At long last: A telecom provider launches a tenure-based reward program
Behavioral psychologist and research B.F. Skinner’s famous “reinforcement schedules” describe the ways that varying the intervals between rewards and the steps required to earn them can reinforce desired behavior in test subjects. One of Skinner’s reinforcement schedules is called “continual reinforcement” – helping a subject feel rewarded all the time can provide powerful reinforcement toward continuing a desired behavior. In subscription-based business models, tenure-based loyalty programs that reward long-standing best customers provide such continual reinforcement – and yet, very few subscription-based businesses offer such tenure-based programs. In the United Kingdom, cable television provider Sky TV may be showing us how it’s done.
By Rick Ferguson
Tenure-based loyalty programs seem like a natural fit for subscription-based businesses such as wireless and cable television providers. After all, these companies make increasing profits the longer you’re a subscriber to their services. And yet we all know, either personally or anecdotally, the feeling of frustration that longtime subscribers feel when they learn of an acquisition offer that gives new customers much better pricing or better services than long-standing ones. Some of these companies are so focused on acquisition that they sometimes seem to actively chase off long-time customers – despite estimates that claim acquiring a new customer can cost a provider up to 50 times more than retaining a current one.
Why is this so? The blanket answer is that acquisition provides a short-term high – particularly to publicly-traded companies that need to report quarterly financials. It’s much easier to goose your stock price by announcing double-digit growth in new subscribers than it is to report a static or declining churn rate. Analysts want to see growth, and growing your new subscriber base is an easy way to demonstrate that growth, even if you’re leaking customers who are continually frustrated by your lack of attention or enticed by a competing acquisition offer. Acquisition is a short-term game, while retention is a long one – and most analysts have a very short attention span.
Companies that take a longer-term view, on the other hand, know that reinvesting in existing customer relationships can grow profits without hemorrhaging marketing dollars. So it is that UK television and entertainment provider Sky TV has launched a new Sky VIP program specifically designed to reward long-tenured subscribers. The program is both simple to understand and rewarding to long-standing Sky TV cable and broadband customers. Here’s a look at the program’s four tiers:
- VIP Silver (0-3 years of tenure): New members who download the My Sky smartphone app are automatically enrolled in the Silver level, where they receive a welcome gift and are entered in prize draws for free VIP tickets to sports and entertainment events.
- VIP Gold (3-8 years): Gold members can also download their favorite shows for later viewing, and gain access to a VIP broadcast channel where they can watch new television shows 24 hours before the general public.
- VIP Platinum (8-15 years): Platinum members also receive free deluxe broadband installation and a free download data boost.
- VIP Black (15+ years): Black members also receive Sky Q installation and a dedicated customer service line.
The cumulative tenure-based rewards function on two reinforcements schedules at once: a fixed-interval schedule that lets Sky customers know they’ll be rewarded for sticking with Sky until they reach the next tier level; and a continual reinforcement schedule as customers enjoy their newly-earned experiential rewards and soft benefits. The simple program structure overlays a soundly-designed program that rewards long-loyal customers – surely a rarity in the cable and broadband space.
Money quote from Sky UK and Ireland Chief Executive Stephen Van Rooyen:
“Sky has always been a customer-led company, and the launch of Sky VIP is about putting our existing customers first and showing we value their loyalty. This isn’t about tactical deals or collecting points – it’s about offering genuine experiences and benefits we know our customers value and which only Sky can offer. That’s why we are gathering every single ticket that we have from our sports partners and giving them to our customers, alongside free tickets to exclusive film previews and money can’t-buy experiences. And for our most loyal customers, who we know want the latest kit and best possible service, we’ll be offering access to our best technology as well as priority customer service. But it doesn’t stop there – this is only the beginning as Sky VIP will keep expanding, with more benefits and rewards to be added in the coming months.”
Sky VIP is the most ambitious program we’ve seen in the cable/broadband space since the heady days of Charter Rewards in the US. We’ll be watching it closely – and we’ll bet that Sky’s loyal customers will keep watching, too.
Rick Ferguson is Editor in Chief of the Wise Marketer Group.