Do companies honestly think that they can “own the customer” these days? I’m astounded to say that some behave as if they do, in such ways as lack of transparency, creating false expectations, and creating artifical exit barriers. Mistaking owning the customer relationship with owning the customer may be part of the problem.
In the last two days I have had cause to ponder how significant organisations can be so backward and outmoded in their behaviour towards customers – it seems to me to be such a serious disease that it may even have the smell of a rotting corporate carcass.
At a small meeting with a team from a leading global IT business, a household name and a monster company, pricing models were being discussed for a new software product. The visiting US expert was here to explain that there are three customer segments – 1-100 seats, 100 – 1000 seats, and 1000+. For each segment there are three pricing models. These took some explanation, with lots of notes taken.
The bottom line is that the very small customer actually gets the same deal as the very large customer because there is a marketing strategy to try to capture more of that market. And in fact one of the pricing models for the very small customer just actually states the price – that’s the formula – couldn’t be more simple.
Whereas the formulas for the large customers are very complex, they have bonuses for current licenses and discounts for volume and then a killer “inverse bugger factor” at the end which magically brings their price down to the same price as the super small buyer needing only ONE seat.
One of the local sales staff asked – why this complexity, and why this magic wand thing at the end to come at with that number? The US expert blandly stated that all this was simply a ploy to make the big customers feel as if they are getting a good deal. It’s just negotiation tactics.
To move a domain from an Australian firm who describes themselves as a “global publicly-listed IT firm” I had to get an unlock key. Other registries list this for you in the domain details, and you just cut and paste. In this case it was only available by clicking a link and requesting it – and it then said “this has been queued and will be delivered to you in up to 72 hours”.
Having to wait 72 hours was bad enough, given that it’s readily available and should be visible within the account. Then I had a call. Why was I transferring they wanted to know!
Needless to say I was annoyed to get the call, since whenever I wanted support it’s very hard to get – which is exactly what I told them and the actual reason I was leaving, plus their prices were outrageous and up to 5 times what others were charging. Immediately I was offered a much cheaper deal. They know this story.
I declined the offer and went on to use the example that I could not even get my unlock online, that I had to make this request. “Oh I can give that to you right now if you like?” Yes, I like, that’s the reason I clicked the request. So if you have this there online then why don’t you publish it in my account console.
“It’s a customer retention strategy – so we can call you” !!!!
Where ARE their minds at?
It’s beyond belief isn’t it. The leaders of these organisations have strategies to deceive their customers, to mislead them, to falsify intentions, and to aim to retain them by brute force.
Not only do these behaviours indicate disorganised organisations which are extemely short-term oriented and with noone accountable for owning a customer relationship, but they think that they can “own” customers by keeping them hostage.
It’s a clear symptom of conflicting goals withing the organisation – also a lack of clarity of purpose, lack of mutual committment across the teams and business units and to the customer, and most of all a lack of respect for their customers. In other words the organisation is misaligned in terms of managing their relationship with the customer. Or maybe they ARE aligned – to short-sighted short-term goals?
I think that it’s also even deeper – it’s a sign of a corporate sickness. An entrenched malaise of the culture and the leadership.
What’s the result with customers
The outcomes of this behaviour are “obvious”, even if not so to the companies:
- Customers are going to find out – this is the way things are in these days of social media;
- Customers are going to feel cheated and disrespected;
- And they are going to tell their friends and colleagues – in an amplified social media way.
It’s not always the case that they will cease buying from the supplier, because they may be hostage customers.
For example, take me and Qantas. I have 1 million frequent flyer miles, yet I dislike Qantas and their attitude in almost every conceivable way. Why do I continue to fly with them – because the others are not much better (we have little choice anyway) and because I have the 1 million miles!
I’m a hostage customer of Qantas (not to mention my telco provider and my electricity retailer!).
Customer equity is destroyed
Whether I stay with Qantas or not, or whether people stay customers of my two case studies or not, it does not mean that staying with them retains their customer equity.
Thinking of customer equity in three parts explains how this is destroyed in these cases:
- Value equity – the perception of value is either betrayed, or it comes out to be nothing but neutral and an non-advantage in my examples. So there is negative or zero value equity, despite the fact I might remain a customer;
- Brand equity – the perception of ther brand. It’s bad, and made even worse when the deceptions are discovered, and even worse when a customer feels like a hostage;
- Retention equity – if a customer is staying a customer despite their feelings above, then they are definitely going to resent it. They’ll be telling the 15 other friends how they resent it, as opposed to the satisifed customer telling 1 other person.
So on all counts the customer equity is destroyed, even if the customer’s business is retained.
When businesses try to own customers, instead of focusing on how they can internally optimise and manage the total relationship, then they will always destroy customer equity.
I wonder how long it takes before they also destroy themselves? Continual erosion of customer equity can only lead to one thing, provided competitive forces are in play – which is not always the case. The Australian IT provider started life as a monolopy, as did Qantas (well not quite but effectively, they still control 80% of Australia’s domestic airline business).
As for the global IT company – Case 1 – well, things can change very quickly, just look at Nokia. How they hold out for so long surprises me.
Have you experienced “customer control” – how did you react?
Do you still buy from organisations who you disrepect – as a hostage customer?
Is owning the customer verus owning the customer relationship the root cause of these issues?