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CHAPTER THIRTEEN
STRATEGIES FOR RETAINING CUSTOMERS

This chapter suggests four emotion-friendly strategies to increase customer loyalty.

Listening to the Voices of Loyal Customers

If companies are to benefit from loyal customers, they need to focus their energies in a coordinated way on the customers who are already most loyal. This requires being able to identify your loyal customers, seeking out what they have to say, and then implementing what they value. The ultimate goal is one in which service value and relationships are so positive that loyal customers feel they cannot get their needs met anywhere else. This necessarily involves personal and emotional connections with your customers.

Here is the advice of the British SJB Services, which studies customer loyalty metrics: “Choosing the most profitable customers and accurately targeting them and nurturing them, while virtually deselecting the least profitable customers, is one way of vastly improving bottom-line profits.”¹ If too many resources are used to gain new customers or to win back those that have left, there will be fewer financial and staff resources remaining to heighten or maintain loyalty.224

Bruce Merrifield, a business consultant from Chapel Hill, North Carolina, advises companies to stop pushing products and focus more on customers. He concludes: “Shouldn’t we pursue a customer-centric re-organization of our business instead of fine-tuning our product-pushing past?”² In fact, a Journal of Retailing article suggests that efforts to attract new customers (by definition less-loyal customers) may not grow your business and may actually negatively affect your loyal, existing customers. The Journal of Retailing authors ask, “Who is likely to perceive a benefit from ‘Bikini Night’ or ‘Seance Night’ at a sporting event? For those who are attracted by such event sales promotions, what is the likelihood of their returning for future events?”³

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Application

What Do Our Loyal Customers Want? First, gather staff together who really know your customer base well. Ask them to identify your top customers—the ones who are very happy with you, who are currently profitable for you, and who will have greater need for your services or products in the future. Then interview your top customers, making sure you include at least three general service-related questions: (1) How do you define good service? (2) What is irritating about the service you currently receive (not necessarily from our organization)? and (3) When you leave our business, how do you want to feel? Finally, ask yourself, What are the common characteristics of our best customers? What aspects of customer service are most important to them? In this way, you will be able not only to create a template of customers who are a good fit for your offerings but also to know how to meet their needs.

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Customer loyalty programs aimed at already-loyal customers are a powerful strategy because they require commitment to and proactivity with existing customers, the point Michael Lowenstein emphasizes in his book, The Customer Loyalty Pyramid.⁴ Canadian Pacific Hotels (CP), which includes the famous Banff Springs Hotel, has made a proactive, coordinated effort to mark its brand on every aspect of its customer service. One step the company took was to target frequent guests in its surveys. CP executives learned that their loyal customers didn’t want a frequent hotel guest program—they wanted airline miles. They also wanted recognition of their individual preferences.225

Making the decision to reward their frequent guests was easy for CP executives. Making their systems operationally able to support the small changes they wanted to make was difficult. For example, CP offered a discount to frequent guests in their gift shops. This simple offering required sophisticated technological changes. The results of their efforts, however, have been well worth it for Canadian Pacific. Business travel has increased 3 percent in Canada overall, while CP’s room occupancy has increased 16 percent, without adding any new properties. CP’s Club members are no longer spreading their stays around to other hotels; they are concentrating on Canadian Pacific Hotels.

United States Automobile Association (USAA), the $7 billion insurance organization primarily catering to former military personnel, builds loyalty “by convincing [customers] we’re loyal to them,” according to Phyllis Stable, senior vice president of marketing. USAA demonstrates caring to customers in hundreds of different ways. “We make it a point, in all of our materials, to let them know that we’re there for them as they make transactions,” Stable continues. When a client dies, USAA coordinates all forms, documents, and correspondence through one account executive. Stable says, “Making things easier for widows and widowers is a true service to help people when they need it—on their terms, not ours.”⁵

Listening to the voice of customers also refers to individualizing experiences for them, which is easier to do for customers you already know. Computers make this possible and relatively easy today. Ritz-Carlton has a “guest recognition system” that inputs 226 data on customers’ individual preferences. If you request a hypoaller-genic pillow, you’ll have it without asking on your next visit to any of its more than thirty-five properties.⁶ Ritz-Carlton’s success has been in utilizing the information it gathers from guests. Some hotels collect detailed information and yet it never seems to be implemented. Janelle has stayed at a hotel in Hong Kong that requests useful and complete information from her—every time she checks into the hotel! When she asks about the information she provided on the last stay in the hotel, she is told, “We need it for our records.” It’s interesting to watch an organization attempt to do what’s right but not have thought the entire process through to completion and considered its impact on customers.

