The importance of keeping consumer power in balance

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Tripadvisor terrorism

Over the last few years, I‘ve done a quite a bit of work for the hotel industry. In every discussion about customer centricity, you can feel the fear for what I call ‘Tripadvisor Terrorism’. Front office employees are very often confronted with brutal guests that are asking for free upgrades in return for not writing a negative review on Tripadvisor or Booking.com. If you know that a hotel with a score lower than 8/10 on Booking.com is in big trouble, it’s easy to see why hotel management teams would worry about this trend. Luxury hotels do whatever they can to make guests happy but giving free updates has nothing to do with customer-centricity and everything with customers blackmailing companies. This is clearly a situation where customers have too much power, causing the customer to abuse it. Once the scales have tipped in this direction, it is very difficult to redress the balance.



Extreme customer centric companies

The digital world has created a world that expects higher levels of customer service. Free and fast delivery of online goods combined with free return policies are the new normal in the world of e-commerce. Companies like Zalando give customers their money back regardless of the condition of the returned articles. A Belgian newspaper tried it once: they basically destroyed the clothes they bought from Zalando to see what would happen when they returned them. The result was remarkable to say the least. They just got their money back, no warning and no questions asked. Any normal company would take a close look at their policy in light of such customer behavior but to companies like Zalando this is apparently not an issue.

Believe it or not, but this kind of behavior is starting to influence customer expectations in any sector. Just think about it: what percentage of your customers also buys on Zalando, Coolblue or Amazon? Probably more than half. And what percentage of customers is aware of the extreme customer-centric policies implemented by some of these new style companies? Probably more than 80%. It does not matter which industry you are in, companies like Zalando, Zappos and Amazon are influencing the expectations of your customers.

Trust versus control

What should you invest most in: trust or control?  My guess is that most companies invest more in control than in trust, whereas some new style companies invest more in trust than in control. The truth is: both are expensive. Investing in control means setting up control systems where many people invest all of their time into making sure nobody is taking advantage of certain customer service rules and policies. Investing in trust is also expensive because you are allowing customers to take advantage of your rules.



Trust within certain limits

An approach based on the principle of ‘trust within certain limits’ would offer a solution to the shift in power between companies and. When we visited Zappos, we discussed this topic with them. They told us they would also react like Zalando. If someone were to return a pair of shoes in a terrible state, they would still repay the shoes… but they would also flag that customer.  If that customer kept returned damaged shoes that person would get banned. So their decision is to remove bad customers from their customer list rather than changing the system. Most companies tend to change the rules and, as a result, customer service becomes average. If you want to be customer-centric in the extreme you need to trust your customers. At the same time, power cannot shift completely towards the customer or they will start to misbehave. A company like AirBnB has this problem sorted out better than the hotel industry as they apply mutual ratings. Both the customer and the supplier receive a rating. If a customer starts to misbehave, they will no longer be allowed to book accommodations on AirBnB. Just imagine how much more enjoyable a hotel stay would be today if the industry had implemented such a system early on.

5 COMMENTS

  1. How many of us have heard the story about how Nordstron allowed someone to return auto tires even though Nordstrom is a fashion store? How many of us trust that Nordstrom would do the rifght thing if we ever made a purchase error and waited too long to realize they should return someething.

    Twice within 6 months I had to return spoiled chopped beef to our neighborhood supermarket because it smelled “bad” the same day we purchased it. The first time we received a full cash return plus 10% for the inconvenience and the sencond time we received a full price store credit. Clearly their corporate management made the decision to watch every penny. I no longer purchase meat there.

    Back in the day it was difficult to flag frequent abusers of the no questions asked return policy but with modenr CRM systems there should be no reason not to treat customers as mature, loyal customers until they prove they do not deserve such consideration. Then shut them down!

  2. You’ve raised an important point. Creating and sustaining stakeholder trust (I’m also including employees in this equation, because they are so often bypassed) is paramount to building customer-centricity. That said, advanced companies like Zappos have been wise to build in safeguards so that both their business and reputation can be protected.

    I’m reminded of the bad press Sprint received several years ago when they summarily ‘fired’ 1,000 customers for overuse, and abuse, of their service operation. No one disputed their right to protect the business; but the arbitrary termination of the relationship with these customers put a dent in Sprint’s reputation. They tried to control the negative publicity but couldn’t stop the story from going viral. All in all, a bad job on Sprint’s part of managing the trust level of their customer base.

  3. I do not see ‘terrorism’ in this scenario. For me, that word has a specific meaning that doesn’t belong in this context. I think of this more as ransom. Regardless, the executives at Booking.com have created a petri dish for this unfortunate ratings abuse. Given the the longstanding proclivities of people to game systems, they should have anticipated this problem before releasing this software to the public. Now, I think it’s squarely on their shoulders to fix it.

    There are a lot of interesting points to debate in your statement, “This is clearly a situation where customers have too much power, causing the customer to abuse it.” These questions are at the top of my list:

    1) since power between consumers and vendors is never evenly divided, and is hard to measure in the first place, how does anyone know when a boundary has been passed giving one party ‘too much power?’
    2) Is the availability of power what causes people to abuse power, or is it something else – like a lack of rules and good application design?

    I think these questions are important to explore not only for online ratings, but in other transactions between buyers and sellers.

    A related article I wrote back in July asks about and addresses what is ‘fair play’ in online complaining: http://customerthink.com/complainer-emptor-when-does-online-rage-become-unfair/

  4. Good post & useful comments. It will be interesting to see how far this trend of unquestioned customer power continues.

    In “The Dark Side of CRM”, Prof Bang Nguyen has curated an interesting collection of voices on the reality that customers & suppliers are already engaged in data wars to seek an advantage over the other. I co-authored chapter 12 with Prof Merlin Stone (focussed on the world of Financial Services). But it’s an insightful reminder that we live in a non ideal world & some customers are not seeking service or reciprocity but to “get one over on” businesses.

    The reference to Sprint getting it wrong in how it ‘fired’ it’s customers is salutary and many companies do this poorly. But beyond dump process, culture and analytics will be needed to both protect businesses and customers (including from each other).

  5. Hi Steven

    Your post highlights a number of issues that are not discussed enough in the business press. As you point out in your Zappos example, there are plenty of companies that use a ‘trust and sanction’ approach for customers that abuse their largesse.

    Some years ago I worked with a Belgian telco to improve its service operations. One of the things the telco introduced was a no quibble policy about billing disputes, up to a certain value. Their logic was impeccable. Up to the value point the cost of an investigation of a dispute was more than the cost of the amount disputed. And that didn’t count the lost goodwill in not accepting the dispute in the first place. Nor the cost of handling complaints about the dispute process itself. A record was kept of customers disputing bills to ensure that they simply didn’t dispute every bill. Despite expectations to the contrary, only a tiny fraction of 1% of customers abused the new dispute resolution process. The telco found that if it treated customers fairly, then the vast majority of customers would respond in kind.

    Food for thought.

    Graham Hill
    @grahamhill

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