So says US News Money. Did you know that it costs 10 times as much to get a new customer as it does to retain an existing one? It's an often cited statistic from John Daly's book "Pricing for Profitability: Activity-Based Pricing for Competitive Advantage" a 240-page tome on pricing strategy.
You can use this statistic to your advantage to lower many of your bills by threatening to cancel the service or switch to a competitor. When there are so many options for services, this effective strategy can turn 15 minutes of work into hundreds of dollars of savings over the course of a year.
What can you use this on? Nearly every service you pay for on a regular basis, especially ones with many competitors. Cable companies, cellphones, gym memberships and satellite radio are just a start. You can try this strategy with any service – the worst thing that can happen is the company says no. The best is that you save yourself a lot of money for just a few minutes of your time.
Here's how to make this strategy work:
Arm yourself with competitive offers. It only takes one competitive offer for this to work, but having a few doesn't hurt. If you're trying to lower your cable bill, find the two biggest competitors in your area and their new customer offer. You will want your current provider to match or beat these offers. In the event it won't, you now know who you will be calling next.
Call your current provider, and talk to a human being. You can use gethuman.com to find a person quickly through a provider's phone menu. When you do, tell the representative you received a competing offer, and their company needs to beat it or you're cancelling.
When talking to a representative, be polite but firm. Customer service representatives have a little leeway in granting requests. If you're cordial and nice, the representatives are more likely to help you. No one likes to be yelled at, and, honestly, it's rude.
You don't need to play hardball, but representatives are listening for keywords. Most follow a script. Appealing to them on a personal level might not work, but saying the right words like "cancel" usually will.
Always make your appeal about the price, and don't let them convince you with other offers. Be especially wary of "free offers" like three months of HBO because they're not offers at all – you'll just have to call back in three months to cancel or be charged for it.
Aim to be transferred to a retentions department. The retentions department will have the authorization to give you the best possible deal. If you aren't talking to someone from retentions, you are not getting the best deal. The retentions department is designed to be the company's last line of defense, similar to the person in the doorway hoping to entice you to stay in the store.
Retentions will ask you if there is anything they can do to keep you as a customer. This is when you tell them about the other offers, and their service is too expensive. Mention you're a loyal customer who has been with them for years, if that's true, and ask them to match one of the offers.
Negotiate a contract period. When they make an offer, try to negotiate the shortest potential contract period, if one is required. Many providers will require that you sign at least a one-year contract in return for a sweetheart deal. Compare their requirement to that of the competitive offers you researched – do they require a contract? If not, say so.
Don't give up. If the company doesn't offer a lower price, and you really don't want the hassle of switching, you can always say you changed your mind, hang up and try again later. Try later on in the week or the month, perhaps when quotas become a factor and can influence how much a company offers.
Very few things in life will give you a greater return on your time, so start calling today.