Abbie Griffin, professor of marketing and operations management at the University of Chicago, identified “best practices” of organizations most sensitive to customer satisfaction. Professor Griffin reported that, in addition to strong top-level management buy-in to the process, acceptance by all employees that every job was related to customer satisfaction was equally critical.⁷ The moment that employees begin to adopt the attitude that customer retention is someone else’s job, attention to the customer is reduced.

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Application

How Are You Loyal to Your Loyal Customers? Most companies want their customers to be loyal to them. A more relevant question is, In what ways are you loyal to your customers? List all the ways you are loyal to your customers, then narrow the list down to the three items that are most effective at retaining customers. Then ask your customers if they agree. Finally, choose three other items on your list and ask yourself what you would have to do to make these three strategies work as effectively for you as the top three on your list. 227

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Retaining Customers by Retaining Staff

Sometimes reality is hard. Most firms lose half their customers in five years’ time. Even more worrisome, most companies lose half of their employees in only four years, suggesting a relationship between the two figures.⁸

Organizational development pioneer Edgar Schein introduced the idea of a psychological contract to describe the emotional foundation between employer and employee.⁹ If the “contract”—the unspoken reality that mutual needs are being met—worked for both parties, then, Schein argued, employment would continue. However, if the terms of the contract were not met, then employees would likely leave the organization.¹⁰

The idea also applies when considering the relationship between employees and customers. If emotional needs are not met, both employees and customers will leave, if they have any choice at all. And because customers have greater flexibility in purchasing elsewhere than employees do in getting new employment, this would explain why the rates of customer loss are higher than employee turnover—but not by much.

All this has made social commentators lament about the contemporary short-term transactional nature of employment that has replaced the long-term relational approach that once used to rule. We would suggest that employment is following customer-supplier relationships, which are becoming more and more encounter based rather than relationship based. If organizations (especially those that offer their services and products primarily through short-term customer encounters) create working environments that provide long-term employment opportunities and also make short-term customer encounters take on aspects of customer relationships, they will have a better chance of retaining staff. This takes us to Frederick Reichheld’s conclusion: “[The] fact is that employee retention is key to customer retention.”¹¹

Towers Perrin, the human resources research and consulting firm, similarly concludes, “Companies that have practices that create or maintain a highly loyal workforce have superior customer retention.” 228

Focusing on the insurance industry, Towers Perrin concludes that companies having an employee turnover of 10 percent or less enjoy a 10 percent advantage in customer retention rate over companies that lose their employees at anything over 15 percent.¹²

The interplay between high-quality staff (motivated and competent) and the high-quality products and services they produce creates a dynamic economic chain that seeks to attract and hold on to high-quality customers (those who have money, who have an inclination to be loyal, and whose own resources are growing). The longer the high-quality customers remain, the greater an organization’s profitability; the longer the high-quality employees remain, the greater the chances of staff producing high-quality products and services and, therefore, of attracting even more high-quality customers. These relationships are the essence of value. If any one part of this attraction fails, the other two suffer as well.

The Economic Link between Employee Retention and Customer Retention

In the early 1990s, the Marriott Corporation attempted to retroactively measure the correlation between employee turnover and customer retention and its impact on profitability. Using conservative numbers, Marriott calculated the impact of a 10 percent reduction in staff turnover in two of its divisions. The conclusion: the savings in rehiring costs from retained staff and the increased revenues from retained customers, from a mere 10 percent reduction in staff turnover, would yield profits greater than the operating profits of both of the divisions considered.¹³

Taco Bell has discovered that its stores with the highest employee retention rates have sales 100 percent higher and profits 50 percent greater than Taco Bell outlets that do not hold on to their employees.¹⁴Most organizations understand that value, real and emotional, will help retain customers. Many do not understand the same is true for staff.

