No capitalist can refuse a chance to cut those heavy personnel costs by transferring jobs to customers who work for free.
—Craig Lambert, Shadow Work: The Unpaid, Unseen
Jobs That Fill Your Day
You pay for this, but they give you that.
—Neil Young, “Hey Hey, My My (Into the Black)”
It’s close to sacrilege to disrespect the anointed institution that is the customer. After all, the customer represents demand, the engine that pulls the train. Be it traditional consumer markets, business-to-business (B2B) segments, government entities, institutions like colleges and hospitals, internal departments, sophisticated channel resellers, professional services, or the growing consumer-to-consumer market—the needs and wants of downstream customers stimulate every organization to perform. You could say the customer is the point, the reason why organizations do what they do.
However, many customers wallow in captive, monopolistic or oligopolistic markets. A veil of customer loyalty masks the prohibitive realities of high brand-switching costs, geographic barriers, poorly served markets, socioeconomic means, and restrictive purchasing contracts. Choice implies options, yet customers are confronted with limited selections in many markets.
The maxim Customer is king is a make-believe ideal often meant to distort the true nature of the relationship between buyer and seller. A disingenuous but effective metaphor, Customer is king magically transforms one thing into another. Like most metaphors, it doesn’t modestly suggest mere association like its more subtle kin, the simile, which uses like or as (i.e., treat the customer like a king, or as a king). Customer is king is a bolder affront to the senses; senses that when belonging to an average consumer are no match for a commercial system designed to efficiently transact (for a profit), manipulate (to influence attitudes and behavior), and satisfy (for the allure of future business). Incidentally, the satisfaction outcome is conditional and only pursued when necessary.
The objective of this chapter is to debunk the Customer is king maxim. I’ll provide evidence gathered from the research literature, surveys, corporate communications, personal experiences, and numerous observations from our consumer culture. Sadly, the customer is very often treated as prey rather than king.
No Way to Treat a Royal
First, note that I use king as a gender-neutral term. This is merely a reflection of how the concept of customer is generally referred to in a marketing context. For perspective, I present a battery of questions to help frame the dubiousness of the Customer is king maxim, including:
Would a king pay his cable television provider more each year while getting less desired entertainment content? Would a king wait in line overnight outside Best Buy for a new i-something? Would a king consistently waive his legal rights by agreeing to arbitration clauses buried in purchase agreements? Would a king grovel and overtip a maître d’ for a good table?
Does a king not demand a refund after a bad movie, concert, haircut, meal, or business book purchase? Would a king need protection from the Better Business Bureau, Federal Trade Commission, or Consumer Financial Protection Bureau? Would a king be pleased with a $500 rebate offer on their next Volkswagen (VW) purchase after learning of a fraudulent emissions system in their current VW? And speaking of cars, would a king tolerate the typical car-buying ritual perpetrated at most dealerships?
Would a king be duped by manipulative promotions or predatory lending practices? Certainly not a wise monarch. And would Wells Fargo have set up nearly two million sham accounts—without the customers’ knowledge—if the bank truly respected their patrons? Lastly, would a king pay to watch a $20 million ballplayer strike out four times, pay nearly $8 for a warm 12-oz beer, wait 10 minutes to use the bathroom, and sit in an uncomfortable seat at Fenway Park on a rainy night in April? Probably not.
Even if the customer was king, he would be a complicated monarch with serious issues. Customers may be more accurately described as irrational, emotional, impulsive, impatient, shallow, socially needy, status seeking, gullible, bored, and hopelessly aspirational.
Some customers are unreasonable and dishonest. They may refuse to provide personal information to marketers in order to protect or conceal their identities, or give incorrect information for the same reasons.1 Many consumers act like spoiled royals, believing they occupy the moral high ground relative to merchants and producers. Some rogue customers have taken to anonymous and divisive rants on the Internet. It’s as though technology has liberated the oppressed consumer class, granting them a new-found power to voice displeasure—whether it’s warranted or not. Complaint forums abide the wronged with opportunities to publically howl and rant. The customer feedback dimension of the web functions more like a digital placebo for relieving customer angst. The web’s mythical powers of consumer empowerment are seldom actualized. Unknowingly swallowing the hype, buyers view the Internet as a democratizing equalizer, yet the cyber realm is more masterfully exploited by sophisticated producers and sellers.
While there are bad actors on both sides of commercial transactions, most customers are trustworthy souls seeking fairness in transactions that deliver value. The focus in the next several pages will be an investigation into the lack of respect accorded customers by many of their purveyors.
