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Giving Away Customers Is Bad Business

Written by David Batstone

Giving away your customers is not a good business strategy. Oh, and try to bring in more money than you spend. You would think the first business maxim is as obvious as the second. So why then do so many companies fail to embrace the customers that come their way?

With troubling frequency I find myself falling into a state that I call the "customer shuffle." The first incident occurred several years ago when I signed up for cable television service from Comcast. I signed up at a local distributor that represents Comcast in my area. But when I tried to change my service several months later, neither the local distributor nor the national provider would "own" me as a customer. The customer service agents at both companies shuffled me back and forth like I had leprosy. I bid them both adieu.

This past week I experienced yet another amazing case of customer shuffle when I made an effort to connect with my home insurance provider, Balboa. The fact that I even have a policy with Balboa is a bit of a mystery to me in the first place.

You see, I have a home insurance policy with the California State Automobile Association, or AAA. When I bought a second property five years ago, I called AAA to insure this property as well. But the AAA agent told me that his company could not insure a non-owner-occupied home, but could link me up with another insurance company, Balboa, that could. Ok, so property insurance is so complicated that a firm can provide it for a home occupied by the owner, but cannot do so for one not occupied by the owner? Perhaps greater minds than I can make sense of that fine distinction.

Anyway, I received a surprising notice from Balboa this past week informing me that it was canceling my insurance policy because I had "failed to pay the premium." Well, I never received a bill for the premium. I also took note that the cancellation letter had located my non-owner-occupied home in the wrong zip code and town.

So I called Balboa's customer service line. The agent asked me why the bank that carries my mortgage was getting billed for my premium, yet was not paying it. I told him that I had received direct billing for five years, and asked why they were now billing my mortgage carrier. He had no explanation for that switch, but assured me that he would now switch it back to direct customer billing.

Having solved what I thought would be the thorny issue, I casually asked the Balboa agent to fix the erroneous property address on my property. I couldn't believe my ears when the agent told me that he couldn't make that change. "You have to call AAA," he explained, "because we are simply an underwriter for your policy." Though I protested that Balboa insures the property and therefore should have the proper location, he did not move. So I called AAA customer service, and its agent told me that only Balboa could change the address because it was a Balboa policy. Not surprising. I then called back Balboa, and got a new agent who told me to call AAA. When I protested that I was tired of being the ping-pong ball sailing over the net, the agent offered to make a request to change the erroneous address, but I would need to call back in two weeks to see if the change was approved.

I know you think I am making this stuff up! It is beyond absurd. In the midst of shuffle I did find out that AAA now insures non-owner-occupied homes (a genius must have come on board!), so I switched the property over. Balboa lost a customer even though it would have been so easy to keep me.

Too many firms focus obsessively on customer acquisition and give only cursory attention to strategies of customer retention. In many cases that is so because the company has determined that retaining customers is too costly. It's a bone-headed approach: Bring in revenue with new transactions and hope that some customers stick around simply out of inertia. Existing customers get the shuffle treatment, and just have to deal with it.

A business that plans to be successful over the long haul will think long and hard about how to best embrace the customers they do win over. After all, there must have been some reason that they fell in love with you in the first place. Even if they stumbled in your door by referral or chance, make them feel like a long-awaited visitor who now has a home.

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John - Customer Shuffle

2005-11-09 08:33:22
4 years ago my home mortgage was with Countrywide Mortgage. I had been bought up by Countrywide from another mortgage company a year after I had purchased my home. Overall, I had been happy with Countrywide, but rates were falling and I wondered if I could do better. I called Countrywide three or four times to see if there was anyway to reduce my rate. I was willing to buy the rate down or go through another application process if needed. After all, this would be needed if I changed companies.
I was repeatedly dismissed out of hand, so I went out mortgage shopping. After going through the entire process, which took months; and getting approved, having the new settlement date set and title search completed-I got a call from Countrywide asking what they could do to keep me as a customer! I nearly lost it with the agent on the phone.
To make matters worse, they send me letters every few months asking me to back to countrywide!
The new company, World Mortgage just called to ask if I would like to buy my rate down by a 1/4 percent for a $200 processing fee. What a difference a 1/4 percent makes in my opinion of the company!
John

