The importance of keeping consumer power in balance
I am a huge fan of customer-centric companies. Many companies are looking for ways of becoming more customer-centric. However, some companies are faced with the limitations of accommodating the customer all the way because if you give them a finger, they’ll have your arm. The truth of the matter is, if you give customers too much power they will take full advantage. This is unworkable for any corporation.
Over the last few years, I‘ve done a quite a bit of work for the hotel industry. In every discussion about customer centricity, you can feel the fear for what I call ‘Tripadvisor Terrorism’. Front office employees are very often confronted with brutal guests that are asking for free upgrades in return for not writing a negative review on Tripadvisor or Booking.com. If you know that a hotel with a score lower than 8/10 on Booking.com is in big trouble, it’s easy to see why hotel management teams would worry about this trend. Luxury hotels do whatever they can to make guests happy but giving free updates has nothing to do with customer-centricity and everything with customers blackmailing companies. This is clearly a situation where customers have too much power, causing the customer to abuse it. Once the scales have tipped in this direction, it is very difficult to redress the balance.
Extreme customer centric companies
The digital world has created a world that expects higher levels of customer service. Free and fast delivery of online goods combined with free return policies are the new normal in the world of e-commerce. Companies like Zalando give customers their money back regardless of the condition of the returned articles. A Belgian newspaper tried it once: they basically destroyed the clothes they bought from Zalando to see what would happen when they returned them. The result was remarkable to say the least. They just got their money back, no warning and no questions asked. Any normal company would take a close look at their policy in light of such customer behavior but to companies like Zalando this is apparently not an issue.
Believe it or not, but this kind of behavior is starting to influence customer expectations in any sector. Just think about it: what percentage of your customers also buys on Zalando, Coolblue or Amazon? Probably more than half. And what percentage of customers is aware of the extreme customer-centric policies implemented by some of these new style companies? Probably more than 80%. It does not matter which industry you are in, companies like Zalando, Zappos and Amazon are influencing the expectations of your customers.
Trust versus control
What should you invest most in: trust or control? My guess is that most companies invest more in control than in trust, whereas some new style companies invest more in trust than in control. The truth is: both are expensive. Investing in control means setting up control systems where many people invest all of their time into making sure nobody is taking advantage of certain customer service rules and policies. Investing in trust is also expensive because you are allowing customers to take advantage of your rules.
Trust within certain limits
An approach based on the principle of ‘trust within certain limits’ would offer a solution to the shift in power between companies and. When we visited Zappos, we discussed this topic with them. They told us they would also react like Zalando. If someone were to return a pair of shoes in a terrible state, they would still repay the shoes… but they would also flag that customer. If that customer kept returned damaged shoes that person would get banned. So their decision is to remove bad customers from their customer list rather than changing the system. Most companies tend to change the rules and, as a result, customer service becomes average. If you want to be customer-centric in the extreme you need to trust your customers. At the same time, power cannot shift completely towards the customer or they will start to misbehave. A company like AirBnB has this problem sorted out better than the hotel industry as they apply mutual ratings. Both the customer and the supplier receive a rating. If a customer starts to misbehave, they will no longer be allowed to book accommodations on AirBnB. Just imagine how much more enjoyable a hotel stay would be today if the industry had implemented such a system early on.