How to Lose a Customer for Life for Ten Bucks

Steve Martin in his heyday had a funny routine called Let’s Get Small. Today I am going to ask you to do the opposite. I am going to ask you not to be small.

A while back I wrote an article called the The $20 Brand Bond, noting how Amazon locked in my loyalty by facilitating a modest refund in record time without asking me a single question. Now I am going to tell you the story from the other end, how a local brick-and-mortar company lost me forever for half that much.

wine corksThis was the very definition of a no-brainer. My wife and I recently went to dinner at a neighborhood restaurant, which since it opened offered a no-corkage policy if you bought a bottle of wine at a shop a few doors down. We had done this several times and enjoyed the restaurant as well as spent a little more on wine, since there was no mark-up after retail. All was well with the village—until we walked in one Friday with a store-bought bottle stickered with the retail shop’s brand, only to be told while the waiter was uncorking it that the no-corkage fee no longer applied weekends but was now good weeknights only. I asked why the fellow at the wine shop hadn’t told me that since we had just been there and mentioned we needed the sticker for the restaurant to waive the corkage. The waiter said he had no idea why, but it was “out of his authority” and he would send over the owner.

This restaurant is about 1500 square feet, maybe 20 tables. The owner arrived a half-hour later. I told him the situation bothered me, that we had followed the routine only to be told after our bottle was open that corkage would apply because it was Friday. He responded, “Well, they should have told you at the wine shop. I’ll have to follow up with the owner there. He should tell his people that we changed this policy. I have to charge you $10 tonight.”

“You’re the owner,” I said. “You have to charge me $10? You have no leeway to make this one-time exception since we didn’t know you changed the rules?”

“We changed the policy so I am going to charge you,” said the owner, and he walked away.

We will never go back to that restaurant. I have told this story to perhaps 50 people around town. I am not naming the restaurant here out of loyalty to our community to prevent harm to our local businesses. Yet here you observe the destruction brought on a business by making the single most important mistake a business can make: not loving customers.

What’s interesting about this particular scenario is that we almost always order extra food when we don’t pay the restaurant for a bottle of wine, and we take home increased leftovers. We also tend to tip heavily and supplement the night’s bill so the restaurant doesn’t get beat on its own promotion. We understand the cost of customer acquisition and operating in a competitive environment. We understand you can change your policies anytime you like and rules are rules, no doubt to be fair and ensure continuity in the enterprise. We also understand that we have choices, we like great value more than we like a reduced bill, and we like to be treated kindly when we are guests in your house. You don’t have to do any of those things. Feel free to advertise, run Groupons, buy ads on Google, whatever you think gets us in the door. What gets us in the door fastest is getting us back in the door after we just had a swell experience. It doesn’t get any cheaper or easier than that.

When it comes to your customers, never think small. Your customers are your lifeblood. Without them your business is nothing. It takes years to acquire a customer base, and marketing is often your biggest intangible risk investment in a new business. You can lose a customer in an instant, and the potential damage to your reputation is unquantifiable. Yelp and OpenTable are only the beginning of your problem when you do a customer wrong. While bad reviews there are almost impossible to shed, they pale in comparison to the power of WOM: Word of Mouth. Casual conversation now travels at internet speed. Word of mouth escalates and compounds exponentially, but we are more predisposed to hear the bad over the good. It might take a dozen people telling you a place is good to try it. It might take only one to get you to avoid it all costs.

Is this just about small local businesses? I think not. Listen to the people around you talk about their cable companies, their phone carriers, their insurance companies. What’s their #1 complaint? Well, cost of course, getting gouged for mediocre products. And then? Customer service. They can’t get anyone on the line to help them. When they do get someone on the line they have little discretion to help them. These customers are held in place by a lack of choice—a situation that won’t last forever. When these neglected customers do have a choice—and they will—they will be gone, gone, gone!

Last week I attended a talk called The Rise of the Chief Customer Officer. I agreed with everything the speaker had to say about making customer service strategic and giving the Chief Customer Officer a seat at the table, except for one thing: I don’t think a CEO or an owner can afford to delegate this title; I think the CEO or owner has to be the Chief Customer Officer. If you want to show your employees what matters to you most, lead by example. Customers matter most. They pay for you to have a business. Contrary to an old cliché, they aren’t always right, but they do always matter. If you don’t woo them at every turn, they will vote with their feet. Or their mouths. Or their smartphone.

Thinking big means thinking long term. You don’t want one-off transactions; they are much too expensive. You want ongoing relationships, where customers return to you because you treat them like gold. Invest in relationships and the transactions will follow. Leave a few bucks on the table today for lifetime value that is unlimited.

