Customer relationships: Love them or hate them but no room for in-between

Photo: The can of soda I got for £1.80 on Ryanair by dizarillo on Flickr

American readers may not know Ryanair. It doesn't operate in the States. But it's Europe's largest airline, legendary for its cheap flights and its aggressive disdain for its customers.

Which other company would relish the PR it garnered as the CEO announced that he wanted to charge passengers for using the toilet on flights? The list of other customer-unfriendly behavior is long, from its "puerile" charging policies for certain credit cards as well as more familiar-to-Americans charges for bags, drinks and most everything else.

As the Irish Times reports, this belligerence to customers has had its effect. In a recent reputational ranking of 581 companies, Ryanair ranked near the bottom. Still the passengers keep coming in record numbers. Henry Farrell wonders how "shafting your customer" can be an effective business strategy in a consumer-oriented business in a competitive sector?

Some interesting theories are put forward in the comments section of his post. I think "Barry" is right when he says:

"I can think of two – first, the reputation contains a strong implication of ‘cheap’; people who are cheapskates frugal will be attracted. Second, people might figure that they’re smart enough/tough enough to take advantage of the cheapness, without being tagged by the add-on charges. Most, of course, will be mistaken."

Say what you like about Ryanair but, in its defense, it is clear and upfront about its relationship with its customers. Many other companies want to have it both ways and are deeply conflicted. They want customers to love them but they are stuck with business models that their customers hate.

As described by an article in HBR called "Companies and the Customers Who Hate Them:"

"One of the most influential propositions in marketing is that customer satisfaction begets loyalty, and loyalty begets profits. Why, then, do so many companies infuriate their customers by binding them with contracts, bleeding them with fees, confounding them with fine print, and otherwise penalizing them for their business? Because, unfortunately, it pays."

This article reviewed the financial results of companies in a range of industries and showed that many companies depend for much of their profits on customers "shooting themselves in the foot." They make money when people don't act in their own best interests. These companies give their marketing teams the challenging assignment of trying to disguise the unpalatable truth of their business model behind shiny examples of where they are doing good.

These are also the companies, according to Bill Taylor, most likely to suffer in the current climate of "business populism" where people are upset about the economy and want to stick it to the business establishment. He sees this time as being a great opportunity for companies that challenge the norms and accepted practices of business-model-hated industries. He cites two examples: Southwest Airlines, which decided not to charge for checked bags while the rest of the industry was collecting $1.7 billion for doing so and Life Time Fitness, a relatively new company in the Fitness industry.

Life Time Fitness has decided not to follow the industry model of: "Bait-and-switch pricing, punitive contracts, and shoddy service" in favor of a customer-preferred model of low up-front fees and month-to-month membership.

Life Time Fitness CEO Bahram Akradi says:

"Almost everything we looked at in terms of how this industry did business was designed from the club's point of view: What's good for me, not what's good for you. We were treating customers the wrong way, selling memberships the wrong way, serving members the wrong way. So we asked, 'What would this industry be like if we did things the right way? What would a club look like if members designed it? What would the membership offer look like if the customer wrote it? What would the hours of operation be if customers set them? What if we let customers dictate how we did things?' That's why we did away with contracts. A contract makes you fat and lazy. We have to win over every one of our customers every month. It forces us to keep getting better."

So far, this strategy looks like it's paying off. Life Time Fitness is growing quickly while some of its competitors are falling by the wayside. Which other industries could be reinvented by challenging the customer-unfriendly status quo?

The Twitter dilemma: How to embrace without touching

Back a long, long time ago when I was at school, we had a teacher who stood in as school nurse for a while. He had no medical training and, whatever our ailment, he prescribed a Strepsil throat lozenge. He had a big tub of them so it was very efficient and great as long as we weren't actually that sick.

I was reminded of that story when I received this tweet from Nescafé after my post about its latest advertising campaign:

NescafeUSA @martinjbishop We liked your blog post! Have you gotten a chance to try the Nescafe stick packs yet? 10:50 AM Jun 10th from web in reply to martinjbishop

A response that just didn't connect back to what I had been writing about (which was whether Nescafe's advertising response to the launch of Starbucks VIA instant coffee was a good idea or not).

If you take a look at @nescafeusa, you can see what's going on. There's only a narrow range of tweet types:

1) Approval (or RTs) for anyone who mentions Nescafe positively
2) Suggestion to try Nescafe stick packs for anyone who mentions VIA
3) Occasional chipper "morning everyone" tweets

This, I think, shows the dilemma that Twitter poses for companies like Nestle that have traditionally had a very cautious relationship with the outside world (media and consumers). They want to join this new social media thing but they worry about how to engage safely and how to keep control. Better not give the probably-relatively-junior member of the brand team "in charge" too much leeway, they think, else he/she says something that will get us into trouble. And we can't expect our senior marketers to take on this job. They've got enough on their plate already and they're not that interested.