TMI consultants offer a program to our clients that focuses on customer loyalty—by focusing on employee loyalty. When we have succeeded in getting concrete data, the results have been strong, considering this is a back-door approach to customer retention. One of our international TMI partners, for example, worked with a large Swedish dental-care practice. The company put employees in charge of making structural changes in their own work, for their own satisfaction. This included making decisions about functional roles for both dentists and dental nurses. Since the program and the follow-up implementation, most of the clinics in this system have reported a direct impact on their bottom lines through attraction of more patients.229

We also asked every employee of another TMI client, a retail chain with forty shops, to complete an evaluation survey that posed questions about attitudes, relationships within the organization, managerial styles, and willingness to accept change. Individuals, managers, and the entire organization were anonymously assessed. After the results of the survey were shared with the staff, managers were taught a problem-solving method to devise solutions with their store personnel so they could address outstanding areas of staff dissatisfaction. Six months later, the survey was once again administered and showed a dramatic change in staff attitudes toward their employers. A year later, these changes were reflected in improved customer evaluation surveys—and higher gross revenues.

Organizations need to ask what specific emotional value added to staff’s lives will inspire them to stay and willingly make deposits in customer emotional accounts. Unfortunately, many ask how they can get staff at the lowest possible costs. Too many companies shop for staff strictly along price lines. According to Fortune magazine, as late as the mid-1990s, up to 25 percent of retail stores offered no health insurance policies to clerks, and 40 percent of clerks were paid less than the official poverty level for a family of four. Yet these same organizations expect their staffs to represent their products and services in the best manner possible to the organizations’ most important resources—their customers. This has led one consultant to lament, “For the most part, service companies view frontline workers as a disposable resource rather than an economic resource.”¹⁵ These statistics explain why Arlie Hochschild may have been 230 inspired to write The Managed Heart. But low pay is a choice that organizations make, not a requirement. Organizations must create the environment in which positive emotions can be celebrated by both employees and customers, and this requires, at minimum, a living wage.

Many organizations focus their financial reward systems on sales employees because they are responsible for bringing in new business. At the same time, they fail to provide extra financial rewards to staff who retain customers. Surely they are both selling. Organizations, at a minimum, need to know who in the organization contributes the most to building the customer base. Once this is learned, then the organizations can shift emphasis to where customer retention lives in the organization—or at least pay as much attention to it as to the sales department.

We are acquainted with a research study that contrasted the relative contributions of salespeople and customer service staff to customer satisfaction. The survey reports that in one industrial paper company, customer service added 52 percent toward total customer satisfaction, while sales contributed a mere 20 percent. Customer service added 33.6 percent toward customer satisfaction in the automotive industry, while salespeople contributed only 16.8 percent. In the telecommunications industry—customer service accounted for 40 percent of total customer satisfaction and sales less than 20 percent.¹⁶

Yet if you ask salespeople, they consistently state they provide excellent service and that customer dissatisfaction is caused by other departments. Our experience from listening to thousands of service staff is that they are all too often left to handle the customer dissatisfaction that results from sales staff overpromising what products can or will do. If salespeople don’t always respond to customers who call after they have purchased, they also tend to blame that on their “busy-ness,” over which they believe they have no control, or on the customers themselves!¹⁷ Isn’t it interesting, therefore, that salespeople are generally rewarded at much higher levels than customer service staff. All this has led Peter Jordan, when he writes about the value-added resale business, to conclude, “If a business’ primary overall objective is to retain its good customers, then its reward structure needs to be pegged to that objective, rather than heaping glory and reward on the rainmakers who bring in new accounts as in a front-end commission arrangement.”¹⁸ 231

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Application

Do We See Our Customers as Long-Term Investments? Ask the sales team to list the behavioral implications of the statement “Our customers are sales to be made.” Then ask them to consider the statement made by a company CEO:“A customer is an investment, rather than a sale.” Compare the two lists of answers. Which approach is likely to result in loyal customers? What kinds of problems will result from taking the first approach? What are the challenges in the second statement?

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Job Satisfaction and Staff Retention

The relationship between job satisfaction and loyalty to an organization has been extensively studied. Among salespeople, for example, satisfaction has been consistently found to relate to commitment to the organization and lower turnover.¹⁹

Numerous shining anecdotal examples can be found of the link between job satisfaction and staff retention. As with examples of outstanding customer service, these examples become part of the legacy of an organization. One such example we are aware of arose out of a nationally covered news incident. A young couple hired a nanny who they eventually suspected of abusing their child. They captured the abuse on videotape, which was widely played on television news shows. The mother was so distraught that she wanted to immediately quit her senior-level position with a managed health-care company so she could take care of her child herself, even though she was the major income contributor to her family and her job provided the best health-care insurance. Her boss told her she was too upset to make such an important decision on the spur of the moment and encouraged her to take time to heal her family—while she worked mainly from home. She did, and is now, some years later, even more committed to her health-care company.²⁰ 232

