When Marketing Tactics Backfire

Last Updated Aug 20, 2007 6:21 PM EDT

Chances are that a slick marketing brochure is sitting in your mailbox at home right now asking you to upgrade your cell phone, cable, or Internet service. While this may seem like a good tactic to upsell to your customers, new research indicates that these efforts can cause a company to lose business, not gain it, with certain customers.

Wharton marketing professors Peter S. Fader and Eric T. Bradlow, along with David A. Schweidel, a marketing professor at the University of Wisconsin-Madison, have pinpointed three states that customers generally fall into:

In State 1, customers are close to certain key services, such as basic cable. "In this introductory state, you're just dipping your toes in the water and trying out one or two services to see if they meet your needs and if you like working with the company," Fader said.

In State 2, "you broaden your relationship, often acquiring additional services, like premium channels," Fader noted. But that's not always a good thing. "A customer who moves rapidly into State 2 is likely to reconsider his portfolio more quickly and possibly acquire additional services. However, while such customers may appear tempting, these same customers are also likely to transition into State 3 quickly and reconsider their portfolios (i.e., drop all services) without much delay," the researchers write.

State 3 customers, the walking dead, are just one move away from severing their ties with the company. "However, customers' transition to this state may not be immediately observable; they may maintain their current portfolio for several months (or longer) due to inertia. Having plateaued in their level of service, their next change almost certainly will be to drop all services," the researchers state.

Instead of using the same strategies with all customers, companies can spend their marketing and advertising dollars more wisely by focusing on relationship building with State 1 customers and slowing down the progression from State 2 to State 3. As for the "walking dead" in the last state, it may be best to simply leave them alone. The marketing prompt may backfire, moving them from inaction to the undesired action of cancelling their services.