Arden C. Hander - ... customer service 10K miles

2005-11-09 09:12:26
One never need to bring me over to his tale of bizarre customer treatment, and for those who have not yet experienced it, they will! Why? With cheaper labor offshore or even in India & telephone service beamed by satellite to Timbucktu as easily as down the street, the clerk with whom you are trying to make some sense about a billing problem is perhaps thousands of miles away. Your credit history & records have already been transported out of the country, which raises more than a few hackles with me & even more concerns about into whose hands that data might fall. If there is not a HIPPA violation somewhere? Even so, this would be no doubt 'grandfathered' since they beat us to the punch and it having gone on for years without our discovery. I first learned of this kind of activity in England when a supervisor at Debenham's told me she was concerned about the practice, now about six years ago, but then found on my return home that it had been happening here too. When you can withdraw cash in another country's currency at an ATM abroad with your card, the convenience they sold us on first for free may already have morphed into more transmissions that you can imagine, but hackers & the underworld beat us to it. Try losing your Discover card (which you should have left in the states since it's of no use outside the country) in Europe & not being too concerned since it cannot be used there but finding that it has a huge cash advance charged to you before 24 hours have passed! Yes, somehow the crooks know how to pass it to whomever for dirty dealing, even if we are clueless.

I don't want to be overly concerned to the exclusion of travel & other normal activity, but the risks are scary. When you talk the next time to incompetence personified on the phone, maybe that's why management has taken such steps as offshoring in the first place; yet, what do we do & how do we do it? Those in charge were the ones who created the obscurantist & jobspeak rules of engagement initially. If business does itself in with such behavior, touchee! Problem is that they take us down with them even when we try to bolt the system. And going elsewhere will often fetch you another similar experience. Some of us remember a time when this was not true!

Terry Hadaway - Commiserate

2005-11-09 09:14:11
I feel your pain. No, I really do! I am in the process of abtaining health insurance from Blue Cross/Blue Shield through eHealthInsurance.com. The application has been in process for about six weaks now. Yesterday, I called the web site's 800 "customer service" number to get the status of my app. A recorded message told me to call an 800 directory assistance number for the new number. Yet the 800 directory assistance number disclaimed any knowledge of its client. The online chat "CSR" could only give me the original number to call. All he could do was tell me that it was working from his end and suggest that I somehow had failed in my attempt to dial an 800 number. The possibility that the service his company offered could have glitch somewhere totally escaped him. About half a dozen phone calls and two online CSR chat sessions later, I still have no clue as to the status of my application. So much for the added convenience of technology

Stephanie Sarver - Customer Shuffle

2005-11-09 16:59:31
What you're experiencing is the full expression of the "shareholder value" approach that took hold in business management 20 years ago. Increasingly corporate leaders have replaced a value system that recognized customers as their primary concern, and replaced it with one that recognizes the maximizing of shareholder wealth as their primary focus.
The effects of this subtle shift can be seen in your experience. As a customer, you're only one tool in the toolbox for maximizing shareholder wealth. Accounting and finance methods don't quantify the value of satisfied customers; they do quantify the cost of delivering customer service. Good customer service costs money, and those costs are immediately evident in financial statements. Conversely the cost of losing customers is gradual and will appear over a much longer period, and then buried in declining sales that likely could be attributed to many other factors.
Moreover, given that companies are bought and sold as a tool of building shareholder value, business leaders know that if they allow a division to gradually fail through poor customer service, there's still opportunity for "creating value" later when that division is sold off. (And then they are credited with brilliant management.)
Many stakeholders lose (customers, employees), but a few, such as senior executives and shareholders win.

What can customers do? Not a heck of a lot except share their experiences and let market repuation build its slow effect on their sales.