At the same time, other examples sting for their lack of compassion. We are acquainted with a mother whose young daughter developed a severe ear infection. On the same day, the mother had some pressing demands of work that needed to be completed for her boss. So the mother went to her daughter’s elementary school, picked her up, and brought her back to her office. She placed a pad under her desk so her daughter could rest while she completed her boss’s work before taking her daughter to the doctor. The woman was formally reprimanded for bringing her young child into a “secure” area where her desk was located. Permission was supposed be obtained for any outsiders, and she hadn’t gotten it for her daughter. The woman—and her many supportive colleagues—wanted to know why she should show compassion to customers if none was shown to her for her industriousness.

As discussed earlier, if organizations want their staff to deliver the memorable service required to have an impact in the experience economy, work must be designed so it is also a positive experience. A 1995 United States Department of Labor review concluded that innovative workplace practices not only increase current profitability but also indicate future economic success.²¹ Since other studies demonstrate a correlation between staff job satisfaction and customer retention, it is undoubtedly a strong starting point for organizations that are interested in improving their customer retention statistics.²²

Taking emotions into account requires building robust work systems for the following:

• Rewards and recognition (Experiences imply celebrations.)
• Respect for employees (Gandhi spoke of respect for customers; that same respect needs to be shown to staff.)
• Economic value (For employees, it means fair compensation for time invested.)
• Variety (Without periodic changes, even the most professional-minded person will lose his or her enthusiasm.)
• High standards (The organization needs to identify quality standards and then constantly promote them to both customers and staff.)
• Challenging growth (While it is not possible for everyone to reach the top of an organization, every employee can identify a realistic career path.)233

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Application

Demonstrating Loyalty to Staff. What are the ways you and your organization show loyalty to your staff? What are the five most important reasons your staff want to continue to work with you—besides to earn money? What are the unique ways you add value to your staff’s existence?

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Going for Impact: That’s Where Emotions Reside

Showing attention to detail can be a powerful emotional hook for retaining customers. Ford salespeople still talk about customers who came into showrooms to look at the Taurus when it was just released. Ford was the first to introduce the small trunk net for securing groceries in a moving car. Salespeople were amazed that while customers looked at the total car, they kept coming back to finger the net. Ford is convinced it sold thousands of cars—all for the cost of a three-dollar net. That’s an emotional extra, showing sensitivity to an age-old problem of groceries tumbling about inside car trunks.

Extras deepen the feeling of being cared for. One of Ford’s most highly rated dealers makes sure that all cars serviced are washed clean at pickup time. If the car isn’t picked up as scheduled and sits in the parking lot over the weekend, the staff wash it again before the customer comes in. A valet brings cars to the customers so they don’t have to go to the parking lot themselves. And every customer who purchases a car gets a follow-up call.²³ 234

One man reports buying a new Lexus and on his first drive home from the dealer experiencing extraordinary personalized customer service. He turned on the radio of his brand-new car to find it set to his favorite classical musical station, he pushed another button and found his favorite news station, and so on, through every button, all set to his favorite radio stations. He was curious. How could this happen? Coincidence? Hardly. An enterprising Lexus employee had noted the radio settings on his trade-in car and programmed them into the new Lexus.²⁴ Now that’s elegant personalization of a service experience, and to be sure, this story has been told—over and over again. It’s about emotional impact.

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Application

How Do Your Customers Choose You? To understand how customers think of value, you have to focus on how your customers choose from among the suppliers they know. Value has to do with your competitors, while satisfaction surveys are typically not structured in relationship to competitors. The following three questions can help you to focus on value issues:

• What are the five key value factors your customers use when choosing to buy the kinds of products or services you offer?
• Rank the five key value factors and assign percentages to each.
• List your top competitors. How do you and your competitors rate—in your customers’ eyes—on these five key value factors?

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But one hook won’t do it. Companies need to identify a handful of preferences customers want and then consistently deliver them. Brian Richardson, vice president of marketing for Canadian Pacific Hotels, operates on the assumption that a brand is not one promise but many. “When you put together six or seven preferences and do it consistently, you suddenly have people who think you’re listening and responding.”²⁵ Listening and responding to customer needs are the essence of brand value. Mintel International, a London-based global market research firm, found that after quality and price, customer service, staff behavior, and complaint handling are the critical elements of a brand reputation.²⁶ 235

We have asked groups to list brand features of a handful of well-known brands, such as American Express, Disney, Toyota, Macintosh, Microsoft, and Nike. Almost always, the descriptors are consistent across the groups. And it is this consistency that creates the sense that the brand has empathy with its customers.