Our local restaurateur got his ten bucks for the bottle of wine per his policy. Good for him. The next ten times we don’t walk into his cafe at $100 per seating costs him gross sales of $1000. The ten people who don’t come in because of word of mouth cost another $1000. Multiply by ten years of lost loyalty, that’s $20,000 of topline vaporized. You won’t need an MBA to calculate the negative ROI on that cold hard ten-spot in his pocket.

Still want that extra margin on a bottle of wine on tonight’s tab?

Stop Dropping the Ball

MittBallI get called frequently to help companies with their brands. Usually this involves helping identify the competitive advantages in products and services, articulating the unique selling proposition around innovations that constitute a customer promise, and then devising a sustainable communications strategy around that promise. That’s the hard part.

There is also an easy part. At the potential obviating of substantial advisory services going forward, here is an exceptionally simple way to solve half your problems. Ready? This applies equally to your personal life and your professional life. Copy and paste the following two words on the palms of your hands so you can see them every hour of every day:

Follow through.

Yes, it is that easy. A brand is a promise. There are three potential paths that follow a promise: (1) you fulfill the promise, wherein you satisfy and keep a customer, at least until someone leapfrogs you; (2) you exceed the promise, wherein you create an evangelist who markets for you; or (3) you violate the promise, wherein you create nasty noise in the marketplace that speaks ill of your offering at every possible turn.

When you break a business promise, you undermine the brand. When you break a personal promise, you undermine your own credibility. This is not negotiable. This is as hard-core real and irreversible as it gets. You need to follow through.

Here are several recent examples of broken brand promises:

  • My wife left her mobile phone on a plane. We went to baggage services. They couldn’t find it. They said they would call us the next day. They didn’t.
  • I went to pay my health insurance bill online as I do every month (I’m told recurring billing is for some reason not available on my plan). This time the system was broken. After on hour on the phone, I got a customer service representative who said she saw the problem in their system, that it would be fixed in 24 hours, and she would call me back. She didn’t call me back, and it wasn’t fixed. A week later I called again and began the process anew. This time another rep gave me entirely different instructions and said he had no idea why the previous rep had instructed me as she did.
  • We hired a contractor to do some work at the house. He didn’t show up. He didn’t call. When we rescheduled and he did show up the next time four hours late, my wife asked why he missed the previous appointment and was now four hours late. He said, “Well, I’m here.”
  • I filled out a time sensitive form online with a state agency. About a week later, I received a personalized letter via snail mail acknowledging my inquiry, conveying that the signer of the letter would get back to me promptly with an action plan. I never heard from him again.
  • A journalist for a high-profile financial periodical contacted me by email to conduct an interview about my book. I agreed and suggested a time. She asked if I could change that to a time that was more convenient for her and I agreed to that time. I gave her my mobile number. She did not call me at the appointed time. After 15 minutes I emailed her and asked if we were still on. Two hours later she emailed and apologized for missing the call because of an emergency. She asked if she could email me the questions. I said yes and she said she would send them. She never did.
  • A producer from a media company emailed me an inquiry to help his company launch a new venture. I said I would be happy to talk about it and suggested some times. I never heard from him again.

Yes, I know, everyone is busy. It’s completely normal to leave loose ends open in our fragmented, email overloaded lives. It can happen to anyone. It’s perfectly acceptable to leave people hanging if you have a good excuse. They will forgive you as soon as the words “I’m sorry” cross your lips.

Baloney! You’re living in a fantasy world if this is what you’ve convinced yourself, no matter if you are a rookie or a veteran. And you’re not as good as you think you are. Not even close. Otherwise you wouldn’t have left me blowing in the wind to be picked off by a competitor.

Winners say what they are going to do and then do it. I don’t care if you have to make lists of your lists. If you aren’t going to do something, don’t tell someone that you areand you’re scot-free off the hook. If you say you are going to do something and then you don’t do it, you lied. Yes, you lied. Or your company representative lied. And by transitive logic, your company lied. To a customer. That is the customer’s perception.

Think you can buy a big bubbly bag of advertising to win back the trust of that customer? Have fun calculating the ROI.

Think you can apologize and win back my trust? You can’t.

Maybe I have choices at the moment, maybe I don’t. If I don’t have choices now, I will soon. That’s what creative destruction is all about, old failed systems being replaced by better ones. Constraints on distribution are lifted from entrenchment every day. No matter what you have to offer, no matter how good you are at what you do, if you don’t show up as promised, you will be replaced. No one will feel sorry for you. No one will bat an eye when you crumble under your own incompetence or arrogance.

This really isn’t hard. In fact it’s as easy as it can possibly get. Make a promise, keep a promise. Follow through all the time. Do that and call me for the other half of your brand problems.

Public Service Made Customer Service

Earlier this year on The Daily Show, Jon Stewart asked Nancy Pelosi a rather awkward question: In effect, can our government still do big things? She never really answered the question, which was also kind of awkward. I don’t think she saw it coming. He was really probing into the nature of government competence and our ability to trust elected, appointed, and civil service employees to be great at their jobs and exceed our expectations. It was not meant to be a partisan question, but somehow that’s where it went, which sort of ducked the broader concern, which sort of reinforced his critique.