So they end up with this rather bland, occasionally ill-fitting, half effort where the toe has barely touched the water. Contrast this with the beyond-expectations response I got a few weeks ago from Irritrol, a much smaller company that hasn't even decided what to do with Twitter yet but who is already using the medium more effectively.

A post office dream: The computers are down. Nothing is working

One hates to fall back on old clichés but sometimes it's difficult not to. Never have I seen a post office worker so smug and content as she announced to the lunchtime crowd running in from the rain that: "The computers are down. Nothing is working"

"Can we buy stamps?" "No"
"Can we weigh packages?" "No. Everything is connected to the computer"
"Can we do anything?" "You can try another Post Office."
"Is their system down too?" "I don't know"

The Post Office is one of those businesses that could do everything right for months and months and the only thing that would really register would be an event like this.

Peace and Love and Ringo out

If you ever wanted Ringo Starr's autograph, sorry, you're too late. He told his fans via his website that he no longer has time to deal with their requests.

"This is a serious message to everybody watching my update. Peace and love. Peace and love. I want to tell you after the 20th of October please do not send fan mail to any address you have. Nothing will be signed after the 20th of October. If that is the date on the envelope, it's gonna be tossed. I'm warning you with peace and love I have too much to do. So no more fan mail. Thank you, thank you. And no objects to be signed. Nothing. Anyway, peace and love, peace and love."

I still had this somewhat disturbing video lodged in the back of my mind when I read David Armano's article in AdvertisingAge: Innovation vs. Litigation--Why Brands and Social Media Have a Legal Challenge.

In an article that talks about the difficulty that companies can have getting past their legal departments when they want to participate in social networks, David describes how different social media is compared other marketing activities including interactive marketing: "For starters, it's social, which means it's people-to-people, not technology to people. Secondly, you can't walk away that easily from social initiatives the way you can walk away from that microsite and banner campaign you just launched. (Well you could--but I wouldn't recommend it.)"

In other words, once you're in, you're in. Unless you want to end up sounding like Ringo.

Financial Crisis: Restoring trust and confidence

Rob Findlay has a good post at The Bank Channel titled: After the storm must come trust where he proposes a six-point "Trust & Confidence offensive" to restore customer confidence. As he says: "You need to use and hear words like trust, safe, confident, and not hear words like switching, complaint, cash and mattress. Taking care of your customers is crucial."

Financial crisis quote of the week

In a post about what will happen to the dollar vs. the Euro, Tyler Cowan makes the case that the Chinese will trust the States more than Europe in these financially-turbulent times:

"Bush, Bernanke, Paulson -- we call them leaders. The Chinese think of them as the customer service department. I suspect the Chinese get straighter answers from them than we ever do."

Tyler Cowan, Marginal Revolution

The top five sneakiest ways to pass on costs to your customers

Rising oil prices are driving up costs for everyone from food manufacturers to hotel operators. At this point, few companies are able to fully absorb these costs so they face the challenge of how to pass these costs onto their customers.

It's not surprising that companies are reluctant to put up prices. They are worried how customers who are not conditioned to expect or accept higher prices will react. That's led some companies to go another route and pass on costs by a variety of sneaky tricks.

And the nominations for the top five sneaks are (envelope please):

1. Use cheaper (lower quality) ingredients: Mike Neiss, writing in The Tom Peters blog, talked about his health club changing its detergent and making the towels "scratchy" and lowering the temperature of the pool by 5 degrees.


2. Downsize*: One example from my local coffee shop. My breakfast treat of choice: Granola with fruit and yogurt to go used to cost $7 for two containers (one for the fruit). The last (and final) time I ordered the same product, it was $7.60 with everything crammed in one container. The Consumerist has a continuing series called "The Grocery Shrink Ray" which details CPG company downsizing examples.


3. Reduce service quality: Mike Neiss points to restaurants that are not fully stocking their wine list and hotels that are taking away amenities. Trouble is that it's often these seemingly little things that matter the most.


4. Make your front line employees suffer: It can be the same work with less employees or less salary or benefits per employee (or both, I suppose). Circuit City took this approach to an extreme when it decided to fire all its senior salespeople and replace them with cheaper, new hires.


