Tuesday, May 20, 2014

Cable Companies Should Enchant Customers Rather than Chase Them Away

Today’s marketplace faces fierce competition for high-speed internet, phone, TV and entertainment providers.  Phone companies have been transforming for the past two decades into a soup-to-nuts solutions provider for both business and residential markets.  Cable companies compete for digital voice, TV, entertainment/games and most recently home security.  Satellite companies are looking to partner with anyone that can help them expand their footprint and increase their customer base.  It’s becoming a dog eat dog world in this tumultuous industry. Geographic territories become blurred with mergers and acquisitions in order to become more competitive and potentially more monopolistic in some areas.

Here are a few pairings:
  • Centurylink and DirecTV as well as DISH Network
  • AT&T and DirecTV – a $48.5B merger awaiting FCC approval
  • Time Warner Cable and Comcast – a $45.2B merger subject to shareholder approval
It’s not a surprise to see today’s article “Everybody Hates Time Warner Cable and Comcast” published by TIME and written by Doug Aamoth.

Here’s a quick excerpt:

“High prices, poor reliability, and declining customer service are to blame for low customer satisfaction with pay TV services. The cost of subscription TV has been rising 6% per year on average—four times the rate of inflation. But now, dissatisfied pay TV customers have more alternatives than ever before. The rise of streaming video from companies like Netflix and Amazon, combined with pay TV’s deteriorating service quality and higher prices, has led to the first-ever net loss of television service subscribers for a full year in 2013.”

It is arrogant for these companies to believe customers will continue to open their wallets again and again each month. That was true when alternatives to the incumbent provider were non-existent.  Lucky for us, disruptive technology has infiltrated the marketplace and there are many options…
  • TV:  Amazon Fire TV, Apple TV, Aereo
  • High-speed Internet:  phone co’s, wireless co’s, satellite co’s, cable co’s, internet service providers such as Earthlink (yes they still exist)
  • Phone:  from traditional hardwire phone companies, to wireless providers to voice-over-internet protocol (VOIP) providers such as Skype, MagicJack and Vonage.
  • Entertainment:  it’s all about the content library of movies and TV shows.  Not just content created by networks such as NBC, CBS, ABC, and Fox , but all the cable networks as well. 
    • A recent value add is the creation and production of original content such as The House of Cards, which has significantly drawn new audiences to the Netflix brand.
    • Hulu gets to tap into the NBCUniversal library and obtain exclusive rights to many prime time content, plus they are developing their own original programming.
    • Amazon Fire TV leverages all the content from their Amazon Prime subscriptions, which includes Netflix and Hulu. 
    • Where is Blockbuster?  Still figuring out how to become relevant and gain market share via streaming media.
Customers want exactly what the TIME article pointed out – affordability, reliability and improved customer service.  It seems the suite of offerings has become the primary focus of these businesses.  The notion “He who has the breadth and depth of services wins” is false in this particular industry.  It is about providing quality service and product above and beyond the competition, and building long-term and profitable customer relationships. 

The goal is to keep your customers happy over the long haul.  Why is it that newly acquired customers are rewarded with the best pricing/deals for coming on board?  Where are the rewards for loyal customers who have to suspend their contracts and subscriptions in order to get a better deal somewhere else?  New customers are fickle.  They come in for the “deal” and move on later when they find a better deal. Existing customers who are rewarded for their loyalty, stay loyal.  This is the formula for building a successful and sustainable business.

My recommendation is to have cable companies rethink their approach.  Here is what I propose:  cable company executives form a book club and start thinking outside the cable box.  The first two books they should read are: 



1 - “Enchantment:  The Art of Changing Hearts, Minds, and Actions” by Guy Kawasaki, former Apple evangelist, current chief evangelist of Canva

2 – “Delivering Happiness: A Path to Profits,Passion, and Purpose” by Tony Hsieh, CEO of Zappos.com    

Why do I recommend those books? Because they change the mindset from “entitlement” to “earning” customer loyalty.  Sure, every business expects attrition, which is why they focus so much on new customer acquisition. However, after reading these two books (which are two of many that I would recommend) the paradigm will shift to customer empathy – and ultimately lead to delighting and enchanting customers, who will in turn, remain loyal to their brand.   

It isn’t rocket science.  It isn’t about building financial models, adding incremental price increases and looking at subscription rates going up and down as the years go by.  It is about providing value to customers, gaining their trust, and proving over time that your brand seeks to earn and retain their loyalty. 

In a world where social media can make or break a brand, it behooves a company to earn loyalty, then reap the rewards of positive dialogues generated and shared in social communities.  This is word-of-mouth marketing at its best.



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