Like I said, it was awkward, and it got me thinking, why should the output of government services–or public service–not be subject to the same expectations of for-profit customer service? I have been chewing on this for weeks, and I can’t come up with a decent response. I serve in a volunteer role in local government, so I guess that makes me part of the problem, but it also drives me to be part of the solution.

The obvious retort will be that absent the free market and competition, any single point option will more than likely descend into mediocrity as a result of monopoly and entrenchment. I don’t think it’s that simple, because for-profit and non-profit enterprises are both constantly under attack by creative destruction, which when ignored is an equally powerful remedy to mediocrity. Improved methods will obviate the obsolete; it is only a matter of time and catalyst.

Global EntryThis past month I experienced a pleasantly opposite case, where public service did exceed my expectations–with expedience, practicality, and cordial handling. I applied for Global Entry, the Trusted Traveler Network administered by the U.S. Customs and Border Protection Agency. I went to their website, filled out the form in less than half an hour, was promptly notified online of conditional approval, and asked to sign up for an in-person interview at LAX. I quickly discovered there was a three-month wait for an interview, but the site suggested I check back frequently online for a cancellation. I got one within 48 hours for an appointment the same month, went to the interview, was promptly welcomed upon arrival (I was early and they took me when I got there), and ten minutes later I was fingerprinted and done. I was approved online that afternoon. Perfect.

This was exemplary customer service in action. It was almost as if Border Patrol had set out to prove that customer service was still possible within our government where there is an expressed commitment to make it so. They have my applause. I don’t know if I can award them my future business or ongoing loyalty given their scope of offerings, but just like writing a positive restaurant review on Yelp, I am giving them the loudest shout-out I can in as public a forum as I can, which is how the customer service game pays back winners with referrals.

I couldn’t help but compare and contrast that with several other recent observations of public service that simply haven’t embraced that ethos:

HealthCare.Gov – I usually focus on the broader issues of healthcare, which matter more to me than a broken website, but like Jon Stewart in the Nancy Pelosi interview, let’s focus for a moment on the website fiasco. Not only didn’t it work, not only was it impossible to navigate even when it did work, those in charge of deploying it allowed themselves to get fleeced by private-sector contractors. When you run a business with customer service in mind, you are compelled to keep your costs low and be a subject-matter expert before you offer service paid for by your customers. We are the customers of HealthCare.gov. We overpaid and we got a poor experience. Not good customer service.

Jury Duty – It makes us shiver, but it should make us proud. Anyone who gets the notice in the mail immediately starts to hedge, not because they don’t want to perform public service, but because our historic experience of this form of public service is that it is wildly inefficient. How long ago was this antiquated system designed, where you sit in a room all day doing nothing, waiting to be called or released? Yes, it has improved modestly with online registration and log-in, but when I recently spent a full day in a room of 125 people doing nothing of value, and fewer than two dozen of us were used at all, I wondered how it was possible to justify the lost productivity of 100 people times 8 hours, or 800 person-hours gone up in smoke in just the room I sat. It’s so wrong that no sustainable business could ever tolerate it, nor pay for it. If you want me to provide public service, start by seeing me as your customer and commit to process engineering so that my participation is truly of value.

Governor Christie’s Off-the Ranch-Staff – There’s a reason the obscene obstruction of a New Jersey bridge continues to ride the headlines, and it’s not just politics as usual. I use the word obscene purposefully, because using any position of public authority to harm rather than help a constituency goes against everything our democracy represents. When a public servant forgets that his or her salary is paid by the people and not the political party, all bets are off. Maybe there should be a slightly tweaked Hippocratic Oath in government: “First do no malfeasance.” If you go to work with full acknowledgment that you are in public service and your job is to provide customer service to those forking over the dollars for your gig, you couldn’t pull the trigger on anything like this, look yourself in the mirror, and say. “I did what I was supposed to do today.” When you do harm for personal gain, you add no value. You make a mockery of the privilege of serving those who trusted you.

When I was kicking around some of the themes for this post on my Facebook page as I often do before writing a new article, someone posted on my news-feed that it was a silly use of my time to write about stuff like this, because it never changes. Private-sector contractors will fleece the government, no one in the court system cares if they waste our time, and politicians will always use their power to reinforce their authority. I don’t think that’s true, and my experience with Global Entry is proof that we can do better if we make it a goal.

