Curtis on...Just Because You Can, Doesn't Mean You Should
Curtis Bingham, Founder & Executive Director of the Chief Customer Officer Council, discusses how to foster loyalty among your customers by doing the right thing.
Transcript for Curtis on...Just Because You Can, Doesn't Mean You Should
I'm Curtis Bingham and I'm the founder and the executive director of the Chief Customer Officer Council.
A couple of years ago, I was doing a project for a major credit card processing company where I was creating customer strategy. I did a series of interviews and very in-depth analysis of their customer base; and I found a customer segment that would gladly pay two, three, four, and even five times more for this product and the services than anybody else because they value the particular feature so highly that it made it just totally invaluable to them.
We suggested to the CEO that they should focus on this particular segment, charge one or two times more for the extra value that was being received, and that would net them an additional 20 million dollars in annual incremental revenue. That’s revenue that would recur every single year.
The CEO focused on another finding that was minor but important to him, and that was the fact that, for the most part, the decision to go with a certain credit card processing company was a once-and-done decision. In other words, they did a lot of due diligence, did a lot of competitive analysis upfront when they first began to evaluate the credit card processing companies; and then, once having made the decision, they never looked at their bill again, never looked at their fees and did not examine things very closely to see whether or not they were still getting a good deal in comparison with other companies in the market.
The CEO decided to raise all the fees across the board a little bit and charge a one-time annual membership fee of approximately $70 dollars.
There are three things that are wrong with this. The first is that it's just plain wrong. It's unethical.
The second one is that it penalizes everyone rather than capturing the value in play. Everyone pays an additional fee and incurs an additional burden when there are only a handful people in the segment that we have discovered that really valued the extra services and capabilities that this product offered.
The third and most important thing that was wrong with this decision was that it emphasizes short-term revenue at the expense of long-term customer relationships. It's all focused on giving an initial boost to the company’s top and bottom lines, but it completely ignores the impact that this decision might have on long-term relationships and long-term customer value.
As many of us learned when we were children, the foundation of a lie works as long as you don't get caught. Your strategy is dependent upon not getting caught. Murphy’s Law will inevitably prevail.
If your customers don't notice, your competitors will point it out with great glee, highlighting the fact that you're abusing them and hoping that they don't know.
Consequences have a nasty tendency to catch up with us when we can least afford them. The consequences of this decision here can be severe. There's a fair amount of academic and anecdotal research from companies large and small that indicate that loyalty generates additional 5 to 33 percent greater revenue. In local cases, it could be 170 percent greater revenue that has come from significantly loyal customers.
Trust is the foundation for that loyalty. So, here in this case, if you destroy trust, your customers feel abused. They feel like they've been taken advantage of. You sacrifice the trust. You sacrifice the loyalty. Therefore, you end up sacrificing your customers and their attendant revenue. Not only that, you sacrifice the relationships with other customers not necessarily affected by this because word of mouth is so much more powerful than anything that you can do.
It's just this simple. You sacrifice loyalty; you sacrifice revenue; you sacrifice customers.
The question for you is, what are you doing to customers that you're hoping nobody will notice?
Just because you can do something to your customers doesn't mean that you should.