The Lock-In Trap - Once Bitten, Twice Churned

Back in the old days of outsourcing, contracts would get signed for five years, seven years, or even longer.

Then a common pattern would emerge. During the first year or so, the supplier was an enthusiastic provider of its services. Spurred on by the enthusiasm that comes from winning the contract, it would listen to the customer, work with the customer, and build out its services with enthusiasm.

By year 2, that enthusiasm had tailed off. The supplier was now focussed on new opportunities, and the customer got relegated to the not-so-exciting category of business as usual.

In the final 18 months of the contract, the supplier would wake up. Suddenly aware of the potential loss of the customer, it would try to switch back to the enthusiasm of the early years and try to persuade that customer that it really cared.

In 90% of cases, the switch came too late. The customer, once bitten, was twice shy.

This was just another manifestation of the glamorous pound – business’ non-rational preference for revenue from new customers over revenue from existing customers. Non-rational because a pound is a pound, but a pound from an existing customer is cheaper to get – and is therefore more profitable – than a pound from a new customer.

Upsell, cross-sell, and simply retaining customers, are all more profitable than winning new customers.

At the root of this is the lock-in. Once a customer has signed a contract for X years, they are locked in for X years. The supplier, instead of relying on the quality of its service as the means to keep its customers, relies on the lock-in. And that’s where the degradation of the relationship starts.

But how about approaching this differently? How about saying to the customer: you are locked in for 12 months so that we can recover our costs, but after that you can leave at any time?

This could form the basis for a company culture centred on providing such a high level of service that customers don’t want to leave. And in terms of marketing, building a community of customers who think you are really good at what you do is probably the best marketing that anyone can have.

One caveat. All of the above is a fundamental, strategic truth. But if you are running a SaaS or similar business which is likely to be seriously affected by AI, then you are better off getting the maximum lock-in you can while you work out how best to adapt your business for the new world.

27th May 2026