If we refocus the orientation of public service to be around customer service, it de facto has to improve. Perhaps more importantly, if we don’t keep tabs on the kinds of small to medium items called out here, how can we possibly have faith in the really big stuff entrusted to government: national security, fiscal solvency, social justice, and the like. There has to be a service model underlying all these tasks, subject to scrutiny, objective benchmarking, and listening to the customer. No, we’re not going to vote on what constitutes a valid TSA safety post or police DUI checkpoint, but we should always expect to be treated with courtesy when authority is surrendered for the greater good. Authority should be enacted with reason, humility, and respect so that it wins our buy-in and loyalty. Our aim should be to inspire all contributors to do their finest work all the time, to demand it of themselves as an absolute, to seek constant improvement of systems, teams, and individuals.

Think about it: virtually every customer-facing business now asks you to rate every experience you have with them, and the smart ones deploy this feedback almost in real-time to win competitive advantage. Start rating your experiences with public-service agencies, whether they request it or not, and not just at election time. Demand better and we will get it, maybe not in real-time, but sooner or later creative destruction does its job and washes away the ancient with one flavor or another of much celebrated reform.

And don’t forget to say Thank You when you catch someone doing something right. Everyone likes to get a thumbs up when it’s earned!

The $20 Brand Bond

Amazon LogoLet’s talk about lifetime value of a customer for a few seconds. I use the term “a few seconds” purposefully.

Recently I bought one of those discount vouchers for a neighborhood deli, where you pay something like half of face value and then cash in full value when you’re at the restaurant. This one wasn’t from Groupon or Living Social, but from Amazon Local. When I went to cash it in, the deli was out of business. Tough times always for restaurant retail. It happens. Went to another place for lunch. Oh well.

I got home that night, went to the customer service web page for Amazon Local, found the template under Contact Us, and submitted a one-sentence email notifying them of the event. How long did the response take? Less than a minute. Full credit.

Yep, Amazon Local “bought” this voluntary endorsement for a whole twenty bucks. Plus my ongoing loyalty. My lifetime value to Amazon the Brand just increased a good deal more than twenty bucks, perhaps a hundred times that, maybe more. Why? Well, first because they respected me and my time, but more so because they laid the pipe to assure me that if something bigger ever needed to be addressed, I could count on them.

What did they do right internally to cause this function to be enacted externally? For one, they fully empowered their staff, someone in a call center likely on the other side of the world. There is no way in that brief turnaround their staff person had to ask anyone for permission to do anything. They saw an issue, they jumped on it, case closed.

We look for WOW THE CUSTOMER moments in business all the time. We spend hundreds of millions of dollars on advertising to get someone to sample a new product or service, so that somehow a WOW THE CUSTOMER moment can occur. This one cost an entire twenty-dollar bill.

Compare this experience to another I wrote about earlier this year, where try as I might, I could not get one of the largest retailers in the world to help me locate a $5 replacement part for a thousand-dollar appliance I had purchased from them. That retailer competes with Amazon, probably does not know it, and will never get another dollar from me. If you have a moment, go read the transcript I shared from that interaction. Coincidentally, I happen to have shared that post with a rising star at Amazon back when it happened who was aghast when he read it. He had no idea of the contrast to come.

This is not meant to be a lionizing of Amazon. Full disclosure, they were a minority investor in my previous company and proved to be a formidable competitor, daunting in many respects, not the least of which was their near-rabid obsession with precision, time to market, and transaction perfection. They had vast resources to call on that were not available to me, but they used them wisely and never skimped when it came to the customer experience. That is a big part of how they got to be best in class, and consistently one of the top performers in the Internet Retailer Top 500.

Germane to Amazon’s perfection is a mandate of setting a customer service standard that is so extraordinary and so rare it can seem financially irresponsible to emulate—so much of net margin goes right back into the expense line to serve the customer. Market analysts often shiver when they report on Amazon, wondering how their eye-popping trading multiples can last, with so much volume but so little relative profit. Amazon seems to pay little mind to these analysts, instead worrying instead about customers. That leaves them no choice but to focus on lifetime value, calculating it in complex equations with net present value back to the reinvested capital that most others would probably harvest.

How tempting it is to consume the fruit of that harvest, but harvest has to come each year, and that is why we focus on brands. Here I lionize the customer service commitment as an essential and grounding component of the brand promise. It is the shortest business case study in the world, yet almost every company you encounter gets it wrong.

A service culture in the information economy puts the CEO at the bottom of the hierarchy and the customer at the top. The customer is the boss. The people closest to the customer, individual contributors like those in customer service, are the ones who interact with customers. They make or break your brand. How much discretion and authority are they usually granted? None. How much should they have? As much as you can pile on. They own the customer relationship, so they own your future.

Go on, hire the highest paid consulting firms and retain power player ad agencies. Hold multi-day off-sites for brainstorming retention strategies. Give motivational speeches about reframing your mission and vision.

Or just be really, really, really appreciative of your customers. Love your customers, every single one them, embrace them as strategic imperatives, bonds that build moats.

What’s the ROI on world-class handling of those who frequent your brand? You tell me.