5. Add charges for things that used to be free: You had to know that airlines would make this list and, of course, they do. As Chris Wilson says in a recent post: " I wonder what airlines are thinking when they decide to clutter procedures with extra fees for passengers to agree to, and the rabid slash and burn of any extra service that used to be included in the ticket price." Seth Godin has an extreme example from Air Canada that adds capriciousness into the mix.

Sneak is weak. Only honesty will pay off in the long run.

Links:
1) Everything Matters... : The Tom Peters Blog
2) The Grocery Shrink Ray examples: 1, 2, 3: The Consumerist
3) Meatball Sundae Thought #2: Get your story straight: (Details of Circuit City's innovative approach to employee engagement) Brand Mix
4) Human Talk: Airlines: Chris Wilson in The Marketing Fresh Peel

* Note: restaurants like The Cheesecake Factory that serve gargantuan mounds of food that none but the most determined can possibly finish get a free pass on this one. They'd be doing us all a favor.

Hertz playing with fire

There's something that's pissed me off about renting a car for so long that I've almost run out of supplies of, well whatever, to be upset about it anymore.

That's the: we'll-charge-an-extra-$3 plus/gallon-for-gas-if-you-don't-drive-miles-out-of-your-way-to-fill-up-at-a-gas-station-that-mysteriously-never-seem-to-be-anywhere-near-an-airport-(except-in-Denver) policy aka (by me at least) as egregious customer abuse.

So I had a sudden rush of euphoria when I read the following headline in my Hertz newsletter: "Save Time--Don't Stop for Gas." Could it be that this putrid policy was going to be abandoned? Could it be that finally one company had realized that whatever profits they make from this activity wasn't worth the cost in terms of customer disatisfaction?

As I read the copy, my hopes were being confirmed: "Now Hertz offers pump prices on gas when you return your car. No more leaving early to try to find a gas station on the way back to the airport. No more worrying about filling up before you return your car. We'll charge you the going rate per gallon in the area....."

Oh my god, they really were going to do this. I'm going to be a loyal Hertz customer forever....

"... plus a flat refueling fee. It's that simple."

I actually missed that little bit the first time around. Turns out the "refuelling fee" is $6.99 so if you drive less than (roughly) 60 miles you will actually pay more than you did before. Nice.

I feel inclined to find a pair of scissors and cut up my gold card into little pieces. But I'm going to resist such a dramatic gesture. Partly because it's company policy that we have to rent Hertz and partly because I think this is the thin end of the get-rid-of-this-charge wedge. Surely we must see promotions in the future where the refuelling fee is waived?

I'll wait to see, scissors at the ready.

Links:
1) Save time--Don't Stop for Gas: Hertz News
2) Overlooked: court upholds pricey car rental fuel: Elliott

Best Buy, Worst After Sales?

Raelyn Campbell has sued best Best Buy for $54 million for losing her laptop and most people, at least those reading the Yahoo! Tech blog think she's right.

Raelyn took her laptop in for repair and never saw it again. After hounding the company for months, they finally admitted they lost it. Then they offered her $900 for losing the machine (as a gift card). That wasn't even the replacement cost of the machine itself let alone the installed software. She asked for $2,100 and they just ignored her so then she sued for $54 million.

I really don't like lawsuits like this. But, on the other hand, as a fellow victim of what one commenter on the post called Best Buy's "depraved indifference" to customer service after the sale, I feel like cheering her on. 86% of people answering the Yahoo! Tech Blog's poll attached to the post voted for: "She's right. Time to make the corporate bully pay."

Certainly looks like time to tweak the approach to customer service.

Links:
1) "Best Buy Loses Laptop: Owner Sues... for $54 Million": Christopher Null at Yahoo! tech

Hertz values (mostly) represented by LAX bus driver

Hertz has a rather typical and bland mission statement on its website. "Our mission is to be the most customer focused, cost efficient.....shared-value culture of.... strategic investments in...."
It also has a list of aspirational values such as: passion, integrity, accountability, transparency, commitment, teamwork.

So, it was refreshing to hear a Hertz driver at LAX trying his best to live up to those values by making the following announcement (as best I could record in my note book) to his passengers as they got on his bus:

"Several of you have complained about the long wait for this bus. I'm sorry about the service. I admit it was pretty disgusting. When the new management took over the company, they made lots of changes. They fired 15 drivers. They took the customer complaint cards off the buses. They just don't care about you. Or about us. Welcome to LA!"

Let's see: Passion: check. Integrity: check. Accountability: check. Transparency: Definitely. Big check. So, a little bit of work to do on teamwork but otherwise more or less perfect.

