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The customer is NOT always right: How to address right and wrong customers

12th Mar 2012
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What defines a 'right' customer vs a wrong customer? And knowing that the customer is not always right, what do you do? Lior Arussy explains.

Several years ago, Southwest Airlines employees charged an obese passenger for two seats. The passenger sued the company. Southwest defended its position in court and won. This was a simple case of a customer who was wrong. The airline has a responsibility to all passengers, including the one slated to sit next to the obese passenger. Would you like to be that one?
Let’s examine several examples of customers who were not right.
  • Case 1 - During a recent analysis done by us at a global hospitality provider, our consultant overheard a group of 17 happy diners say to one another at the end of the meal: “Let’s go to guest services and complain. They will waive the dinner fee for us.” There was absolutely no basis for the complaint other than taking advantage of the generosity of the hospitality vendor and the diners’ keen knowledge that the vendor is sensitive to customer satisfaction surveys and results and would do anything to avoid negative feedback and comments.
  • Case 2 - A recent recruiting experience taught me a personal lesson. Being concerned with finding the right person who would fit Stativity’s culture, I asked the recruiter for a temp–to–hire arrangement. He was completely willing to comply with my request. The candidate provided was not a good fit and we had to let him go. During a discussion with another recruiter, I was told that the temp–to–hire arrangement does not appeal to top candidates and I might want to reconsider my request. Instead of telling me what I wanted to hear, the second recruiter taught me something new and expanded my knowledge. He stood to lose my attention and business by refuting my request, but preferred to tell me with is right – rather than treat me like I was always right.
  • Case 3 - Several years ago I was working with a client who continued to supply its wares to customers who did not pay their bills for over 365 days. When questioned why they do this, I was told that they must be customer centric and not argue with customers. I am sorry, but non-paying customers are not customers. They are merely vultures living on the profit margins provided by the good paying customers. Such vultures belong anywhere else but on your customer list. (May I suggest your competitors?)
Especially in this economic environment, we cannot tighten the commitment to customers without thinking things through and understanding the consequences. In today’s world of customers empowered by social media, we rush to fulfill the wishes of every customer who publicly blasts her dissatisfaction.  When we do this, we run the risk of raising a new generation of customers who can hold us hostage even when they are wrong and we are right.
Who is the 'right' customer?
The 'right' customer is right. The wrong customer is not right. What defines a 'right' customer vs a wrong customer? There are four dimensions that can assess customer quality.
  • Fair – Premium Price – Did the customer pay a fair price and potentially a premium price or was he focused on obtaining the deepest discount possible? Did he ignoring your quality and treat your product / service as commodity?
  • Knowledgeable – Customers who are knowledgeable are more likely to appreciate your value and what it takes to create it. In addition, they may require less education and therefore you require fewer resources to service them.
  • Collaborative – Customers who are willing to do their share, such as use self-service, are in the “right customer” category. Such customers understand that it takes two to succeed and are willing to do their share. As a result, they allow you to make a fair profit.
  • Win-win attitude – You can see it in their approach. The 'right customer' respects your brand and value. The wrong customer assumes it is a win-lose situation and they drive the hardest bargain possible with the assumption that any profit you make is a loss for them. They fail to see the value you provide in return.
These four dimensions define the 'right' customer. The 'right' customer does not enjoy value he or she did not pay for. They pay their fair share and do their part to ensure the success of the relationships. When you view your customers through this four-dimensional prism, you will be able to identify the 'right' customers very quickly and distinguish them from the wrong customers.
Knowing that the customer is not always right, what do you do? Here are several principles to address the 'right' and wrong customers.

Customer relationship reset

We need to drop the old clichés –“The customer is always right” or “the customer is king.” The customer is often wrong, might be unrealistic, sometimes abusive, and (if tempted) take advantage of us. The customer is not above reason and should not be treated as if they cannot be reasoned with. The customer must do his or her share and be willing to pay for the value they receive. If this is not the case, they should not be customers.
The 'right' customer is right. The rest are not. The profitable customer is king. The rest are begging for value they did not pay for. Let’s get a reality check here and make sure we select customers carefully. Especially in this economy, you cannot afford to do business with the wrong customers. Over generalizing clichés should be replaced with carefully crafted corporate strategies.