Success Despite Contempt
There are a variety of naughty lists available to help catalogue the worst offenders of customer maltreatment. One such list comes from the financial news and opinion outlet 24/7 Wall St., which conducts a survey of 1,500 randomly selected respondents in order to compile a Customer Service Hall of Shame.2 The worse a firm’s customer service score, the higher it ranks in the Hall. Predictably, cable and satellite television providers, cell phone carriers, and banks are the most adept at failing their customers. In Table 2.1, I include the top 10 worst offenders (measured by frequency of “poor” ratings) along with each firm’s market capitalization, return on equity (ROE), and brief commentary.
The list in Table 2.1, and others like it, is heresy to those believing in the absoluteness of the Customer is king credo. How can certain firms grow while consistently disappointing customers? The answer lies, in part, with imperfect markets, short corporate time horizons, inflated customer expectations, and the insatiable demands of irrational consumers. It’s as though some customers actively seek abusive commercial relationships.
Global consulting firm Bain & Company offers some insight as to why wireline communications firms are perennial underachievers in customer service. The Bain & Co. authors explain that:
These firms thrived in the past as customer acquisition machines, built to grow through rapid penetration of the digital television, Internet and voice products they introduced during the past decade. Their cultures and capabilities haven’t adapted to the new reality of greater choice for consumers, including choice of satellite and over-the-top online video alternatives.
They still reward more for new installations than for growth in the number of profitable subscriptions. They invest more in advertising and marketing than in service technicians or in set-top box capabilities that would delight or at least retain customers. And they don’t pursue the rewards of customer loyalty as much as they hunt aggressively for new sales to replace departing customers.9
The above annotation explains some bad behavior, but it does not completely demystify the industry’s reluctance to undergo fundamental change. Comcast, for example, spends heavily on promotional campaigns trying to convince stakeholders that it is prioritizing customer needs (e.g., scheduling installation appointments). This serves as a smokescreen masking the erosion of the value proposition offered to customers. Comcast’s long-term survival appears predicated on the success of future acquisitions (like DreamWorks)—not its disregard for current customers.
Table 2.1 Top 10 Customer Service Hall of Shame rankings8
| Firms with the most “poor” ratings for customer service | Market capitalization | 5-year average ROE % | Comments |
| 1. Comcast | $150.3B | 13.5% | With regional monopoly power, the comcastic treatment of customers will likely get worse with cord cutting, as the firm seeks to maximize margins with remaining customers. The U.S. Government rejected a merger with Time Warner on antitrust concerns. Perhaps Comcast’s desire to create entertainment content (e.g., purchase of DreamWorks) will mercifully distance it from consumers. |
| 2. Direct TV | n.a. | n.a. | Acquired by AT&T in 2014 for $49B in cash and stock ($67B when including assumed debt).3 This merger does not bode well for consumers. |
| 3. Bank of America | $149.2B | 2.8% | Fees, fees, and more fees. |
| 4. Dish Network | $22B | – | Employee dissatisfaction is not helping the firm’s customer scores.4 Firm has considered mergers with T-Mobile and Sprint in the past. |
| 5. AT&T | $221.8B | 11.3% | Fined $100 million in 2015 by the Federal Communications Commission for reducing data speeds (a.k.a. throttling) of its unlimited data subscribers. The Federal Trade Commission filed suit against AT&T for the same issue.5 |
| 6. AOL | n.a. | n.a. | Acquired by Verizon in 2015 for $4.4B. |
| 7. Verizon Communications | $210.8B | 40.6% | Treats customers as sheep and uses a third party (Asurion) for many phone warranties seemingly to both deflect and increase customer rage. |
| 8. T-Mobile | $31.6B | –65.7% | Smaller than rivals but without a model to differentiate it from others. Hustles customers with the same phone plan shell game that competitors use. Network reliability is rated poorly.6 |
| 9. Wells Fargo | $241.2B | 13.2% | Wells Fargo had a relatively high “excellent” rating in addition to its sizable “poor” rating. Poor scores may be related to general discontent with the banking industry following the last financial crisis.7 It appears customers either love them or hate them. Note: This survey was conducted before the bank’s infamous sham account scandal exposed in 2016, where 5,300 employees were fired for illicitly setting up accounts unbeknownst to customers. |
| 10. Walmart | $214.4B | 22.2% | We shouldn’t expect much from a discount retailer, but some of the goods are cheap (vs. inexpensive) and check-out lines are slow. |
Surprisingly, an airline did not appear on the Hall of Shame list until United Airlines checked in at #28.10 Admittedly, the airline business has been a tough gig for decades. It’s hard to earn profits in such a highly regulated, competitive, weather-dependent, high-cost, and safety-conscious industry. However, a New York-to-Los Angeles trek in the not-so-friendly skies takes just as long today as it did at the dawning of the commercial jet age in the 1960s, with no improvement in creature comforts. Planes are packed full and baggage fees are common. The disrespectful practice of overbooking continues. And while we should rejoice at the airlines recent consistency with regards to profitability, the industry has been reluctant to pass on fuel cost savings to its precious customer cargo.
