OVH loyalty program creates headaches

Thu, 20th February 2014, 16:24

A while back, Europe's second largest webhost OVH came up with an interesting plan to reward customer loyalty. It goes like this: if you've been with OVH for long enough for the company to have added newer, faster servers to their datacenters, you can rent up- improving your service without increasing cost. In fact, as some customers noted in the OVH company forum, the deals on some of the new technology actually outstripped the older servers, comparatively. It's a solid plan that says something positive about the OVH as a whole- a reinvestment in existing customers instead of a more ravenous strategy of growth.

There's just one problem, of course: turnover. After all, who could resist such a great deal? It worked better than OVH had intended- while the system is workable if customers look to move up each 2-3 years, as the company grew they ran into clients ready to upgrade to the newest servers after less than half a year- soon they'd lined up so many customers they were forced to 'sell out', that is, stop taking new orders entirely while they whittled away at the current backlog of customers looking to upgrade and filled the servers that were now empty.

The logistics of this are difficult to picture. After all, you're dealing with exclusively pre-existing customers, this isn't representative of expansion. And yet the technical side of OVH is now pegged down as moving a sizable chunk of the customer base from the old servers to the new, with all the headaches that entails.

What's more, the exodus left the company with a bunch of empty servers- a whole bunch. And these are the old servers- rapidly growing obsolete with ever-improving technology.

It's something of a nightmare, but was it predictable? As some have noted, OVH prides itself on its four pledges: No installation fees, no long-term commitments, monthly payments and regular addition of features. The problem with this is that most of the new features went to the new servers, and combined with the lack of installation fees… why not upgrade? There seems to be no reason to hang on to hardware that is only decreasing in value as more options become available. Here, then, was OVH- in such an enviable market position with no ability to grow, at least for the time being, and increasingly unsatisfied customers looking to improve or expand their service!

But just as interesting as the conundrum itself is how OVH is dealing with the problem. First is their new loyalty program: long term customers get 1 free month on renewal after waiting 6 months, and 3 free months on renewal after waiting a full year. OVH also rolled out HubiC recently. The dramatically discounted cloud storage platform has pricing that should put more than a few of the old servers to good use.

One wonders how effective these strategies will be at reducing (or eliminating!) turnover- while they should mitigate the problem, the core issue (the fundamental appeal of upgrading to better servers for competitive prices) remains. If there’s anything OVH should take from this whole ordeal, it’s that business strategy is a long game indeed. It will be interesting to see how OVH continues to evolve in 2014.


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