At the end of 2014, Fred Reichheld, Bain Fellow, Author and Creator of the Net Promoter System, suggested that one of the big ideas of 2015 would be for companies to start rating their customers and to, ultimately, fire bad ones as companies focus more and more on doing business with customers that they want to do business with.
Firing bad customers is an idea that receives broad support from many businesses. But, implementing it can sometimes be harder than it sounds as firms tend to be sensitive about revenue losses and the potential risk to their reputation that comes from firing customers.
But, it does happen and once done firms tend to keep ‘blacklists’ of customers that they don’t want to do business with.
However, firing customers is not always straightforward for some firms and some have recently taken up Mr. Reichheld’s second suggestion and that is to start ‘rating’ their customers. Companies at the forefront of this include Uber, Lyft and airbnb, whose business models are to connect customers with ‘service providers’ in their respective areas of interest. Reports suggest that these companies are now starting to rate their customers as a way of protecting their ‘service providers’.
This is causing a degree of unease amongst some customers and reporters due to the lack of transparency of these ratings and the fact that they are not keen on being reviewed regarding their individual behaviour.
Their reaction is interesting and smacks somewhat of double standards, given that we are continually encouraged to rate our experiences with companies that we do business with and to use those ratings and reviews to help us decided who to buy from.
Funnily enough, their reactions also sound very similar to some company reactions that were heard when internet based customer reviews and ratings first entered onto the scene.
But, the fact that companies are starting to rate their customers points to a bigger issue and that is the behaviour of some customers.
In Singapore, Prime Minister Lee Hsien Loong at the Singapore Service Excellence Medallion Award ceremony in May echoed this when he suggested that it was not only incumbent on businesses to provide good service, but that customers should also value and treat service staff with courtesy and respect.
I think he makes a very good point.
But, that does mean that companies must trust their customers to act in the right way.
That might be fine for some but not for others. One company, in France, decided that it didn’t want to leave customer behaviour to chance and through it’s price list is both educating it’s customers on what is expected of them and will penalise them for their ‘bad’ behaviour.
The firm in question is the Petite Syrah Café in Nice, France, where back in early 2014 it introduced a different set of prices for it’s customers dependent on how polite they were to staff. For example, if you say ‘Hello, a coffee, please’ then you would be charged the normal price of EUR 1.40 ($1.58 or £1.02). However, if you are shorter, more direct and less polite and said only ‘a coffee’ then the price could rise to EUR 7.00 ($7.89 or £5.07).
According to the press coverage of this particular tactic, it was done more ‘tongue in cheek’ than anything else and hadn’t really been enforced. But, it was also making a serious point and was aiming to educate some of their customers about what behaviour was expected of them.
So, should businesses fire, rate, educate and maybe even penalise customers for bad behaviour? That has to be up to them. But, what is clear, I believe, is that customers, companies and employees should all be treated with respect and, therefore, the incidence of some customers having their behaviour rated is likely to increase until that happens.
This post originally appeared on my Forbes.com column here.
Respect assumed and notwithstanding, more customer-centric companies do a better job of up-front targeting and finding creative ways to eject customers who, for any of an array of reasons, prove themselves to be undesirable: http://www.targetmarketingmag.com/post/avoiding-one-night-stand-targeting-customers-who-will-stay-with-you/4/
Well, first, every company has a right to choose/fire customers.
However, Customers have rights also. They have a right to know how you are segmenting them and whether they are in the segment they think they belong to. and if fired (and I am thinking B2C), why fired, how to be re-installed etc.
You should not arbitrarily fire.
Airlines segment, downgrade/upgrade you depending on how much you fly. Is this good enough. What happens when a very high flyer retires? or if the person recommends or makes booking decisions, where should he be placed? Is he a Customer if he does not fly himself?
Should you fire him for not flying?
Hi Adrian
Another thoughtful post.
For me the nub of the matter revolves around complementary rights and responsibilities. Companies and customers often take advantage of the former, without fulfilling the latter.
A company has the right to offer a product to a customer and the responsibility to deliver what the customer paid for. A regulatory framework, typically provided by government, ensures that there is a roughly-level playing field over which transactions can take place. For example, limiting the ability of a company to create patently unfair terms and conditions of sale. And for the customer to wriggle out of fair ones.
In a similar way, a customer has the right to purchase a product and to expect the product to do what was advertised. He has the responsibility to pay for the product and not to use the product for purposes it was not intended for. The regulatory framework ensures the same roughly level playing field for product usage. For example, limiting the right of the customer to claim compensation for using the product for a purpose it was not intended for. Or for the company to wriggle out of its responsibility for a faulty product.
Of course, there is considerable greyness in this admittedly simplistic framework.
Does a company have the right to ‘fire’ a customer that it does not want to do business with. Yes, up to a point. The regulatory framework rightly outlaws discrimination based on gender, race, age, disability and so on. A customer has even more rights to fire a company it doesn’t like, for practically any reason.