Fortunately, there are several firms that score well on customer service metrics. Companies with the lowest percentage of “poor” scores in the 24/7 Wall St. survey included Bed Bath & Beyond, Amazon, Barnes & Noble, Marriott, and Auto Zone. When accentuating the positive by looking at firms recording the highest percentage of “excellent” ratings (which dictates placement in the 24/7 Wall St. Hall of Fame), the top performers were Amazon with 59.4 percent, Chick-fil-A with 47 percent, Apple with 40 percent, Marriott with 39.2 percent, and the grocery giant Kroger rounded out the top five with a 38.6 percent excellent rating.11 When customers get what they expect, or maybe get a little more, they are generally satisfied. Expectations matter a great deal.
The Customer Satisfaction-Performance Paradox
We have all heard how satisfied customers are the keys to business success. However, a review of the research often tells a different story. A 2014 MIT Sloan Management Review piece outlined several studies and markets showing weak satisfaction scores for top-performing companies. Examples include mass market brands like McDonald’s and Walmart. The article’s authors, led by Timothy Keiningham, point to contributing factors such as a diverse customer set, low price requirements, convenience, and a large assortment of goods. Smaller firms are more likely to score higher in customer satisfaction since they cater to specific needs in focused niches. The data showed that higher market shares often have an inverted relationship to customer satisfaction. As for profits, the authors remarked, “While customer satisfaction and profitability are not mutually exclusive, they don’t have to be aligned, either.”12
Using a massive data set containing over 160,000 customer responses and performance metrics from 137 public firms, Keiningham and his colleagues found the importance of customer satisfaction is relative to competitors in a firm’s category. Many firms experience either weak or negative return on investments from their satisfaction efforts. A company may unwittingly put pleasing unprofitable customers ahead of profits. Additionally, in explaining the relationship between customer satisfaction and customer spending, the researchers commented that “Changes in customers’ satisfaction levels explain less than 1% of the variation in changes in their share of category spending. Yes, the relationship is statistically significant, but it is not very managerially relevant.”13
The American Customer Satisfaction Index (ACSI) tracks consumers’ general level of satisfaction. The ACSI recently went down for the eighth straight quarter and is at its lowest point in 10 years. Interestingly, the index tends to drop as unemployment goes down. Administrators of the ACSI gather that service employees may work more diligently and be more customer-centric in times of job scarcity. Also, stagnant wages may contribute to consumers’ feelings of low satisfaction given that their earnings have not outpaced even low levels of inflation.14
Writing for Bloomberg in 2013, Eric Chemi used ACSI data for a sobering piece titled, “Proof That It Pays To Be America’s Most Hated Companies.” Chemi’s analysis revealed “no statistical relationship between customer service scores and stock market returns.” He further grumbled that airlines, banks, and cable and Internet providers “don’t have much incentive to care” about customer service given the general contempt for customers by most major competitors in these industries.15
In addition to satisfaction, scholars use many other terms to describe how organizations interact with customers. Popular constructs for evaluating a firm’s consideration of customers include marketing orientation; customer focus; customer-centric; customer orientation; customer driven; customer sensitive; and customer relationship management (CRM).16 While the granddaddy of the terms is marketing orientation, CRM has become more hip since it is often the acronym used for the sales and marketing module of computerized enterprise systems that help run entire organizations. Later in the chapter I will specifically address the misnamed relationship portion of CRM for its superficiality.