Hotels doing it right

Two small but welcome gestures from two different hotels the same day. Montbleu sent a thankyou-for-staying-with-us email (and survey) after our recent stay there. And Hilton Garden Inn sent an email confirming my upcoming stay along with directions to the hotel, the 5-day weather forecast (rain), local guide and HHonors balance. Both emails done really well.

A minute by minute account of how Expedia lost a customer to Kayak

(This account is my best recollection, several hours after the fact. Times are approximate. Feelings accurate.)

3:00pm: A gap in meetings. Great. I've just got time to find flights to Bentonville. (Three guesses why I'm going there.) Then on to Houston (My glamorous life!)

3:01pm: I'll look up my options on Expedia.

3:02pm: Damn it. What's the name of that airport I have to fly into? Stupid site. I have to know the exact name or the airport code. But I don't.

3:03pm: Open new tab and search for "airports in Arkansas." Oh, that's right. It's Northwest Arkansas Regional Airport. How could I forget that?

3:04pm: Start filling in flight details including "XNA" for the airport.

3:05pm: Departing time. I want to fly in the morning. What's this? A pull down menu for all the times but the morning option is below the bottom of my screen. I've got to line the screen up just right, with the departing box right at the top of the screen so that the morning option just shows up at the bottom to be able to select it. That's crazy.

3:06pm. Departing time for Houston. I don't know - sometime in the afternoon. Line up my screen again just right. There's no option for afternoon. Just "noon" or "evening." Sigh. Select "noon."

3:07pm: Last leg. Back to SFO. Hey I'm getting good at this lining up the screen thing.

3:07pm: Airline preference. I want to fly United. I need to make sure I keep my Premier status or else I'll be stuck on the back of the bus again like last year. They probably don't go there but I should at least check. Oh no. Another pull down. Thank goodness I didn't want to check Virgin Atlantic or anything that begins with a "Y" (Yemen Airlines?).

3:08pm: Search for flights

3:08pm: We found more than one airport that matched 'houston'. Please select an airport from the list below

3:08pm: That list includes "Houston: all airports"

3:08pm: Select Houston: all airports. Search again

3:09pm: Result #1: $1,831.99. United. Itinerary: SFO - Chicago - XNA - Chicago - Houston - Chicago - SFO. And seven more listings, variations of the same. There's no page two for other options. Hmm, that's not going to work for me.

3:10pm: OK, I wonder if there's any other Star Alliance flights that I could fly on. I'll still get the miles.

3:10pm: There's no option for Star Alliance under airlines. Ugh. OK, I'll try U.S. Airways. They're one of them, right?

3:10pm: Line up screen and select U.S. Airways

3:10pm: It's thinking about it. Thinking. Thinking.

3:11pm: We were unable to find available flights between San Francisco (SFO) and Fayetteville (XNA) on US Airways. Below are available flights on other airlines.

3:11pm: Aye, Yae, Yae

3:11pm: Scroll back.

3:11pm: Select the "View flights separately" button under heading of "Didn't find what you were looking for"

3:12pm: Don't find anything better. Isn't there a new site? Someone told me about it. What was it called? Canoe?

3:14pm: Find kayak.com

3:15pm: Wow. This is great. There's no pull down menus that go below my screen. Bentonville shows up in the airport list. There's an option for "afternoon." Plus it's searching everything: Expedia plus Orbitz plus Hotwire plus Priceline plus some of the airline sites as well.

15 minutes. 5 small irritations. 1 lost customer.

Starbucks vs. McDonalds

A big news day for Starbucks. First, the WSJ has a front page article about McDonalds foray into espresso beverages, baristas and all. Later in the day, Starbucks announces that Howard Schultz is returning to his role as CEO replacing the unfortunately named given the circumstances, Jim Donald who is leaving.

By this morning, most everything that could be written has been written. Here's one of the news pieces that quotes Schultz as saying most of his company's headaches have been "self-induced."

Here's a link to John Moore's thoughts about the McDonalds move. John is a Starbucks expert having worked there for a number of years and he focuses on the challenges that McDonalds will have trying to replicate the Starbucks experience within its ultra-efficient fast food operation.

For general Starbucks gossip, go here. And finally for some other thoughts about the battle between McDonalds and Starbucks, read Danielle Blumenthal's comments here.

The point she makes, same as my own reaction, is how both great and how awful it is for Starbucks that McDonalds should be now thought of as a competitor. On the one hand, it shows the success that Starbucks has had penetrating into the mainstream. On the other, it shows how close it has become to being just another commodity.

Based on his comments and his infamous leaked memo, that's something Mr. Schultz is all too aware of and is coming back to fix.

