I recently switched cellphone carriers from Bell (one of 3.5 carriers we have in Ontario) to Rogers. There is a 30 day cancellation notice required, which I happily gave a couple weeks ago and was told that my next bill would lower the plan pricing so that I would only be paying for cancellation date + 30 days. Sounded fair to me. I get my bill and of course there is no discount so puzzled I call up the customer service. It turns out that my credit will come on my final (Nov 1) bill* Fine, so will Bell refund me money when my Nov bill has Bell owing me? Oh of course… in 6 to 8 weeks.

* if you haven’t had the pleasure of spending exorbitant amounts of money on phone service in Canada an explanation of the billing process is in order. Each bill received contains the charge for the next month of service plan as well as any extra usage charges for the previous month. Therefore the Oct 1 bill was charging me for October’s service and any long distance I used in September. My phone service ends partway through October.

Bell has effectively scored a 3 month interest free loan from me and every single other person in the ranks of those leaving their service. Is this final move to squeeze every dime from their (former) customer base really going to affect me? Of course not, but this kind of treatment is exactly the sort that leaves a bitter taste. Although I wasn’t satisfied with Bell as a carrier perhaps I would have subscribed to their DSL service or their satellite TV. Clearly this will no longer happen since I’ve experienced their customer service first-hand. This little rant leads nicely into the point of this blog article…

Companies Are Losing Easy Profits By Devoting Exceptional Resources to Alienating Hard-Won Customers

It is well-established that it is far more expensive to acquire a new customer than to sell to an existing one. If acquiring new customers is so difficult it should make sense to do everything possible to keep your customers, and certainly a business should not be actively devoting resources towards the opposite effect. There’s no doubt in my mind that at least the executives in major companies acknowledge that this is true, but this truth becomes lost the further down you dive into the structure of a corporation. Each department has its own responsibilities which in turn spawn its own priorities, objectives, and metrics of success. If these metrics are left to be devised strictly on the basis of the department’s role, then a billing department may be concerned mostly with maintaining a healthy cash flow by collecting money due as quickly as possible. Sounds reasonable enough, but if that’s your only metric of success, where is the motive to maintain high customer satisfaction (something that the entire company presumably cares about) and not take actions that will hurt satisfaction?

This is the perfect breeding ground for policies like taking money from a customer that you aren’t owed and returning it three months later (whilst not extending payment terms anywhere as generous to customers). It certainly provides a rosier cash flow and opportunity for a nice interest return on money that isn’t yours. The costs of these policies are charged to the company in the form of reduced sales and lost customers, but the department responsible for these costs does not directly bare them (and may in fact be rewarded for its high performance against the metrics set out for it).

On the outside the company appears to be growing miniature heads moving in different directions and causing the corporation to sabotage itself needlessly. This inconsistency is noticed by both employees and customers, creating resentment in both groups towards the corporation and its suicidal tendencies.

But I’m a small business owner and don’t have a large bureaucratic organization. How does any of this help me?

As a small business it’s tempting to blindly copy what the big boys do since they are making money hand over fist. I’ve fallen into this trap many times myself, happily creating my own virtual bureaucratic procedures with no thought as to their real effect. It’s unlikely that a single corporation will change its ways as a result of this post, but if you are a small business owner you have the agility advantage to quickly re-assess how each aspect of your business operates and realign it with the overall company strategy and beliefs.

Should you really require 60 days notice to cancel a service just because Mega Lawyer Driven Corp Inc. does? What kind of refund policy will avoid needless resentment towards your business? Does your existing customer support focus on making life easy for the customer or easy for you? Are you nickel and diming people (*cough* activation fee *cough*), which could be costing you return business, referrals, and larger contracts? What sort of policies have you enforced on customers that are a nuisance or are based on using punishment to coax desired behavior?

Don’t bother spending money on advertising that extols virtues which only parts of your company follow. It’s a basic fact that people hate feeling lied to, cheated, disrespected, deceived, or otherwise treated unfairly, no matter what section 10 paragraph 4 of your “service” agreement might state.

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This entry was posted on Tuesday, October 10th, 2006 at 11:46 am and is filed under Business, Entrepreneurship, Business Strategy, Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.