Cagey Consumer

Demise of MCI Friends & Family Program

Around 1990, shortly after the dawn of equal access long distance service, MCI pulled what appeared to be a marketing coup with the introduction of the Friends & Family calling program. In marketing terms, this was known as a loyalty program, because it encouraged people to remain MCI customers even when a better deal might be available from the competition.

Customers of the original Friends & Family program received a lower rate for calls made to customers that they had included in their calling circle, which could contain up to 20 MCI customers. Customers who decided to switch to a competitor would have to explain to their friends that calling them would now cost more, thus resulting in a degree of reluctance to change long distance companies.

Over the years, MCI regularly made modifications to the program. They expanded the calling circle to allow a discount to non-MCI customers in the calling circle. After competitors' advertising poked fun at calling circles, the discount structure was changed to replace calling circles with discounts for calls depending only on whether or not the person being called was a Friends & Family customer.

Along with these changes in the plan, the strength of the loyalty aspect declined, as the differential discount for calls to MCI customers was eventually reduced from over 30% to a virtually negligible 5%. However, MCI retained customers through discounts that made their program roughly competitive with the other major carriers and through a series of monthly specials known as Family Fanfares.

The introduction of MCI's 15¢ per minute flat-rate plan known as MCI One signaled the imminent demise of the Friends & Family program, which MCI refused to make available to new customers. As of July 14, 1997, MCI began announcing to its customers that the percentage discounts from their basic rates would be reduced to only 5%, even for customers billing over $25 per month, with a 10% discount for calls to any MCI customers still on the Friends & Family program.

MCI Unfriendly Policies: Good News for Competition

Like an employer with a policy of never laying off employees, MCI had a policy of never kicking anybody off a rate plan. But in the process, MCI was less than honest, neglecting to tell customers that the rates on their existing rate plan would eventually rise to the point at which switching to their latest program would become "an offer you couldn't refuse." While this may have created ambivalence for some customers about remaining with MCI, the loyalty aspects of the program probably kept many customers hooked up with MCI long after they really wanted to leave.

MCI's virtual elimination of the vestiges of its loyalty program can be expected to produce a large increase in the number of MCI customers switching to another company. Naturally, this is great news for other long distance carriers, who allocate a substantial amount of money to "acquisition costs" for each new customer. For instance, AT&T sends out "switching checks" for $80 or more to many of its competitors' customers, with no assurance as to how long people who accept these checks will remain with AT&T after they switch.

While cashing such a check may be the best deal in the short run, this payoff can quickly be eaten up for consumers who fail to shop around for their long distance service. To be sure you aren't paying too much for long distance, you will need to contact various long distance carriers, with information about your calling patterns, such as how many minutes of interstate long distance calling and how many minutes of intrastate long distance calling you make in a month. A first cut to helping you select a long distance calling plan is available using the Cagey Consumer long distance rate calculator.


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