Michael, a loyal customer discovered that Netflix loves it’s young new customers more.
It costs to acquire customers; you lose money to get the customers and you hope to make money over the long run. Sometimes it’s very obvious that a company trying to buy your love. Cable companies give discounts for trial periods. Cell phone companies give you free phones (that don’t work with competitor’s systems). Strangers give you free smiles.
What’s less obvious but just as common is that the vendor works extra hard to provide top quality service; particularly during that period when your likely to be suffering from buyers remorse.
So it appears that Netflix tends to dispatch DVDs faster to new as yet unproven customers. It also appears to be reluctant to ship quickly users who watch and return their movies quickly.
The pricing games that address the customer acquisition problem are analogous, but different, from those that segment a market so that customers are charged closer to the value the place on the product. But they both play into the question of scale; if a company has scale advantages – and most do – it’s fatal to not play these games when your competitors are. The scale advantages reaped by reaching a broader range of customers enables a firm to lower prices overall. For this reason some people like to presume that these games are create a social good.
The rub is you to play these games successfully demands a degree of secret keeping. If the buyers begin to understand how the game is played they begin to shop – shopping raises the cost of sales. If the buyers become extremely suspicious they don’t trust the vendor and cost of sales explodes.
It’s getting really hard to keep secrets. It’s hard to play these games when Michael’s got Perl scripts. But does he have an attorney?
Meanwhile in other news on the customer acquisition front:
The $1.5-million settlement ends a class-action suit on behalf of rubes who may have been brainwashed into buying tickets for those stinkers based on raves by David Manning of The Ridgfield Press, an imaginary critic cooked up by Sony marketers to deliver blurbs for newspaper ads. Sony defended its right to plant phony reviews under the umbrella of free speech.