Although there are differences in the terminology, suffice it to say that the aforementioned terms all deal with how a firm is geared toward treating the customer as a strategic or operational priority. For the sake of simplicity, our discussion will treat these terms as one. Much research indicates a positive relationship between market orientation factors and an organization’s financial performance, but findings overall in this research domain are equivocal. Before citing a few specific studies, I invoke a challenge to conventional dogma surrounding market orientation with the following from Phil Rosenzweig, author of The Halo Effect:
Just to be clear, I think that strong customer orientation probably does lead to better performance. Companies that listen to their customers, that design products and services to meet customer needs, and that work hard to satisfy their customers should, all else equal, outperform companies that don’t. But you don’t discover these companies by asking: Are you customer oriented? All you’ll get is a self-reporting Halo, cued by company performance. If you want to measure customer orientation, you have to rely on measures that are independent of performance.17
Next, I present a small sampling of studies to illustrate how the degree of a firm’s market orientation may influence organizational performance. First, a study of the hotel industry highlights how a firm’s perception of its customers’ values (e.g., price sensitivity, desire for services) will determine the type of orientation exhibited by the hotel. For example, if customers are considered more price sensitive, hotels will adopt a competitor orientation (i.e., match or beat competitor prices). Hotels with target customers that prize service are more likely to operate with both a customer orientation and a competitor orientation. Published in the Journal of Business Research, this study concluded that the stronger a firm’s customer orientation efforts, the more the firm will demonstrate market advantages due to innovation and market differentiation.18 Studies such as this tend to split hairs regarding how the firm reacts to external stimuli—be it customer or competitor activity. But this research raises an interesting question concerning high-end hotel customers (e.g., Ritz-Carlton patrons): To what degree is their hotel choice predicated on differentiated services versus the attractiveness of extraordinarily high prices (implying exclusivity)? As a two-time winner of the Malcolm Baldridge National Quality Award, Ritz-Carlton management would likely argue the answer lies in differentiation, quality, and customer satisfaction.19
A study of 434 Chinese manufacturing firms examined the customer focus component of the total quality management (TQM) approach for prioritizing activities of the firm. The study author concluded that customer relationship practices have a positive effect on production performance and, to a lesser extent, customer satisfaction and financial performance. While I am generally a strong proponent of TQM practices, the self-reporting aspect of customer orientation reported in the study’s methodology is problematic. The data collection tool assesses customer orientation by asking respondents to rate their own firm on the following prompts: “Our company emphasizes the importance of customer orientation;” along with “We make every effort to understand our target customers;” and “We take our customers’ opinions and suggestions seriously.” Managers’ positive biases will likely present themselves when answering Agree or Strongly Agree to these questions.20
Another example from the literature is a meta-study published in the Journal of Marketing that compiled 114 separate studies. The authors concluded that “the market orientation-performance relationship is stronger in samples of manufacturing firms, in low power-distance and uncertainty avoidance cultures, and in studies that use subjective measures of performance.”21 This conditional interpretation of outcomes is indicative of the difficulty with generalizing results of this phenomenon to broader populations. While our intuition may lead us to believe a strong marketing orientation (i.e., customer focus) will translate into better financial results, the findings from the academic literature are not so clear or convincing.
It’s All About Relationships
Marketers have been moving away from relying on transaction-oriented interactions with customers—or at least the appearance of that cold reality. Relationships have been all the rage in marketing circles for the last couple of decades. As I stated previously, CRM modules are standard elements of firms’ IT infrastructures and enterprise systems. Numerous cloud-based services offer impressive capabilities to store, retrieve, and configure customer data. This data represents a strategically important resource for ongoing customer analysis, targeting, follow-up, and promotional initiatives. For example, while I could care less about my car dealer sending me a “Happy Birthday” e-mail, I do appreciate the occasional special discount offer, recall notice, or reminder for maintenance.
But relationship is a strong word. It implies trust and some level of reciprocity, a two-way street that goes beyond the simple exchange of fees for goods or services. Conversely, transaction is such a cold, impersonal term. Relationship is much warmer and evokes the emotional connection coveted by marketers. If you have a romantic, family, friendly, or even just a professional relationship with someone, you expect intelligible and prompt responses when you call or interact. Below are a few examples of some less-than-stellar responses (and often no response) that I have received from firms that have been doing well in the marketplace.
Hanes not-so-tighty-whiteys: I sent Hanes Brands a detailed letter with several tags and waistbands of Hanes Men’s Briefs that had lost their elasticity. The briefs must have hit their mean-time-to-failure because several of them failed around the same time. I received no response from the company after one year, plenty of time to investigate what had happened. Although the items were far from new, I deserved at least a brief, cursory reply.
Brews you could lose: I sent the Boston Beer Company a letter recounting an unsatisfying experience I had with a case of Sam Adams Boston Lager. Despite my sending them a detailed letter and the lot numbered portion of the box, I did not get a response.
Frozen dinner: Let it go! I wrote to Weight Watcher’s after opening a Smart Ones frozen dinner that was compromised. The clear plastic that covers the meal was torn, likely due to excess adhesive used on the outer carton. Photocopies of the packaging, with lot numbers, were included with my detailed letter. It’s been over a year now and I’m still waiting for a response. I just can’t let it go.
Not the best fit: I asked my local gym (a small regional chain named Best Fitness) to reduce my membership dues to the minimum rate since I was no longer using premium services or multiple locations. They said, “Sure, but . . .” I would have to quit and rejoin the gym, which gave them the legal right to extort an additional $49.99 from me for reinitiation alms! Bear in mind that I had been a member in good standing for six years, a nice long relationship, I thought. Gyms in general have a reputation for being sales-oriented and not member-centric. This particular organization is strictly sales driven and does a nice business mainly due to clean, convenient locations. As a customer, I needed to realize that this company was more structured around the mantra Customer prospect is king. Existing customers unwilling to be upsold additional services were not a priority. This relationship ended amicably because I realized we had different goals. I told them it wasn’t me that was the problem—it was them! I now understand that the gym’s focus is new business. I just wish they were more upfront about it.