Amazon.com works hard at this. Dianna recently ordered two books on Amazon, and the next morning ordered a third. She asked if the orders could be combined. Less than twenty-four hours later, she received a return e-mail saying that the first shipment had already been sent but that Amazon, under the circumstances, would not charge for shipping the third title. The letter was signed with a person’s name, instead of the title “Customer Service Representative.” Dianna replied with a strong positive letter in which she said, “I am truly amazed at the complexity and speed of your operation and the high-value personalized customer service you provide.” Immediately, she received another Amazon.com response, again signed by yet another Amazon.com employee, with the comment,”We want to provide service on a level that customers will remember, and it is very gratifying to receive such a nice compliment.” Computer generated? Perhaps, but speedy and personalized enough to make substantial deposits into Dianna’s emotional account with Amazon.com.

Customers expect core features or services to be available. At the same time, it’s the peripheral services that customers notice and frequently talk about.²⁷ We have never heard anyone mention Doubletree Resorts’ quality of mattresses or size of rooms, but we certainly have heard people talk about the warm chocolate chip cookies offered upon check-in. When you ask customers what they want when they say they want better service, United Kingdom researchers found they speak about three factors, all three of which are emotional. They want their opinions respected, they want to be assisted by people to whom they can relate on an equal level, and they want sincere concern and kind-ness.²⁸ None of these desires are core features, but they all have impact.236

Customer safety and on-time performance are core business factors in the airline industry. They are expected. If an airline continually crashed its planes and was never on time, it would have a hard time attracting customers. But most customers don’t comment on core services unless they are missing. A customer will more likely disembark from an airplane and talk about a joke the pilot told than comment, “Hey, we didn’t crash! These pilots are something!”

In fact, customers do not want more core services than they need. Otherwise, they will be forced to financially support something they feel is excessive. If customers buy a product that is gold plated on the inside and this plating makes absolutely no difference for the functioning of the product, doesn’t extend its life, and never gets looked at, it is too much for all but a tiny niche of people who like everything gold plated. However, most customers will welcome peripheral services, such as a shipping company that (1) sells postal stamps at cost, (2) sends notification of a problem in advance of the customer finding out about it, or (3) makes payments easy to remit. We subscribe to a daily customer service electronic newsletter that reprints customer letters. Virtually every positive situation customers write about deals with something peripheral.²⁹

Application

Core Services and Loyalty. At a staff gathering, ask them to list all your core services. Make sure everyone understands that core services need to be consistently delivered. Now list your organization’s peripheral services, especially the emotional peripherals. Ask where the group thinks loyalty is formed. 237

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Again we return to the notion that emotions are created in the moment and quality perceptions are created over a period of time. Obviously, organizations must work to provide the best core offerings. When failures occur in core offerings, however, it is the established emotional relationships with customers and the generosity of feeling and empathy that have been created because of the small favors done for them that create the emotional flexibility for customers to forgive organizations for their quality errors. As Toby Wagner, national sales manager of the Troy, Michigan–based American Speed Printing, emphasizes,

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Application

Peripheral Services. What peripheral services can you add to your service offerings? A good way to bring fresh ideas to this question is to periodically schedule a brainstorming session with your staff or colleagues. Bring music, so everyone is in a more creative frame of mind, perhaps catalogs and magazines to stimulate thinking, and then let everyone suggest ideas. After you have accumulated a number of ideas, set criteria for determining which ones might be appropriate for you to implement. For example, you may want to set limits on costs, time involved, complexity, and so on. Then decide if you want to make these peripheral services available to everyone at all times or whether you would like to use them intermittently. 238

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Communicating a Message of Fairness

Children hear thousands of times in their childhood “That’s not fair,” and they rapidly learn to repeat the phrase from an early age. It becomes almost instinctive for adults to react strongly when they feel a fairness norm has been violated. Some people will fight to the death for what is fair, and customers who feel they have not been treated fairly are inclined to get even. Some will become consumer terrorists, even willing to pay a high personal price to restore “justice.”

