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10/03/07 Update: Somebody from T-Mobile got in touch with me and offered me a Blackberry Curve for less money than what new users buy it for. I took the offer. Thankfully someone at T-Mobile is watching out and taking action - but I still think they would benefit from making this a proactive program instead of a reactive one.

I am a T-Mobile user and yesterday I tried to upgrade to the Blackberry Curve. Even though I am long-time loyal T-Mobile customer, spending $180+/mo on their services, I would have to pay $400 for the new handset instead of the $250 that new customers have to pay. I was furious but the guy in the store could not do anything and recommended that I call customer service - which I did. Half an hour into that call I got the same response.

Obviously I am about to become an iPhone user until those guys screw up - no matter how much it will cost me to break my contract (earth to T-Mobile marketing - it isn’t about the money, it’s about principles on how you treat your customers).

It is of course not the first time that this has happened to me, as I am sure it has happened to you. This time around, however, I figured I would do some back of the envelope calculations to demonstrate the stupidity of this particular marketing technique/abuse campaign.

I am a very loyal customer and if they would have switched me and not screw up too badly in the future I could have easily been with them for another 4 years. At $180/mo, that is a loss of $8,640. I am also a big recommender when I like a product or service, and can point to many people who switched to T-Mobile because of my recommendations. Let’s say that 4 people become subscribers every year based on my recommendations (might be more with a cool toy like the Curve), and let’s further assume that 50% of those would have joined through some other marketing outreach program from T-Mobile. For the sake of this exercise let’s say that those people who do sign up based on my recommendations would spend half of what I spent. That means that by losing those recommendations they would lose $8,640 in referral business the 1st year, $6,480 the 2nd year, $4,320 the 3rd and $2,160 the 4th year. And supposing that the customer acquisition cost, not including handset subsidies, is around $200/customer, the other 8 referrals who might have joined based on other outreach programs might have saved them another $1,600 in acquisition cost.

So the lost opportunity so far for not giving me the discount is $31,840. I know, it should be converted into its net present value to get the real number - but for a $150 rebate??

Now that is not all. I am sufficiently turned off with this idiotic marketing behavior that I am willing to write about it on my blog. With 18,000 unique visitors/month according to Google Analytics and close to 1,200 RSS subscribers according to Feedburner, I can only assume that a few people will not switch to T-Mobile because of my bad experience. Add to that the number of social networks that I belong to and where this recommendation will get syndicated, and the amount of lost business because of my negative recommendation could actually be far worse than the lost business caused by me no longer being a customer and referrer.

How stupid can this be? And when will the government step up and let us own phones that are no longer locked to a particular service provider?

[Tags: t-mobile social networking word-of-mouth WOM customer lifecycle value customer referral value]

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