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What are the pros and cons of having a business model - snatching other businesses existing customers, especially a month or two before they renew with them?

Is there any business term for what I have just described above?

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The business terms are "competition" and "churn". – littleadv Dec 15 '12 at 6:55
@littleadv Thank you, However, may I ask you to enlighten me on my main question? If you can :) – anilkumble789 Dec 15 '12 at 7:00
Well, I'd want to know first how exactly you want to snatch these customers. The business model is not "I'm going to snatch customers", but "I'll have XYZ competitive advantage so that the customers will move from competitors to me". What's that XYZ in your case? – littleadv Dec 15 '12 at 7:03
@littleadv The XYZ here is quality, pricing and service. Let me add here, there are and there will be a lots of customers who are either tricked into by sales guys or they are dissatisfied with what has been given. – anilkumble789 Dec 15 '12 at 7:06
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So what makes you special? What is it that would be hard for the original service providers to catch up with and snatch the clients back? – littleadv Dec 15 '12 at 7:39
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2 Answers

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I would say this is a tactic but not a business model. You can use many tactics on many aspects to support a model, but a model can't be based on tactics.

Besides I don't believe there is a legit method to know which customers have expiring plan on competitors. Maybe you know, but a little caution is still needed for it may be grey. deleted because OP mentioned his legit method in comment.

My two cents about the tactic:

Pros: Effective. Time and cost saving.

Cons: Labour intensive. Limited audience

More suggestions:

  1. You can check the ad channels the competitor use and do them same.

  2. If you are far superior to them and client bases are almost same, it's okay to compare them in your sales copy as long as it's fair and accurate. (This is not a legal advice. Ref: http://www.insidecounsel.com/2011/11/08/ip-using-a-competitors-trademark-in-marketing)

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Its a legit method, I am just finding customer purchase date and call them before ending of an year. Any more insight? – anilkumble789 Dec 15 '12 at 10:43
@anilkumble789, that's nice. I added some opinions though a bit general. Hope that helps a little. – Billy Chan Dec 15 '12 at 11:51
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It depends on the sector as to if you really want to do this.

In the British fuel and heating market (Gas and Electric) this is the way the entire market runs. The same can be said for car insurance and home contents insurance. It's the norm.

This would be unlikely to work with Gym membership and is unlikely to work where the person paid some upfront fee in addition to their subscription or whatever they are paying.

Generally snatching customers is a pricing game. Being a little bit cheaper is often the biggest (or only) selling point as they have to risk changing from what they know to what they do not (you). Seth Godin (check him out) calls this the race to the bottom.

You are going to need a well motivated cold calling sales team and in all likelihood you are going to be shedding some profit in commission to these guys and gals.

Be prepared for your competitors to fight back and try to do the same to you. If you are all SMEs then you might find the biggest cost is social in that the other owners are not going to be keen to buy you a drink...

If this is going to be your approach do it hard fast and at full steam and don't be afraid of putting smaller competitors out of business or simply buying them up to get their customers.

Also look to the cost to acquisition and profit ratio. It is very easy to spend a few pennies more per customer than you ever earn from them. The bit in the middle between cost of getting them and cost of serving them is your profit. Keep it big.

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