Wednesday, June 6, 2007

The Slippery Slope for Losing Customers

Rather than logging some more statistics about customer, this will focus on the premise laid out in the June 2007 issue of the Harvard Business Review. The article that I will relate to is titled "Companies and the Customers Who Love to Hate Them." This article caught me off guard. It presents a perspective on service that I had never considered.

The premise of the article is that companies often implement policies for good reason that help them and help the customers. BUT, before you know it, the policy has morphed into a penalty to the customer and may become a signicant revenue source for the company. For example, the authors use bank credit cards to make the point that the banks initially stopped customers from exceeding their spending limit on the card. However, to make it easier for the customer, the banks allowed the spending limit to be exceeded but charged a fee. Now the fee has become significant and the banks are ending up making more profit from fees than from the interest on the charges.

The customer now sees the over-spending fee as a negative and the customers don't want to pay them. The customer base has now become vulnerable and may be willing to change to get rid of the penalties.

The slippery slope for the charge cards is that the policies that helped customers stay within their spending limits and control their spending has now become a major revenue source that the bank credit card companies are not willing to reduce or eliminate and some have even increased the penalties to increase their income causing even more customer anger.

Another point in the article relates to complicated contracts developed by companies that are intended to provide customers with choices so that they can best utilize the products or services. Companies often want to create products that give the customer a lot of choices. That is what a lot of customers want. Every service customers may not have a requirement for 2 hour response time when service is required. Therefore, service companies will offer service contracts with various response time options. However, the slippery slope is that as the contracts get more and more complicated, the customer can lose sight of what is best. Customers end up getting either much better service than the need or they don't get enough service to meet their needs.

The slippery slope for service contracts is when the company offering service contracts loses sight of the customer needs and tries to create a contract that will apply to any and all possibilities. When this happens, the customer may end up spending either too much for service or not enough. To make matters worse, the company wanting to be more productive, will want a service contract to better schule his personnel and support assets. Now the customer can feel trapped. In one sense it is in the company's best interest to be able to forecast his service expense. On the other hand, the customer is trapped into a contract.

The bottom line is to beware of what you do as a company to improve your performance and help the customer. It may morph into policies and procedures that may ultimately reduce company loyalty.

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