Most companies are organized on a product, or brand basis. A bank has home equity customers, auto loan customers, mortgage customers, credit card customers. There is a vice president in charge of each of these functions. No one is working to build loyalty to the bank, to widen their purchases to other products, to deepen their involvement with the bank. Many of these vice presidents can actually weaken the customer relationship by the marketing programs that they are conducting.
Experience shows that discounted transactions bring in new customers.
Over a period of four years, they aggressively promote acquisitions through discounts. In Year 4 they realize that, while they have succeeded in acquiring many new customers, their profits are seriously eroded by the discounts. They decide to eliminate all discounts. In Year 5 they end up with fewer real customers than they had in the first place. Discounting, in other words, is a serious trap.