Kevin Barron - Owning the Problem: 2 Models

2005-11-10 20:39:58
The folly that often exists when a customer and company are going their seperate ways is in the aspect of "ownership" and the empowerment & resources required to do so throughout what may be referred to as a "problem resolution lifecycle". Simply bifurcated... the resolution of a problem is either a 'proactive retention approach' vs a 'reactive retention approach'. A proactive approach empowers the customer service experience from the get-go, while the reactive approach is usually after the customer's wits are at end and pushed into a self-defensive mode, AKA "I'm closing my account!".

Simply put, firms can listen and take ownership when the problem first arises, or the ownership can occur when the problem has reached it's apex. One requires significant time and resources, the other takes on a high volume/low cost approach accepting a loss-rate of giving away customers.

Problems will always exist. They mutate like a cold virus. They can't, and will never be stopped. Both corporations and customers must accept this, and usually we do. No customer service super hero model can defeat it.

These type of consumer horror stories of the simple is-it-just-me-or-is-this-absolute-lunacy? experiences have become Americana. Each story unique, but the underlying blunders are simple in their core. Often the customer is commonly left to fend for themselves, while swearing that "after this is over, I'm closing my account/service/relationship". Meanwhile, in far too many instances the relationship is saved (for the time being) as some companies feel their REACTIVE approach is not only suffice, but actually may pat themselves on the back in successfully "saving the client".

Whimsical how after the fact, it has become acceptable and standard for the client to be gifted with the seminal "manager escalation". Gee thanks. My heart disease will be writing your management a Thank You letter. At that point, the problem is remedied, the client resumes a regular heartbeat, and it's back to laissez-faire, until the next reactive drama rises. This is quite analagous to a bad relationship, when a couple patches the hole in their perverbial roof, without recognizing that the hole is best fixed when the roof is dry, not wet, and when the problem first arises, not after the rainstorm has passed through it. Again, problems will always exist, and the client experience may never be 100%, therefore the cockeyed goal of 'how to keep the rain from falling' (to exhaust this analogy) is also folly. There is no such thing as 100% preventiveness in any customer service model, so we as customers should accept this, and be willing to understand why and really take a macro view of ownership when engage particular firms for our business.

Balboa Insurance not being able to adjust/react/compromise is probably due to today's growing cultural template that utilizes and strives for efficiencies in customer service cost-benefit model. It's a tack that sets the course of customer relations on efficiency, versus, say... an REI, where they see a different cost benefit in the full ownership and resolution of the client issue. All too often we assume the customer service rep is just some slack who really couldn't care less about some whiny client 2,175 miles away. When in fact, the call-center we interact with, is really managed (or attempted to) with BMW-like efficiency. Kudos to them, unfortunate for us. We must assume our benefit is cost-savings passed to us, or a slick website that intelligently suggests products to me.

An REI can spend 6 times as much on a particular resolution, and assume said customer will continue to come back and spend their hard-earned money 7 more times. REI takes on a cost-benefit risk that not every client experience or problem will gobble resources to the hilt, and assumes those customers will return as a faithful customer into perpetuity. The hope is in the partnership created between corporation and client, and neither abuses the relationship. The client saw the problem looming on the horizon, yet throughout the experience they were communicated to, co-empowered, allowed alternatives, apologized to vehemently, given options... their heartbeat remained in double-digits throughout the experience.

A customer service model that allows for both proactive and creative latitude needs to empower the customer service rep to work within, and more importantly, around their own system. Moreover, it takes a LOT of resources to take ownserhip of the "problem resolution lifecycle" from the start, and companies need to accept that, or be willing to part ways with a number of clients. In other words, spend 100 peoplehours serving 100 clients who are moderately faithful at a "loss rate" of 10%/month, or spend 200 peoplehours serving 75 clients who are extremely faithful with a "loss rate" of 1%/month.

It may seem simple governance for companies to take the moral super hero route, but the "cost-benefit culture" is not an easy task to grapple amidst other priorities. Or so it seems.

Jerry Dilliard - Customer aggravation

2005-12-15 16:12:11
Afriend called me today after waiting through 17 options on a voice-mail "customer service" list and discovering that none of the options fit the problem: "There IS no such thing as customer service, there is only customer aggravation!"

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