Set clear expectations

Customers should know what is expected of them as part of a relationship. They need to know what you promise to them and what they are expected to do in return for receiving the promised value. Often expectations remain vague and unclear. A “reasonable response time” may mean 30 minutes to the customer and 48 hours to the provider. Be clear and do not leave anything open to interpretation.
Working with a luxury car dealership I came across a unique situation. Customers were purchasing rare cars (in some cases only 2,500 cars were sold in the entire world,) yet expected their desired car to be available immediately. Such cars were made to order and required special customization, yet the customers were unforgiving in their unrealistic expectations. 
It is imperative that from the outset that customers have a clear understanding of what is possible both in terms of price, timing, quality, and level of service. Hiding the inconvenient truth from customers will only aggravate them later on and result in either significant service resources being required to respond to your unhappy customers or some form of compensation to them. 

Ask 'why?' five times

When presented with an unrealistic request, try to understand the context. Ask the customer: “Why do you think you deserve this? “What is the source of their request?” “What are the benchmarks you are using to make this request?” Try to establish a logical platform you both share to resolve the request. Keep on probing. It may take five 'Whys?' until you get to the heart of the matter.
By asking 'Why' five times, you are also able to ascertain a new dimension of the customer’s request – the emotions that drive the 'what?' or 'when?' the customer is seeking. As a product or service provider, you often fail to understand the emotional issue associated with the customer’s request. When you get to the customer’s heart, you will be able to craft a solution that is truly suitable. When buying a nail, the customer does not really just need a nail. What the customer is really looking for is the ability to place picture of his late, dear father on the wall.  Understand that, and you will be on your way to creating the right solution.

Don’t argue with the customer, charge for it

There is a simple litmus test for how serious the customer is: Are they willing to pay for their special request? If the answer is 'no', we have a problem. The customer is, in a sense, asking you to bear the cost of the special request. Try to find out why they think they deserve a freebie.  Try to establish a mutual financial platform where you can jointly examine why they think they earned this free service they are asking for. If their answer does not satisfy you or does not make financial sense, then you need to determine if you can find a justification to fulfill the customer’s request without getting paid for it.
If they are willing to pay, find a way to make it happen, while keeping it profitable for you. It may be profitable as part of the overall customer relationship but not in this specific interaction – but overall, it must be profitable.
Charging is a great way to test the customer’s real intentions and needs. If there are no financial consequences, customers will ask for anything imaginable. They will act like spoiled kids who know no end to their desires because they did not have to work for the money to pay for the items they crave. When you create consequences and financial discipline, they will quickly rethink their requests and many of them will evaporate. Additionally, it will provide you with a mechanism to evaluate the request and follow a logical path to approve some requests, even if the customer is not willing to pay or is asking for a waiver. This might be a long-term customer who is asking for a one-time special accommodation or a collaborative customer who is assisting in reducing your costs.

Identify the abusers

Some customers are abusing your organization. Several years ago a US cellular operator 'fired' a group of customers. The act drew a great deal of popular attention, which caused the company to halt the practice. A closer look at the details disclosed a telling story. The fired customers were low cost customers who called the cellular operator on average 50 to 100 times a month! They were abusing the system. They did so while paying $29.95 per month for overall cellular service. No customer needs to call a vendor that many times a month. If they do, there is something fundamentally wrong with the relationship and one side has a totally different expectation than the other side. The cellular provider had no other choice but to let them go. Firing this type of customer frees up resources, which can then dedicate their time and attention to address the needs of the right customers.
Every company that operates with clichés such as “the customer is always right” has created abusers – customers who do not know where or when to stop. Customers who think that there is an open, free buffet will have no shame lying to get a free meal. Abusers should not be tolerated and the practice must be stopped. If it does not, you run the risk of spreading it to other customers and compromising your business model.

Focus resources on the profitable customers

Desperate for sales, you have run various special promotions and discounted your products in the process. As such, your customer pool includes those with different levels of profitability. Some customers paid full price and expect a luxury experience in exchange for the generous margins they provided you. Others paid rock bottom prices and are enjoying an experience they did not fully pay for. The latter customers are free riders at the profitable customers’ expense. Align your resources with the 'right' customers as we defined them earlier through the four-dimensional prism. A one size fits all experience fits no one.
Those 'right' customers should be priority one for all your resources and value. Customers, who purchased from you when the price was significantly reduced, should be treated accordingly. They should be provided with a reduced experience.  A reduced experience does not mean a bad experience – it means a less privileged experience. 
Let us look at an example.  When purchasing a restricted fare airline ticket, you will not be eligible for upgrades to business class. (Some European airlines have taken this further and will not award any mileage points to the traveler’s frequent flier account for these lowest fares.) Why? The fee is too low. Does it mean that your economy seat experience will be worse? No. It simply means that you do not deserve certain privileges. When paying for a single room at the Four Seasons hotel you will receive a great experience. But the guest who paid for a club level room will enjoy an upgraded experience. He paid more, the hotel enjoyed better profit margins – which it can apply to delight this customer more.
There is nothing right about treating customers with different levels of profitability the same way. In fact, it is flat out wrong. There should be a different level of 'right' for different levels of profit. By not teaching your customers that there are sacrifices that need to be made for lower prices, you are spoiling them and creating unrealistic expectations.
The reason you are limited in your ability to delight and wow your 'right' customers is that your resources, both human and financial, are tied up with low profitability customers who are expecting high profitability experiences. Break this vicious cycle and you will have all the resources you need to treat the 'right' customer the right way.

Include measurements of customer collaboration into profitability

Through the four-dimensional prism described above, you can measure customer profitability. It is the ultimate measure of success with the 'right' customers. For example, one customer is highly collaborative and conducts his interactions via low cost self-service channels. Another customer is lazy and refuses to use self-service channels.  He uses the high cost call center instead. Should they both be treated the same? One customer is highly profitable. The other is not. You want all your customers to be collaborative and do their share. Well, do something about it. Reward the collaborators and charge the lazy ones. Measure your success by the bottom line profitability of each customer! Reward collaborators and create a path for success.
Do not take the collaborators who do their part for granted. They are, in fact, the right customers. They are the one who should be treated right. Only the proper measurement tools will allow you to identify, track, and reward the collaborators. Don’t set your measurements by the old top line numbers; focus on customer collaboration - thereby, profitability.


Delight the right customers

Now that you know who your 'right' customers are and you have measured their collaboration, it’s reward time. You need to send a clear signal to all your customers: the 'right' customer is right. Rewarding the 'right' customers in a public way resets the expectations of all customers. They all know now what is important to you and what type of relationships will receive the highest level of attention. You set the stage for customers to select if they wish to be your 'right' customers or not. Treat the 'right' customers as kings and make all the wrong customers envy the royal treatment received by the 'right' customers. This is the best way to have the wrong customers join the ranks of the 'right' customers and make them more profitable.
When working with a business to business client, I pointed out that they were providing their customers with rich and generous free training as well as software to run their businesses, yet many of these customers elected to give a lion’s share of their business to the competition. When my client notified the abusers that their free training and software would be terminated at the end of the quarter due to lack of performance, the overwhelming response was “you got me” or “what will it take to keep it going?” The customers simply took advantage of the free training and software because no one called them on it. They stopped when they lost the privilege. Soon after, the client’s top customers were flown to the Las Vegas Four Seasons Hotel for an all expense paid vacation. By combining a carrot and a stick method, my client improved profitability by 30% in less than a quarter. How? The volume of collaboration increased dramatically and impacted the profitability in a significant way.
The abusive customers were let go, which reduced losses and resources allocated to them. The combination of increasing collaborators, a.k.a. the 'right' customers and removing the abusers, a.k.a. the wrong customers, both impacted their bottom line. Not only was this move profitable for my client, it was favorably recognized by its customers who selected my client as the number one provider in their industry for five years in a row.
Customer strategies should not be left to oversimplified clichés and fairy tales. The customer is not always right. Some customers are not kings. A customer who is not paying for the value they consumed should not be a raving fan. (Do you really want a customer who takes advantage of your company raving about it to everyone and bring more customers like him?).
It is time to take a disciplined approach to analyze which are the 'right' customers and then you can treat them the right way. Let’s crown the customers who deserve to be kings and leave the rest to the competition.

Lior Arussy is the president of Strativity Group a global customer experience research and consulting firm. Arussy is the author of five books including Customer Experience Strategy – The Complete Guide From Innovation To Execution (4i, 2010). Follow Lior on Twitter @LiorStrativity

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