Unfairness feels like injustice, and when customers face injustice they are motivated to seek justice, especially if they have grown up in a system that espouses justice as a high value. When customers believe they have been treated unfairly, they are first surprised, then disappointed. This feeling converts to anger and indignation, emotions that can be held onto for a long time.³¹ Anger wrought from unfairness leads to a desire to punish and is probably the emotional justification for customers who go out of their way to punish an organization they believe has treated them unfairly.³² Trust and fairness are intimately related. The basis for trust is perceived fairness. Without trust, a shaky foundation exists for service exchanges.³³

Fairness is such a strong motivator that perceptions of unfairness will cause some customers to take a high-handed approach—even if they are the ones who will pay the price. One of the authors observed a fellow lap swimmer at her public swimming pool who became indignant when he was forced to swim in a circle because of overcrowding.”This is totally unfair and I’m never coming back,” he said in a huff and left, not completing his swim that day and cutting himself off from future high-value swimming. It’s a great swimming pool, very reasonably priced, and only rarely is it so crowded that swimmers are forced to swim in a circle.

When customers buy services, fairness is expected. Poor service is not necessarily unfair, but unfair service is almost always judged as poor quality.³⁴ Being fair is particularly important for organizations whose services are intangible, since customers can’t easily evaluate the service before using it and are forced to rely on trust.239

Research suggests that when customers perceive themselves to be treated unfairly, they experience immediate, emotional reactions, which dramatically affect their satisfaction judgments. Customers also seem to remember service encounters that have an element of unfairness in them longer than when this is not the case.³⁵

According to marketing researchers, unfairness consists of a number of elements, including a lack of caring, lengthy processes to resolve complaints, procedures that require repeating information, and an unwillingness to take responsibility for the customers’ problems or inconvenience. Lack of fairness is notably commonplace. In one study, customers were asked to evaluate the fairness of service recovery procedures. Less than half judged them to be fair. Fair service recovery procedures were those rated as clear and easy to understand, quick, and without hassles.³⁶

Perception of fairness is most critical when there is a service failure because customer expectations rise under failure conditions—especially if the customers are loyal customers.³⁷ We described this as a narrowing of the “zone of tolerance” in chapter 11. Loyal customers are most likely to emotionally exacerbate the situation they are in by arousing themselves with such words as “My gosh. How can they treat me this way, after all the business I give them? Don’t they know who I am?” Loyal customers get on their so-called high horses and ride away. Onetime customers are less likely to place as high a value on fairness as loyal customers.

Automobile servicing is a field that is beset with an additional “fairness” challenge. Researchers have found that when customers judge themselves to be not technically competent, the element of fairness increases significantly. In fact, fairness becomes the single most important predictor of service quality when customers feel at the mercy of someone else’s knowledge.³⁸ 240

Application

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How Do Our Systems and Policies Rate on Fairness? List all the ways your customers might find your policies and/or systems unfair. Put yourself in the role of the customers as you do this exercise. What is your response when your customers complain about a lack of fairness?

Lack of Fairness Shows Up in the Small Things

Lack of fairness is many times experienced in relatively minor situations—when a service provider helps one person more quickly than another, closes a service window when the customer reaches the front of the line, or offers observably different standards of treatment to another customer. Customers also feel vulnerable when they are not treated fairly—even if the issue is relatively unimportant.

When airlines book themselves very tightly on their shuttle flights between major metropolitan areas, such as San Francisco and Los Angeles, they open themselves up to a lack-of-fairness charge. The tight time crunch forces airlines to rush passengers onto the planes, especially when they are making up for lost minutes. Many of these flights are sold out, so the number of people who need to take their seats and get belted in is at maximum. Passengers are subjected to flight attendants who say, “If you don’t sit down immediately, you will be forced to leave the airplane.” The authors have even heard them say, “If you don’t take your seats immediately, you will be responsible for us losing our place in the takeoff line.” Under these circumstances, everyone on the whole plane grouses about the unfairness of that remark. The airline has created the situation of overcrowding and then attempts to blame the passengers when they don’t move quickly down narrow aisles. An entire planeload of emotional withdrawals is simultaneously made. And the customers, with nothing much to do for the next hour, can spend all that time reinforcing their negative moods. That’s not the way to build loyalty!

