Pali research analyst Richard Greenfield downgraded Vonage stock from `neutral' to 'sell' after he discovered Vonage is offering existing customers a discount rate of $19.99 a month to stop them from switching carriers. Vonage charges new customers $24.99 a month.
Is that really such a bad thing in a market economy where competetion thrives and companies go to great lengths to retain customers. Is that really a sign that the comapny is doing badly.
How many times have you called Sprint or American Express to cancel a service to be given a free offer like a free newer cell phone or a free year of service. Retaining an existing customer is much cheaper for any company than getting a new customer.
Vonage lowering the monthly rate for customers who want to switch, in my opinion - just this one single marketing strategy - is not such a bad reflection on the company. And eventually Vonage may gain from this IF they act on the reasons why customers want to switch. May be its the call quality or may be its their customer service.
But anyway I wouldn't sell my American Express stock just because they offered me a free one year on my Skymiles card, neither would I sell Vonage because they offered to lower my monthly rate. I would rather take the offers. BTW I don't own any of the above two stocks.
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