Does a customer have a right to post a review, positive or negative about a company and its product. Yes, up to a point. The regulatory framework rightly outlaws reviews that are defamatory, slanderous and so on. A company has the same rights to post a comment about a customer. The same framework applies. As William Douglas said, ‘Sunlight is the best disinfectant’.
The problems arise when a company or its customer do not abide by the framework, or in some cases, simple common sense. When Sprint fired 1,000 customers for not being profitable enough it was rightly pilloried in the press, particularly when it emerged that its own incompetent business practices were the reason many of the customers were unprofitable. The CMO and CEO were fired from Sprint shortly afterwards in a restructuring to fix structural problems that the Sprint 1,000 debacle was symptomatic of. What’s good for the goose is good for the gander.
Graham Hill
@grahamhill
I don’t agree with Petite Syrah Cafe’s approach, but rating customers on other dimensions has been going on for many years. Back in the 1980’s, the accounting manager for the company I worked for attended a monthly credit meeting for suppliers to the printing industry. The purpose for the gathering was to compare notes on which commercial print shops were paying their invoices on time, and which ones weren’t. For many years, Rotary Clubs and local Chambers of Commerce have been informal conduits for similar information.
In the ’90’s, I periodically met with other salespeople to discuss similar issues, such as which companies were best to work with, and which ones to avoid. Through those meetings, it became well known that a certain large (now defunct) Richmond, Virginia-based company was especially reviled among salespeople. Today, B2B salespeople might be inclined to share such information using numerical ratings via a secure website. I think it’s a good idea.
Hi Andrew
It is interesting to note that, at least within Europe, Data Protection legislation would give customers the legal right to find out what a company said about it, to challenge it and to correct it where it was wrong. Maybe even to sue the company for defamation or slander if they overstepped the mark.
The pending Data Protection legislation, due in 2017, will make life even more difficult for companies.
Graham Hill
@grahamhill
Thanks everyone for adding your comments on my post and central question: “Should you fire, rate or educate your customers?”
What’s clear is that it is an interesting and evolving issue and one that will be shaped by emerging and changing legislation.
However, I believe there is an opportunity for firms, where appropriate, to do more to educate their customers and/or set expectations about rights and responsibilities on both sides.
Adrian
Hi Adrian
Not so fast…
What moral and legal rights do you think customers should have in their dealings with companies? And what responsibilities should companies have towards their customers.
And the flip-side of the coin: What moral and legal rights do you think companies should have in their dealings with customers? And what responsibilities should customers have towards companies.
Rights and responsibilities are like the weather; everyone talks about them but nobody does anything about them. This is your chance to start to change that.
Graham Hill
@grahamhill
Hi Adrian – Whilst rating and reviewing organisations/products and the experiences they deliver is now part of day to day life, conducting the same principle with customers is not quite the same thing. I would NOT be inclined to use a company that would rate my ‘performance’ as a customer, although there are obviously many who would.
However, like all things when it comes to Customer Experience, nothing is right and nothing is wrong. If firing or rating customers works for a particular business proposition, then do it. It will certainly not work for everyone.
The one thing I do believe that ALL businesses should definitely get better at is your third option – EDUCATION. All too often, the customer experience is negatively affected due to a lack of understanding on the part of both the employee and the customer. If companies were better at educating both, we would be in a much better place than we are today.
Graham,
Aha! Thank you for not letting me off the hook 😉
You pose some interesting questions and ones that I have been mulling over in the last 24 hours.
Having thought about it, I’m not sure there is a one size fits all solution here.
But, here’s an idea that has emerged so far from my ruminations:
Rather than getting stuck into a discussion over morality and what sort of legal protection we need, I’d be more inclined to try and derive a mutual understanding through a conversation between a firm and it’s customers as a direct way of addressing some of these issues.
For example, what if a company co-created an agreed ‘code of conduct’ with their customers that included a set of company promises to their customers and a set of promises by their customers to them i.e. here’s what we expect of you (from both sides), here’s what we promise to do (from both sides) and here’s what happens if either of us reneges on our promises.
Wouldn’t that form a basis of an understanding around what was allowed/expected by and from each other? Wouldn’t that form a good place to start from and wouldn’t it allow for variations in industries, company sizes, different product/services and types of customers?
Adrian
Ian,
Thanks for your comment. I agree that education is important and I’d like to see more of it.
When you say “I would NOT be inclined to use a company that would rate my ‘performance’ as a customer”, do you mean a company that publicly ‘rates’ you as a customer?
Or, are you referring to any type of ‘rating’ whether public or private?
As others have pointed out, private ‘rating’ of customers has been going on for a long time.
Adrian
Public ratings Adrian – without doubt, that would deter me from interacting with a business that wanted to go down that route.