Victoria has a dirty little secret: Here is the response my wife received after she submitted a complaint to Victoria’s Secret for shipping the wrong colored sweater, which was also poorly packaged:
Dear Leanne,
Thank you for taking the time to write a review and share your feedback. It is my privilege to respond to you personally. I appreciate you telling us about your experience in regard to the quality and packaging on your recent order. I assure you that I have personally shared your comments with the appropriate team. We truly value your opinion and your voice has been heard.
Our customer feedback often provides us with direction for future merchandise and services. I would like to invite you to come back and post more of your feedback, now that our Ratings and Reviews have gone live on our website. We look forward to seeing your feedback on your future purchases! Leanne, you’ve chosen Victoria’s Secret and we think of that as a privilege. If there’s anything more we can do for you [emphasis mine] please email or call us any time.
Not to be picky, but saying “anything more we can do” implies they have already done something—which they had not. Victoria’s Secret Customer Service thinks that the above e-mail signifies a resolution. It’s a typical example of a patronizing response meant to convey false empowerment onto a customer desperate for attention and closure. In the end, it took two long phone calls and supervisory intervention to rectify the error.
The short vignettes presented above are part of a much longer list of which I will not subject you to (you’re welcome!). Nearly everyone has similar tales to tell. Yet, the optimist in me is compelled to share a couple of instances where companies possessed a strong grasp of marketing orientation, meaning they consciously did their best to attend to customer feedback, including:
Devil Dog heaven: My young daughter went through a demonic phase where she worshipped Drake’s Devil Dog Devil’s Food Cakes. One day she thought the product tasted funny, and sure enough the box proclaimed “New Great Taste.” It was indeed new, but not great. We called Drake’s and were told that the company chefs had tested the new recipe and people loved it. We stopped buying them immediately. A few months later Drakes sent us a letter, with coupons for free products, stating “thanks to loyal customers like you” the company was reverting back to the old recipe!
Coffee cream bliss: Nestle committed a similar faux paus when they altered the formula for their Coffee-mate product. This decision dramatically changed the aftertaste of the flavored coffee creams. Again, I called, was told about the wonderful results from test marketing, and stopped buying. Apparently other customers felt the same way because a few months later a nice letter, accompanied by more coupons, arrived stating they were going back to the old formula.
While these examples may seem trivial, each firm’s willingness to listen to customers and admit mistakes likely saved the product lines from extinction. Self-advocacy among customers should be an important part of our consumer culture. Marketers need the feedback especially when they don’t ask for it. Note that many formal market research projects are positively biased, seeking to confirm management’s perceptions and tactics. Unsolicited customer feedback need not be reserved for negative experiences. Consumers should contact marketers when they have good experiences as well as bad ones. After all, healthy relationships require ongoing communication. A customer’s independence ultimately hinges on the free will to enter into and opt out of transactions and relationships.
Buyer Beware
We all realize organizations need to operate in the black. For-profit firms are in business to make money and enhance shareholder value. Not-for-profits desire a surplus to continue their missions. But relentless, short-term financial pressures can yield some questionable tactics and bad organizational behavior. For instance:
Package size matters: A simple ruse perpetrated by many packaged food companies involves the clandestine act of package size reduction. One can sympathize with producers when the cost of goods and logistics rise, leading to price increases for end-users. Consumers don’t like this reality but accept it nonetheless. However, many firms reduce package contents and raise prices, thereby double dipping into the budgets and vulnerability of consumers. The worst part, despite the relationship puffery and our supposed socioeconomic contract with these firms, consumers are not informed of New, Reduced Volume. Loyal customers are not forewarned with coupons, new labeling or field merchandising specialists that scream, “Get Less for Your Dollar.” Consumers are only told when packages get bigger, unless of course the smaller portions are in the customer’s best interest (e.g., lower calorie servings or convenient travel sizes).
