Killing Customer Relationships in the Name of Profit

Let’s be clear. There are some customers that no business wants. They are needy, time consuming, demanding and sometimes indecisive. Put simply, they require too much time and attention or too much in the way of discounts to be worth having a customers. To survive with some level of sanity, the business owner needs them to go elsewhere.

However, we also have businesses driving good customer away by an excessive focus on cost-cutting. Further, the cost savings they seek may not be real.

Cost-savings as a goal represents a paradox. After all, the perfect company in terms of low cost makes nothing, sells nothing and has no employees. The cost of operations is zero, but so are revenue and value. How many companies really want to be that firm?

Apparently, a slick consultant can talk a management team into almost anything, including mergers that produce massive losses and automation that produces no gains in productivity or profits. In our current business world, managers make decisions, grab their bonuses and move on, leaving someone else to clean up the mess.

My experience today was with an auto insurer that I used to like. That despite their inane advertising featuring an emu. Today, I wanted to see what a change in location would do to my rates. I used to be able to call a visible 800 number, talk to someone with intelligence, get a quick answer, and go on about my day. Apparently, that’s not the way things work now. Instead, I have a computer which tries to be friendly but behaves more like HAL of the 2001 movie. If I have something other than a brainlessly simple question, I’m channeled into texting with a first line service rep who doesn’t know much more than I do and can’t provide the information I need.

That led me to check rates, and find another company offering the same coverage at a much better price. The renewal on that policy is coming up, and my relationship with the incumbent vendor is over.

There are several problems with what this insurer was doing:

  1. You don’t build trust with a computer. Software is only as good as the programmer, and I’ve learned a healthy distrust over the years. The computer has no interest in “taking care of” me, certainly not in the way that I care for my clients. And there’s no emotional angst in telling a computer to f–k off. Parting is no sorrow.
  2. Tweaking computer software for “personalized” marketing rapidly gets silly. Suddenly, I’m getting pitches for stuff in which I have absolutely no interest — like the trip to Vegas to see a granddaughter that suddenly triggered hundreds of offers for casino junkets. Companies are teaching us to send their messages to spam folders, do not pass go, do not read.
  3. Voice response software isn’t designed to deal with complex questions from customers. That requires a level of AI that doesn’t exist yet, despite claims otherwise. Or if it exists, it’s too expensive to deploy.
  4. Saving money by reducing human headcount to answer calls and skimping on training just adds to the annoyance. Waiting on hold for 20 minutes and then having the call disconnect doesn’t improve customer loyalty. It may distort the metrics that the vendor shows client management, but that’s about it. (Yes, that happened today too.)
  5. Finally, most inane of all, if you’ve screwed up a customer in the past, don’t spam them to try to get the relationship restarted. People remember, even if companies don’t. You’re encouraging people to tell their friends and co-workers about their miserable experience. Progressive and State Farm, are you listening? If you really want to create a negative impression, just run ads with emus. It’s not that hard.

On that note, let’s look at the statistical scam that is US auto insurance advertising. Ads proclaim that “people switching from Company X to Company Y save an average of $500.” Of course they do. People not saving money don’t switch and aren’t included in the calculation. The ad carefully doesn’t say that you’ll save money. No way are they going to promise that.

Now it would help if companies always made the best rates available to existing policyholders. However, they don’t do that, which is why customers need to shop every couple of years for better prices.

Apparently, some insurers have decided that it is easier to let customers churn than it is to improve customer service and relationships to try to keep them.

And that, dear friends, is the marketing road to hell. If at the end of the day companies are only competing on price, it gets quite hard to earn enough to cover overhead and keep the doors open. It doesn’t matter how fancy the ads are. They won’t be able to afford to run them.

However, this behavior provides an obvious path forward for smaller retailers serving well-defined markets. If you can build personal relationships with customers and provide excellent service, you can recapture business from the box stores and online retailers. Doing this involves an acute business strategy and discipline, but it’s very feasible. That’s a topic for another post.

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