeks after joining I did need them, so put in a call.

I won’t go into the details here – suffice it to say that I needed to upgrade my membership for the call to be answered (hadn’t read the small print carefully enough) so did so. Imagine my shock to find that I was not only charged for a new, higher-level membership plus a penalty for not having had the right level when making the call, but was given no credit for my previous membership fees. In other words, I was considerably worse off than somebody who was not a member at all when calling.

Assuming that somebody had pushed the wrong button, I wrote to the AA and – after having to request a response for a second time – got a rather offhand letter referring to “company policy”: that wonderful phrase used by so many people to hide behind. The fact that the policy is stupid seems to have escaped them.

The fact is that the AA, for the sake of around £40 will lose my future membership fees of probably some £3000: an extremely poor decision. They just do not understand the concept of “Lifetime Value.”

Mind you, they’re not alone – I’ve seen numerous examples of some of the world’s biggest companies throwing away, potentially, millions of dollars/pounds in future sales through mistreating their customers in the technology channel.

And yet the concept is so simple: attend to your customers, have sensible policies, take the opportunity of turning an unhappy customer into an advocate for your business and you will thrive. Take a short-sighted view at single transaction level and risk all those future earnings you might otherwise have had – not exactly a guarantee of long-term success, is it?

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