Some displeasing examples of stealth downsizing schemes committed by popular brands, reported by business journalist Douglas McIntyre, include: The extra-large Snickers Bar was cut into two pieces so it is “easier to share,” but the total amount of candy bar is reduced by 11 percent with no price change; Tropicana Orange Juice, in order to compensate for higher costs from a damaging frost, reduced their half-gallon from 64 oz to 59 oz (an 8-percent reduction). It still looks like a half-gallon until you read the fine print; Haagen-Dazs ice cream revamped the pint-sized container by shedding 12.5 percent of the contents, but cleverly retained the same cover; and PepsiCo’s Frito-Lay reduced the family-size bag of chips from 16 oz to 14 oz.22
Albacore tuna brand Chicken of the Sea dramatically trimmed its 6-oz can down to a 5-oz can (nearly a 17-percent reduction) as a way to deal with higher tuna costs. Additional offenders of surreptitious content shrinkage include Kraft Foods’ Saltines, Kellogg’s cereals, Hershey’s Reese’s minis and miniatures, Proctor & Gamble’s Bounty paper towels, and Heinz Ketchup. I do not begrudge any of these firms their right to raise prices and earn profits, but an ethical dilemma exists when loyal customers are not informed of diminished value. If marketers desire a relationship, they should behave and communicate as though they are in one.23
Self-service tsunami: Consumers have grown accustomed to pumping their own gas and doing much of their own banking either online or via automatic teller machines (ATMs). Self-service check-outs are more common at retail establishments. Self-assembly of furniture and other fixtures, courtesy of firms like IKEA, continues to convert passive consumers into do-it-yourself subcontractors. Worth checking out is Craig Lambert’s 2015 book Shadow Work: The Unpaid, Unseen Jobs That Fill Your Day. Lambert provides an insightful account of work that has migrated to consumers.24 There is indeed a fine line between customer exploitation and customer empowerment.
Surge pricing: Also referred to as dynamic and discriminatory pricing, surge pricing makes economic sense from a supply and demand perspective. Peak demand times—be they for Uber cars, airplane seats, or electricity—command higher prices. This alleviates shortages since suppliers will get into the game if above average profits can be had. However, surge pricing tends to penalize customers (some of which are very loyal) during peak gouging times. Customer is prey may be a more appropriate axiom during high points in demand cycles. Much deserved margins for sellers can quickly deteriorate into a customer perception of profiteering.
Loyalty programs based on customer dollars spent tend to lessen the negative impact of surge pricing on loyal customers. For example, Southwest Airlines’ loyalty program dispenses points to customers based on dollars spent, not miles flown. Marriott Hotels, known for its popular Rewards Program, recently instituted lower pricing for members in an attempt to book more customers directly through its own channels versus third-party travel sites.
Contracts, warranties, and rebates: Purchase agreement contracts are proof that a pleasant customer experience is not the top priority of many firms. Cell phone and credit card agreements, akin to the paperwork required of a 30-year mortgage, are prime examples of this contractual malaise. How many customers can attest to have actually read one of these legal tomes? Firms have relied on the fine print of contracts to impart arbitration language to eliminate the chances of class action lawsuits.25 Consumers often don’t realize that arbitration clauses are buried in many of the contracts they sign, negating their opportunity for a day in court. A New York Times investigation into a sample of federal cases filed between 2010 and 2014 revealed that “of 1,179 class actions that companies sought to push into arbitration, judges ruled in their favor in four out of every five cases.”26 However, in 2016 the Consumer Financial Protection Bureau ruled that financial institutions will once again have to permit banking customers the right to file suit.27
Incidentally, consumers’ attitudes toward business contracts may be part of the problem. Uriel Haran of Ben-Gurion University suggests that a “contract’s moral component is weighted more heavily for individuals than for organizations.” Haran’s research revealed a contract breach by individuals is viewed like a broken promise, or “moral transgression,” while the same violation by an organization (i.e., corporate personhood) is considered a “legitimate business decision.” For example, participants were asked to rate the cancelling of a home renovation contract by a contracting firm because the firm could make more money on another job. The contract breach by an individual home renovator (e.g., sole proprietor) received more severe ratings of immorality and greed than the breach committed by a contractor perceived as a company (i.e., not a sole individual). Our courts of law may consider corporations to be people, but consumers appear to morally judge real people in a harsher manner than corporations.28
Extended warranties, with their limitations on merchant liability, are essentially insurance premiums for devices whose time-to-failure is largely known beforehand by producers. The purchase of a warranty may lower a consumer’s sense of risk and the probability for post purchase cognitive dissonance. However, warranties are more advantageous for the seller due to stipulations lurking in the fine print, arduous redemption procedures, and failure by consumers to act.
And then there is the most diabolical of discounts: the rebate. Appearing as promotional eye candy, the rebate is often a chore to apply for and essentially delays the fulfillment of a promised discount. Rebates from pharmaceutical firms entail one of the more vexing aspects of our convoluted health care system. Due to rising deductibles, many families pay the entire cost for pricey medications, yet the insurance company often gets a rebate from the drug manufacturer—even though the insurer didn’t pay anything!29 While the insurance company may be treated royally in these instances, it’s serf city for the lowly insured.
Oddly, the rebate is one of the more straightforward line items you encounter when buying a car. Dealers are very explicit when informing buyers that the manufacturer’s rebate goes directly to the dealership. Yet despite this outlier of transparency, traditional car buying and its requisite haggling endure to produce unpleasant mismatches between professional sellers and amateur buyers. Even confident car buyers need to grasp that a busy auto dealership sells in a day what the average consumer buys in a lifetime.
Truth in advertising: Although consumers benefit greatly from competition among firms, this can lead to unscrupulous marketing tactics designed to help brands stand out from all the marketing noise and advertising clutter. You may recall the campaign for the Shape-Up toning sneakers from Skechers USA, Inc. The ads claimed the shoe would help wearers lose weight and tone up the muscles in their butt, legs, and abdomen. The ads were so effective that even the Federal Trade Commission (FTC) noticed. After being charged by the FTC, Skechers agreed to pay $40 million in 2012 for customer refunds.30 Similar charges by the FTC against Reebok in 2011 led to that company agreeing to pay $25 million for deceptive advertising.31
National retailer Lord & Taylor got into hot water with the FTC over an aggressive social media campaign in 2015. According to an FTC press release, the company “gave 50 fashion influencers a free Paisley Asymmetrical Dress and paid them between $1,000 and $4,000 each to post a photo of themselves wearing it on Instagram or another social media site.” The company preapproved all the online posts. Lord & Taylor also paid for and edited an article about the dress that appeared in an online fashion magazine. There was no disclosure in these promotions indicating that the company was supporting the online social content. Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, stated, “Lord & Taylor needs to be straight with consumers in its online marketing campaigns. Consumers have the right to know when they’re looking at paid advertising.”32 Amen to that.
The examples and data that I have shared reflect a reality that customers need to be diligent and self-advocate. While most customers are not treated like kings, they have the right to challenge sellers and to expect a fair, reasonable value. Customers must let marketers know whether expectations have been met or not, and manage their own expectations. Finally, if you are lucky enough to feel as though you are being treated like a king—enjoy it!
Contra Maxims for Customer Interaction
Only the best customers are kings. Buyers and sellers should transact like they are in real relationships. It’s all about an exchange of value. Good customer service requires listening and action. Customer service: it’s often nothing personal—it’s just business. Customer service can be a great differentiator.
Notes
1. Kelly Tian and Bill Keep, Customer Fraud and Business Responses: Let the Marketer Beware (Westport, CT: Quorum, 2002).
2. Sam Stebbins, “Customer Service Hall of Shame,” 24/7 Wall St, 23 Jul 2015, http://247wallst.com/special-report/2015/07/23/customer-service-hall-of-fame-2/4/ (accessed Apr 14, 2016).
3. Direct TV, “AT&T to Acquire Direct TV,” 18 May 2014, http://news.directv.com/2014/05/18/directv-att-merger-press-release/ (accessed Apr 25, 2016).
4. Glassdoor, Inc., “Dish Network Employee Reviews,” 2016, https://www.glassdoor.com/Reviews/dish-network-reviews-SRCH_KE0,12.htm (accessed May 6, 2016).
5. Gautham Nagesh and Thomas Gryta, “FCC to Fine AT&T $100 Million Over Capping Unlimited Data Plans,” The Wall Street Journal, 17 Jun 2015, http://www.wsj.com/articles/fcc-to-fine-at-t-100-million-for-capping-unlimited-data-plans-1434557988 (accessed Apr 25, 2016).
6. Stebbins, “Customer Service Hall of Shame”
7. Ibid.
8. Ibid., Market capitalizations and return on equity percentages are from Morningstar Equity Analyst Reports dated from February 3 to April 21, 2016.
9. Tom Springer, Charles Kim, Frederic Debruyne, Domenico Azzarello and Jeff Melton, “Breaking the Back of Customer Churn,” Bain & Company, Inc., 2014, 2, http://bain.com/Images/BAIN_BRIEF_Breaking_the_back_of_customer_churn.pdf (accessed Apr 22, 2016).
10. Stebbins, “Customer Service Hall of Shame”
11. Michael Sauter, Samuel Stebbins and Thomas Frohlich, “Customer Service Hall of Fame,” 2015b, http://247wallst.com/special-report/2015/07/23/customer-service-hall-of-fame-2/4/ (accessed Apr 22, 2016).
12. Timothy Keiningham, Sunil Gupta, Lerzan Aksoy and Alexander Buoye, “The High Price of Customer Satisfaction,” MIT Sloan Management Review, 18 Mar 2014, http://sloanreview.mit.edu/article/the-high-price-of-customer-satisfaction/?use_credit=a2cb4cbee5d6634c4c73ab1e333b3772 (accessed May 6, 2016).
13. Ibid.
14. American Customer Satisfaction Index, LLC., “National ASCI Q4 2015: ASCI: Downturn in National Customer Satisfaction Reaches Eight Consecutive Quarters,” LLC., 29 Mar 2016, http://www.theacsi.org/news-and-resources/press-releases/press-2016/press-release-national-acsi-q4-2015 (accessed May 6, 2016).
15. Eric Chemi, “Proof that it Pays to be America’s Most Hated Companies,” Bloomberg L.P., 18 Dec 2013, http://www.bloomberg.com/news/articles/2013-12-17/proof-that-it-pays-to-be-americas-most-hated-companies (accessed May 17, 2016).
16. Shaohan Cai, “The Importance of Customer Focus For Organizational Performance: A Study of Chinese Companies,” International Journal of Quality & Reliability Management 26, no. 4 (2009): 369–379.
17. Phil Rosenzweig, The Halo Effect and Eight Other Business Delusions that Deceive Managers (New York, NY: Free Press, 2014), 72.
18. Kevin Zhou, James Brown and Chekitan Dev, “Market Orientation, Competitive Advantage, and Performance: A Demand-based Perspective,” Journal of Business Research 62, no. 11 (2009): 1063–1070.
19. NIST, U.S. Department of Commerce, “Malcolm Baldridge National Quality Award, 1999 Award Recipient, Service Category,” 15 Feb 2000, http://www.nist.gov/baldrige/ritz.cfm (accessed May 25, 2016). Note: Ritz-Carlton won the Baldridge Award in 1992 and 1999. Ritz-Carlton became an independently operated division of Marriott International, Inc. in 1997.
20. Cai, “The Importance of Customer Focus”
21. Ahmet Kirca, Satish Jayachandran and William Bearden, “Market Orientation: A Meta-analytic Review and Assessment of its Antecedents and Impact on Performance,” Journal of Marketing 69, no. 2 (2005): 24–41.
22. Douglas McIntyre, “U.S. Companies Shrink Packages as Food Prices Rise” Daily Finance, 11 Apr 2011, http://www.dailyfinance.com/2011/04/04/u-s-companies-shrink-packages-as-food-prices-rise/ (accessed Apr 25, 2016).
23. Ibid.
24. Craig Lambert, Shadow Work: The Unpaid, Unseen Jobs That Fill Your Day (Berkeley, CA: Counterpoint, 2015).
25. Andrew Pincus, “The Advantages of Arbitration,” New York Times, 24 May 2012, http://dealbook.nytimes.com/2012/05/24/the-advantages-of-arbitration/?_r=0 (accessed May 7, 2016).
26. Jessica Silver-Greenberg and Robert Gebeloff, “Arbitration Everywhere, Stacking the Deck of Justice,” The New York Times, 31 Oct 2015, http://www.nytimes.com/2015/11/01/business/dealbook/arbitration-everywhere-stacking-the-deck-of-justice.html (accessed May 6, 2016).
27. Jessica Silver-Greenberg and Michael Corkery, “Rule on Arbitration Would Restore Right to Sue Banks,” New York Times, 5 May 2016, http://www.nytimes.com/2016/05/05/business/dealbook/consumer-agency-moves-to-assert-bank-customers-right-to-sue.html (accessed May 6, 2016).
28. Uriel Haran, “A Person-organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts but Individuals Cannot,” Management Science 59, no. 12 (2013): 2837–2853.
29. Robert Langreth, “Your Prescription Gets a Rebate—for Insurers,” Bloomberg Businessweek, Oct 10–16, 2016, 23–24.
30. Federal Trade Commission, “Skechers Will Pay $40 million to Settle FTC Charges that it Deceived Consumers with Ads for ‘Toning Shoes,’” 16 May 2012, https://www.ftc.gov/news-events/press-releases/2012/05/skechers-will-pay-40-million-settle-ftc-charges-it-deceived (accessed May 8, 2016).
31. Federal Trade Commission, “Reebok to Pay $25 million in Customer Refunds to Settle FTC Charges of Deceptive Advertising of EasyTone and RunTone Shoes,” 28 Sep 2011, https://www.ftc.gov/news-events/press-releases/2011/09/reebok-pay-25-million-customer-refunds-settle-ftc-charges (accessed May 8, 2016).
32. Federal Trade Commission, “Lord & Taylor Settles FTC Charges it Deceived Consumers Through Paid Article in an Online Fashion Magazine and Paid Instagram Posts by 50 ‘Fashion Influencers,’” 15 Mar 2015, https://www.ftc.gov/news-events/press-releases/2016/03/lord-taylor-settles-ftc-charges-it-deceived-consumers-through (accessed May 8, 2016).