Listed below is a “fairness susceptibility” chart that shows the relationship between customer knowledge and product complexity and where fairness is most crucial to customers. In this case, fairness plays the most critical role in the upper-left-hand quadrant.241

Fairness Susceptibility Quotient

Application

The Fairness Susceptibility Chart. Where do your customers and products fit on the above chart? Describe a typical customer from each of your various customer categories and the products they are likely to purchase. Place them in the above quadrants and then evaluate your policies and procedures for your products on their fairness quotient.

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Some organizations discourage staff from taking responsibility— which they see as admitting guilt and carrying legal implications— especially when customers complain about unfairness. Wally Bock, in his e-letter “Monday Memo,” copied an e-mail response he received from an American newspaper institution, now an interactive product available to subscribers over the Internet. Wally names the newspaper and describes its unwillingness to take ownership of the problem of its service being unavailable. He calls the company arrogant and accusatory and wonders if it was fearful he would ask for a refund of one-twentieth of the five dollars or so he spends each month for his subscription.³⁹

Marketing researchers Kathleen Seiders and Leonard L. Berry found, however, that when organizations both offer an explanation for what happened and compensate customers who feel unfairly treated, customer perceptions become strongly positive. The two practices “offered simultaneously” are very influential in eliminating customer feelings of unfairness.⁴⁰ 242

Sometimes perceived unfairness stays with a customer for a very long time. Jeremy Dorosin has paper and videotape files of public reports about his lack of fair treatment by Starbucks so big they fill several boxes. In fact, everything is up on the Internet and can be accessed by visiting www.starbucked.com. The ostensible offense was a single transaction of product failure in 1995 and Starbucks’ accumulated poor handling of the situation. Jeremy felt so indignant about the situation that he took out an ad in the Wall Street Journal asking anyone who had experienced similar treatment to call him at a toll-free number. He received hundreds of calls. Here are Jeremy’s words:

When the unfairness bug bites, it doesn’t easily let go. Many years later, Jeremy has not given up the fight. He has written a book, Balance at Middlefork, describing the situation and continues to generate volumes of publicity about his settlement fight with Starbucks. He has personally invested over $45,000 in his fight. A University has written a case study about the event, and Starbucks refuses to discuss the matter anymore. Starbucks has painted Jeremy as a “nut,” which only reinforces his feelings of unfairness. Jeremy isn’t going away. And his event started with a clerk who wouldn’t give him a pound of coffee that Starbucks advertises as a benefit when purchasing an espresso machine.

Angry customers today get on the Internet, download graphics, and create pages that are virtually indistinguishable from company Web pages. Angry customers will punish the “unfair” company by listing their Web sites on all search engines. One such Web site, attacking a car dealer, received twelve thousand visits and hundreds of supporting e-mails in the first two weeks of its existence.⁴² To protect themselves, some companies buy Internet addresses that negatively relate to their names, such as www.Compaqsucks.com.243

The converse also holds true. Perceived fairness enhances trust and can be a solid emotional basis for service exchanges. And once again, it many times occurs over small items. It’s the emotional rush customers experience when the service provider points out something they wouldn’t have noticed and the business takes the responsibility to fix it—at no charge. It’s the gratitude customers experience when company representatives defend you and protect your interests, especially when you know they didn’t have to do that. And it’s the compromises you work out with service providers when they say, “Here’s what I think is fair from our point of view. What do you think would be fair?”

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Application

Fairness and Empathy. Fairness takes a generous heart to deliver. It frequently requires bending the rules a bit. It takes the emotional competency skill of empathy. How can unfairness be prevented? We recommend three strategies:

• Ask your customers if they ever feel they are unfairly treated by you or by any other company. You can frequently learn from examples your customers tell you about the competition.
• Ask your employees to notice when customers experience intense emotions. Chances are, high emotions signal feelings of unfairness.
• Ask your staff to identify customer-unfriendly systems. These are systems where the goals or policies of your company run head on into your customers’ needs or desires.

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ASSESSING YOUR ORGANIZATION’S FOCUS ON CUSTOMER RETENTION

Answer the following questions:

1. Does your organization pay as much attention to customer retention as to acquiring new customers? What specific ways do you focus on sales at the expense of customer retention?
2. Are your customer-retention activities regularly assessed and evaluated for effectiveness?
3. How do you ensure that all the needs of your customers and staff are addressed physically and emotionally?
4. Does the complexity of your products or services require high levels of trust by your customers? How does this affect your “fairness”?
5. Do your staff ever blame other departments or people when customers complain about unfairness?