Don't Force Customers Into A Contract For Your Service Business

I’ve worked in the WordPress consultation space for the past couple of years. Arctek Technologies (my business) initially started as a side hustle offering website hosting.

Offering a service can be very profitable but also frustrating at times. The reason I’m writing this post is that I recently moved and looking for new internet service providers.

The one provider I was interested in offers month-to-month and contract plans. However, the month-to-month plan installation is too costly.

It doesn’t make financial sense to me right now and I don’t want to get stuck into a contract as fiber internet is being implementing in the foreseeable future. It seems the company drives for yearly contracts as the installation cost is almost cut down by half (Installation prices range from R1500 to R5500 excl. VAT depending on your contract).

Why Forcing Customers Into A Contract Is A Bad Idea

Sometimes for business it makes sense to offer contracts, but in most cases nowadays you do not need contracts. Here are some of my reasons why you should not offer fixed contracts (1 – 2 years) if you are in the web hosting / internet service provider space:

Getting Trapped Into Something. When it comes to internet, I hate being stuck into a year or two contract. Most often service/reliability decreases over time or new deals come out that are cheaper and better than what you are currently stuck with until the renewal period.
Frustration. Cancelling a contract can be a total nightmare, try to cancel early and pay a penalty or get stuck with a service that is not meeting your expectations or their promises – this happens a lot. (i.e. guaranteed internet speeds, downtime etc). This often leaves to poor customer reviews and satisfaction.
Distrust. I feel that in the case above that companies that try to lock you in are scared of losing customers, which is crucial to running a successful business but if your service is good and reliable, user’s won’t switch so easy.
Things Change. People move, no longer need a service or even just want something else. This ties closely into point one but businesses should be flexible enough to cater for these changes – especially for a geographically based service such as internet. (excludes mobile data etc.)

Why You Should Offer No Contracts To Customers

This is basically the opposite of the list above, but I will explain it in a bit deeper detail.

I want Control. I want the control to change my internet needs as my life changes, I recently located and some internet options are available but I would like to easily switch over to the more affordable, reliable fiber internet option when it does come available. I don’t want to be stuck in a year contract and spend thousands of rands and have Fiber available in the next 6 months (which I’d be stuck in paying off the rest of the 6 month contract until I can change and then lose out the installation cost).
Trust. I’ve learnt from offering website and internet services to customers that customers will stay with you if you keep to your word and offer a good service. Sure, I’ve had some user’s that may cancel within a month or two after signing up as it’s not what they are looking for but I’ve also had clients stick with me through thick and thin over the past couple of years.
Referrals. I feel that customers would be more likely to refer businesses that keep to their promises to their friends and family. How many people do you refer to contract based businesses?

Summary

Basically it comes down to flexibility for a world that is moving at a rapid rate. We’re in the time of improving innovation and especially in South Africa, internet is starting to move at a faster pace (not as fast as we’d like but it’s still moving). There are a lot of Internet Service Providers that are currently offering free installation on Fiber and such and it’s a good way to grow your business, it is a risk that companies take and it won’t be free forever.

I get that companies need to cover costs on things like installation, but at R3000 for an installation for Fiber vs installation cost of over R5000+ you can see why it’s a bit upsetting – if the price was cheaper for a really over-priced installation I would have signed up in a heartbeat without worrying about cancelling and I would have carried the risk of installation anyway but it’s really not worth it right now to get stuck into a 12 month+ contract just so the installation can be that of the standard rate.