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| Best Practices: The Cost of Customer Happiness |
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| Written by Brad Dawson |
| Tuesday, 01 September 2009 01:00 |
 In a recent study, we found that over the last 18 months, corporations have gone from fawning over unhappy customers to realizing that the cost to retain a disgruntled individual may not be worth it during this difficult economic period. The question is: what is an unhappy customer to do? In September 2007, our team set out to measure the responsiveness of various publicly traded companies based on a negative and positive reaction to their product. As expected, we received kind formal letters back in nearly every case. In every case, the response to our negative letter included some form of try-us-again premium (i.e., a coupon). This premium represented an additional, albeit small, cost to retain us as a loyal customer. Enter the recession. Would companies react the same way even though the financial picture had changed? In January 2009, we attempted to replicate our study, sending both negative and positive letters to the same publicly traded companies. The results were dramatically different. First, the number of formal response letters decreased significantly. We suspect that customer service divisions in these publicly traded entities have been downsized in response to the recession. With one exception, none of the responses to our negative letter included any form of try-us-again premium, another indication that the cost to maintain an unhappy customer was no longer a budget imperative. The message being sent Prior to the recession, the US boasted a customer-service mentality that was envied around the world—at least by consumers. The ability to return items without explanation, customer-oriented dispute resolution practices, and the ongoing flood of freebies made this country the consumer’s best friend. (How many of you got your credit card limit raised every year, even though you never asked?) The customer was the focal point, and corporations revolved around them attempting to satisfy every anticipated need. The corporate message has now changed, perhaps forever. For the most part, corporations have circled the wagons and are focusing on business survival rather than customer happiness. Indirect costs are being slashed, with customer service niceties the first to go. Niceties that were freely given are being yanked away with no explanation. (Has your credit card limit been reduced, even though you never asked?) Unfortunately, consumers who were accustomed to high-levels of customer service are bitter. This bitterness has resulted in waves of customer abandonment, even for corporations that have enjoyed long-term customer relationships in the past. The customer response Corporations need to realize that they have raised three generations of “coddled children.” Consumers expect corporations to yield to their whims. The mantra that the customer is always right continues to rattle around in their brains. But now that the customer role has been diminished and corporations have relinquished their parental role, these coddled children have no alternative than to stand up on their own. As with any teenager, there will be a period of intense hatred. Phrases like “I never want to see you again” and “What have you ever done for me?” will be part of the customer vernacular. The good news is if the corporations play their role correctly, customers will return to them, albeit in a different type of relationship—one in which customers and corporations are solidly independent. The challenge will be how the corporations mature into their new role. The corporate answer Corporations must move from the role of protective enabler to benevolent sponsor. Although corporations have one a good job in forcing consumers to stand on their own feet, they have not crafted an appropriate attitude to remain in contact with their disaffected population. Unless there is a form of reconciliation (on a different set of terms), the estrangement between customer and corporation will be endless, with a poor result for both parties. Having made the initial move in response to the recession, corporations need to take the lead on reforming the customer bond. Obviously, with the customer and the corporation free-standing, it doesn’t make sense to reform a bond under the previous covenants. Instead, corporations need to be in-touch with market needs, prioritize their products to meet some (not all) of these needs, and communicate their real value to the consumer. The old philosophy of placating every segment of an industry market is ludicrous (not to mention cost prohibitive) and sets an artificial promise to a diverse customer block—the automobile industry serves as a prominent case in point. Although legitimate product value needs to be established, corporations must hold their customers accountable for their decisions. If a customer buys a product and chooses to return it a few days later, the corporation should have the right to limit its exposure. The days of canceling credit card purchases based on a whim should be eliminated in favor of store credit. If the customer is not happy with their decision, the corporation should not be the culprit. Customer happiness is a term that will need to be re-worked from both the customer and corporate perspective. The recession may have been the catalyst for the change, but the customer relationship was in dire need of updating. In the end, maybe some good has come out of this economic downturn. It has forced corporations to focus and customers to grow up. Brad Dawson is the managing director of LTV Dynamics and has more than 28 years of management and financial consulting experience. He is a frequent lecturer to international entrepreneurial businesses and serves as a contributing writer to several national and international business and leadership magazines. Contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . |