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Lessons from Verizon's convenience fee furore: Sales culture v customer culture

13th Jan 2012
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Lior Arussy looks at what the reaction to Verizon's convenience fee tells us about the difference between sales culture and customer culture.

At the end of 2011, Verizon Wireless retreated from its decision to charge customers $2 for paying via the phone or the web. The original announcement regarding the charge generated over 100,000 signatures in less than 24 hours from angry customers demanding that the decision be reversed. Verizon was forced to reverse its decision, an embarrassing act that did not enhance the company’s relationship with its customers.
The announcement about the decision reversal was accompanied by carefully crafted statement: “At Verizon, we take great care to listen to our customers. Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time,” said Dan Mead, president and chief executive officer of Verizon Wireless.
When I read the statement, I kept wondering: what were they thinking?
  1. What were they thinking when they came up with this unjustified fee to begin with?
  2. What were they thinking when they tried to institute this a fee after the embarrassment suffered by Bank of America – which was forced to cancel a similar fee of $5 for debit card usage after 300,000 angry customers signed a petition against it? (Bank of America issued a similar statement reinforcing their commitment to their customers…)
  3. What were they thinking the customer response to the fee would be in today’s era of social media and web sites such as
  4. What were they thinking when they put this carefully crafted reversal statement out there – that we are all stupid people and will buy into it?
The answer is quite simple. They were not thinking about customers at all. Customers were certainly not at the core of their decision. Sales and profit trumped customers. They were thinking that they could get away with it and generate more profits for a service that they had previously provided for free.
The temptation for a quick profit combined with belittling customers’ wisdom has affected several others this year. The case of Bank of America was mentioned above. Netflix was embarrassed by its customers, who complained in droves, when they tried to pull a fast one. Netflix planned to split its online and delivery businesses and charge customers separately for each service. The total new charges were higher than what customers paid already for the combined services. This was done, ostensibly, in the spirit of providing better customer service by “forcing” customers to maintain two accounts and having them go to one web site for streaming and another for DVDs.
Customer complaints forced them to retreat from their original plan. These behaviours are not limited to the US only. All over the world, companies follow the same presumably-easy trail to money. In Israel, Tnuva – the largest dairy manufacturer in the country – followed the advice of McKinsey & Co. and raised cottage cheese prices. They assumed that customers would accept this raise without a response. Customers responded with a several week boycott which resulted in an embarrassing reversal of the decision and the resignation of Tnuva’s CEO.
These are a few of the examples we witnessed this year and they stem from a simple truth. These companies put themselves first and their customers second. These organisations, and many others, have a sales culture and sales DNA – not a customer culture or customer DNA.
The difference between a sales culture and a customer culture
In a sales culture, the customer is merely an ATM machine that spits out money if you push the right buttons. The customer is an object who, by the act of his or her becoming a customer, will be willing to tolerate any bizarre decision by the company without question and without a response. After all, ATM machines do not talk back or have opinions. They just stand there and spit money. In this operating model, the customer is merely a means to an end. The customer is not the end goal. The customer is simply the cheapest way the company can find to make its numbers and please its stockholders.
In a customer culture, the customer is an equal partner. The customer is consulted with and treated with respect. The customer’s view matters because there is an understanding that the customer is the one paying the bills. One does not surprise customers with unexpected fees or try to squeeze the customer, assuming they have no other choice. In a customer culture, the customer is a subject with a voice. He or she is a precious asset that needs to be preserved with care.
These distinctions are not just nice statements on the wall incorporated into the company’s mission statement. They are the guidelines by which decisions are made. They are also the organisation’s principles of operation.
In a sales culture, most of the efforts, resources and budgets are spent convincing the customer to sign the agreement and buy the product. Far less attention is given to the delivery of the products and the customer’s delight and satisfaction. The view of the relationship with the customer is through very narrow lenses of signing the agreement and closing the deal. The rest of the relationship is secondary.
For years, technology companies suffering from a sales culture focused on shipping products to customers and never followed up to validate that the products were used and delivered the promised value. Often, the focus was on basic implementation while tens of thousands of software licenses went unused. This practice was so well entrenched in the sales aggressive industry, that it was “honored” with its own nicknamed “shelfware,” as in software that was purchased but sat on a “shelf” and was never used. Just examine the budget distribution of every sales-centric company and you will see the budget heavily leaning towards making promises and closing deals, not fulfilling the promises made to customers.
In a sales culture, sales people are crowned with the title of “rainmakers”. They are the kings of the organisation and the common notion is that, as long as they make their numbers, they are untouchable. The operations and service people, on the other hand, are accorded far less respect. They do the grunge work and are treated as children of a lesser god.
In a customer culture, the efforts, resources and budgets are spread properly across the entire customer journey with the company. The company views and understands the customer through all interactions: awareness, sales, usage, service, returns, invoicing, collections and so on. The customer is not just a transaction. Nor is the customer an event that takes place during the actual purchase. The customer is viewed as a partner in a long-term relationship – a relationship that is invested in, nurtured and grown. Employees’ measurements and executives’ compensation reflect this conviction and ensure that resources are focused on ensuring customer delight and the company’s fulfillment of its promises. The perspective used is one of a wider lens that recognises that the customer relationship that should last for years.
I am confident that Verizon, Bank of America and Netflix have some function that is committed to delivering great customer experiences. Most companies do. I can imagine how passionately they argued against assaulting customers with unreasonable charges. I can visualise their statistics-based Power Point presentations being delivered to serious looking executives. I am sure they tried their best. But at the end of these passionate presentations, the priorities of these companies were made very clear. The truth is that they do not consider customers valuable partners. Do customer experience, but only as lipstick on the pig. When the moment of truth arrived, these customer experience managers could not stop the executives’ decision. The sales culture won. Their answer to the question: “What comes first – the sale or customer’s satisfaction?” was clear.
Customer culture drives financial results
Do sales and customer experience conflict? Absolutely not. Customer centric companies reap the rewards and generate great sales with little need for discounts. They are able to impact the five (5) important P’s of customer relationships:
  1. Preferences towards their brand
  2. Premium price
  3. Portion of budget
  4. Permanence of the relationship
  5. Promotion to other customers
A customer culture delivers strong financial results, even in this uncertain economy. In a consumer study conducted by Strativity Group, we discovered the following facts about customers who had an exceptional experience with a vendor:
  • Portion of Budget: 73% would expand their purchases with a vendor by 10+% if the customer experience was superior
  • Permanence: 70% of loyal customers state that they plan to remain with a vendor for ten years or more whereas only 24% of disloyal customers expect to remain with a vendor for ten years or more. In contrast, 35% of disloyal customers expect to leave a vendor within a year versus fewer than 1% of loyal customers.
  • Promotion: 58% said they would recommend companies that deliver superior customer experiences to others
  • Premium Price: 55% of loyal customers are willing to pay a premium price of 5% or more for the experience they receive versus only 14% of disloyal customers. In contrast, 52% of disloyal customers expect a discount of 5% or more to continue doing business with a vendor while only 12% of loyal customers demand discounts of 5% or more.
Make no mistake; a customer culture is not a form of charity. The difference is that companies run by a sales culture operate out of efficiency-based greed. They attempt to maximise revenues and profits by minimising the value delivered to customers. Customer culture companies operate out of love-based greed. Sales culture companies try to efficiently squeeze every last dollar out of their customers. Customer culture companies want to maximise results by demonstrating love to their customers. Companies focusing on customers increase their revenues and profits by maximising value delivered to customers.
Creating certainty – who comes first?
As we face 2012 and strategic plans are being drawn up to deal with these uncertain times, every employee must know the answer to the following two questions: “What comes first – the customer and a long term relationship or short term profits?” “Are we a sales culture company or a customer culture company?” (There is no “it depends” here. Just as there is no “it depends” when asked who do you prefer your family or your mistress?) When employees know the answers to these questions they can adjust their behaviour and service delivery. Some employees may decide that this is not the culture for them and move – even in these uncertain times. Some employees have values – and they will not treat customers the way they themselves do not want to be treated.
Our consulting work experience with over 140 of the most exciting brands in the world has taught us that one cannot layer a customer culture on top of a sales culture. You need to be honest with yourself and your customers about the type of relationship you are in. A sales culture drives a very utilitarian relationship that results in a commodity experience and strong price sensitivity. A customer culture focuses on differentiation, customer intimacy and premium price. You need to choose. After making the choice, you need to ensure that your efforts, resources and budgets align appropriately.
Deciding to have a customer culture is not just a slogan that appears on a slide at the CEO’s town hall meeting. It is about prioritisation, availability of resources and budget allocation. It is making sure that every employee is empowered and able to deliver on the company’s promises to its customers. It is making decisions after filtering / consulting with customers. It is about measuring long-term relationships and not just short-term transactions. The Verizon story illustrates that when a company does not make the customer culture choice and align its operation and decision-making process accordingly, the result is efficiency based on greed that leads to embarrassment and erosion of customer trust.
Without a conscious choice to become a customer culture company, you will most likely default to being a sales culture company. You will treat your customers as if they are an endless source of income until you hit a wall, as Verizon, Bank of America and Netflix did. And in the process, you will drive your business into the fast lane to commoditisation.
So, one more time: In 2012, what comes first – the sale or the customer’s satisfaction?

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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