Customer service = Corporate PR

By way of Blumenthal on Branding, I found this Brandweek article written by Shel Holtz about the proliferation of social media. It quotes stats that show that almost 1/4 of U.S consumers are now using social networking sites and 19% are using blogs.

One really interesting point was that bloggers have a bias towards complaining about stuff. Such posts are easy to write and a great way to let off steam. It's worked for me.

So, in a world where more and more people are turning to blogs and other social media for information, the ever more important customer service and tech support employees become. Nothing can send a blogger over the edge so effectively as a frustrating experience trying to get something fixed.

Shel makes the point that these employees are the new front line for public relations so their mission needs to be recast. Less about keeping costs to a minimum, more about advocating for and communicating with customers.

You almost expect it from Starbucks, but 3-day blinds?

Extraordinary customer service that is.

I had an early morning start today so, bleary-eyed, I headed into a Starbucks near my client's office for a coffee. There I witnessed a real tour-de-force by one of the baristas. In a loud voice which, on the downside, would have pealed paint, she was calling out both the names and drink orders for almost everyone who walked in the door. I mean one after the other after the other, at least 10 while I was waiting in line. It was just this side of being a party trick but the customers seemed to love it.

But great service from 3-day blinds is something I really didn't expect. Recently, in a child and dog related incident, one of the strings of one our blinds snapped off. There was no way I could repair it and, for months, we just left it hanging there in its wrong-angled position. When we finally decided to get it fixed or replaced, we happened, purely by chance, to take it to a 3-day blinds store near us and were very happy to find out that the blind had originally come from them and they could fix it. (Note to 3-day blinds: Why don't you brand your blinds or at least print some info on them?). The extraordinary bit was that when we went to pick it up, the repair had been made and there was NO charge - just part of the service, sir.

I thought that was quite amazing. In these days where even the concept of repairing things rather than just throwing them out seems old fashioned, what an unexpected treat.

Please go and buy something from 3-day blinds because I don't expect to be in the market for anything from them for quite some time. If you want to buy a cup of coffee on the way, that's up to you.

I'm worth $300!

And that's just because I am on (in?) Facebook.

I didn't do the math myself but that's what the radio program said I'm worth as a Facebook member, based on Microsoft's new stake.

I'm not quite sure how I'm going to live up to my new found value. Certainly not by clicking on any of ads like this that seem to have a different target in mind.

The importance of knowing your target market

Demand for Doritos has sky-rocketed in one Aberdeen store as it now caters to a previously untapped consumer segment. (Apparently regular customers are now paying for the whatever the seagull takes.)

Skype update

Now that's what I'm talking about. Only one day after commenting about the outage at Skype and the seeming inadequate response, I get the following email:

Hello martinjohnbishop

You may or may not know but last week Skype wasn't available for acouple of days. There were a number of reasons for this and I am delighted to say that the problem is now well and truly sorted and everything is back to normal. For those of you who tried to use Skype during that time but couldn't, we're very sorry. For those of you who didn't try to use Skype - well thankfully you were not affected but we want to reassure everyone that Skype is now working happily and the problem is fixed.

We know we have many faithful users out there who give us feedback (good and bad) on what we're doing as a company. The Skype communitymakes us what we are. Without you, our users, we simply wouldn't exist. We've helped people stay in touch with their friends and family over the past four years without any massive hitch and we want it to stay that way.When the unexpected happens, it's important to remember the people who stuck behind us and whose loyalty humbled us. I want to thank everyone for their support, patience and being part of the Skype community. And for those of you who missed out on using Skype last week - I want to especially thank you as well. As a goodwill gesture, we're adding an additional seven days to your current subscription, free of charge. And even if you didn't miss out on using Skype last week - you can still have a week free on Skype, on the house! So please enjoy it, call your loved ones, friends, family and colleagues and thanks again.

Talk soon,
The people at Skype

That just earned them one more outage (hopefully a short one)

4real?

I was one of the unknown millions of Skype customers who lost service for two days last week following an outage caused by a software malfunction. I rely on Skype for calls at home because I don't have cell phone reception plus I was working from home that day so this outage was particularly inconvenient. It did make me wonder if it makes sense for me to rely on this service as much as I do.

The reaction from a company blog doesn't seem too reassuring: "We would like to point out that very few technologies or communications networks today are guaranteed to operate without interruptions".

Probably the company has enough goodwill and track record to get away with this once or maybe twice but not too many more times than that. In fact, because it is so low-priced, it may even have less permission to fail on service than its competitors because consumers will already have the expectation that the low price comes at the expense of reliability and quality.