The Value of an Existing Customer

In most cases, the value of an existing customer is much higher than the value of a newly-acquired customer, for a number of reasons.

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It is, for example. six to seven times more costly to gain one new customer than to retain one existing customer, Flowtown argues. Also, boosting customer retention rates by five percent can boost profits from five percent to 95 percent.

The Value of an Existing Customer / Flowtown (@flowtown):

Embedded Devices Haven't Sold That Well, AT&T Says

In business and politics, there often are several ways to interpret virtually any public statement, and some comments by David Haight, AT&T vice president of product development for emerging devices, is probably one of those.

On one hand, AT&T itself has had modest success selling "embedded devices," typically netbooks sold at a discount with a two-year mobile data plan costing up to $60 a month.

3G-enabled laptops haven't sold all that well for several reasons. The cost difference between a device that uses Wi-Fi-only for connectivity, and a version using mobile broadband is too great, they're hard to find in stores, and service plans are just too expensive, he argues.

Users are able to figure out on their own that getting at $100 or $200 discount on a $300 device, but then having to pay $60 a month for two years, is not such a great deal. Sure, the user gets $100 or $200 of value upfront, but then pays $1440 over two years in service fees. With the growing availability of "free" Wi-Fi hotspots and at-home and in-office Wi-Fi, that might not seem such a great deal.

AT&T obviously has found, in introducing "no contract" and lower-priced access plans for Apple iPads, that consumers prefer both the absence of contract commitments and lower recurring prices.

AT&T might also be signaling its belief that Verizon Wireless will have little luck bundling iPads with MiFi service, since that is basically what AT&T had been trying to do with its embedded devices. Verizon hopes to prove AT&T wrong, offering plans ranging from $20 to $50 a month.

AT&T Exec: New Laptop Service Plans, More Tablets Coming

Groupon Social Coupons Unprofitable for a Third of Marketers

About a third of the merchants extending Groupon discounts say they have lost money on the deals, a study by Rice University’s Jones School of Business found. Which is to say 70 percent of offers did generate a profit for the firms offering the deals.

The study of 150 businesses running Groupon promotions between June 2009 and August 2010 found that those coupon campaigns were unprofitable for 32 percent of the businesses that ran them. And more than 40 percent of the response group said they would not run another social coupon promotion again.

According to Jones School associate professor Utpal Dholakia, the author of the research, the profitability of a coupon promotion can be measured by two main criteria: whether customers redeeming the coupons spent more than the Groupon amount, and what percentage of those customers came back again to shop without a Groupon offer.

Those survey respondents who said the Groupon campaigns had not been profitable for them reported that only about 25 percent of redeemers spent more than the face value of the coupon. They also said that about 13 percent of those coupon holders came back a second time to shop at full price.

One way to look at matters then is that even when an unprofitable promotion has been run, about 13 percent of customers came back to buy again, paying full retail prices. Whether that is worth doing or not depends on the offers being made. But a campaign that provides sales lift of 13 percent does not, on its face, seem a bad investment. It all depends on how the offers are constructed.

Groupon Social Coupons Unprofitable for One-third of Marketers

Verizon Wireless to Offer $15 Data Plan

Verizon Wireless plans to introduce a less expensive, $15-a-month data plan for smartphone customers, the Wall Street Journal reports. 

The  plan gives customers 150 megabytes of data. Customers who exceed the monthly limit will be charged extra. Verizon Wireless apparently will continue to offer its unlimited data plan for $29.99 a month.

The new $15 plan will be available on Oct. 28, 2010 for new customers, and requires a two-year contract. Existing customers have the option of moving to the less expensive option, or keeping their current plan.

California's $500-billion pension time bomb

The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That's the finding from a study released by Stanford University's public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago, the Los Angeles Times reports.

Why should Californians care? Because this year's unfunded pension liability is next year's budget cut. For a glimpse of California's budgetary future, look no further than the $5.5 billion diverted this year from higher education, transit, parks and other programs in order to pay just a tiny bit toward current unfunded pension and healthcare promises.

That figure is set to triple within 10 years and, absent reform, to continue to grow, crowding out funding for many programs vital to the overwhelming majority of Californians.

In other words, at some point, virtually all the money in the educastion budget will go towards paying pension obligations, and zero for educating children. Most states have some version of the problem.

Economists talk about government spending crowding out private investment. Now we've got pension obligations crowding out on-going programs. If we aren't careful, we'll relatively soon have virtually all tax collections supporting debt service and pensions. 

California's $500-billion pension time bomb - Los Angeles Times

More Than 20% of Consumer Broadband Lines Now Come with VoIP

Voice over IP is becoming increasingly important to service providers as a bundle component, say researchers at Point Topic.

“Over 22 percent of consumer broadband lines worldwide now come with a Voice over IP service, and in some markets, such as France, penetration surpasses 90 percent.

Point Topic says there are more than 100 million consumer VoIP subscriptions in service, while another 12 million subscribers were added in the first half of 2010,” says Point Topic’s Senior Analyst John Bosnell.

In some cases, the apparent "killer app" status is likely an artifact of how services can be bought. In many countries, a broadband connection requires purchase of a voice line as well. It might be going too far to say voice is the killer app for broadband access. For most people, Internet access likely is that driver. But voice has emerged as a key feature for broadband access packages, at the very least.

More Than One in Five Consumer Broadband Lines Now Come with VoIP

Android Passes iPhone in Revenue, Millennial Media Says

Millennial Media, which claims to have the largest data set of any third-party U.S. mobile ad network, reports that Android revenue exceeded iPhone-only revenue for its network, in September 2010.

Android requests grew by 26 percent from the previous month,and 1283 percent since January.

Anrdoid Passes iPhone in Revenue on Major Ad Network