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Customer Power: Real world examples of why it’s crucial to get the balance right

October 7, 2016

Customer-centricity is one of the hottest topic in business today. Across the world, companies of all sizes are looking for new ways to become more customer-centric in order to give themselves a competitive advantage in a decreasingly loyal marketplace.

Unfortunately, however, for many businesses the phrase “give them an inch; they’ll take a mile” is all too appropriate when it comes to customer-centricity. By striving to accommodate their customers wants and needs they leave themselves open to a proportion of their clients who will take advantage.

Get the balance wrong and give customers too much power and you will find yourself in a situation that is completely unsustainable in the long-term.

The rise of ‘Tripadvisor Terrorists’

The hotel industry is worth billions of dollars worldwide, and the rise of social media and user generated content has meant that the individual customer is more important than ever before.

In every discussion about customer centricity I have with clients in the hospitality industry, I can sense the fear for what I call ‘Tripadvisor Terrorism’.

I have heard numerous stories of front office employees being confronted by forceful guests asking for free upgrades with the threat of leaving a negative review on Tripadvisor or Booking.com.

Quite simply, any hotel with an average score lower than 8/10 on Booking.com is in trouble, so it is easy to see why hotel management teams are losing sleep over this trend.

Many luxury hotel chains make it a policy to do whatever they can to make guests happy but giving free upgrades has nothing to do with customer-centricity and everything with customers simply 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 companiescustomer-centric-when-digital-becomes-human

The digital world has made it easier for people to shop around and conveniently find whatever they need, but it has also created a breed of customers that expects higher levels of customer service.

Fast, free delivery of goods bought online is becoming the new expected norm in the world of e-commerce and for many this is also combined with a free returns policy.

Some companies, such as European e-commerce firm Zalando, now have a policy to give customers their money back regardless of the condition of the returned articles.

This was tested out by a Belgian newspaper once, as they deliberately destroyed the clothes they bought from Zalando just to see what would happen when they returned them. Remarkably, the result was that they simply got their money back, with no warning and absolutely no questions asked.

Any normal company would take a close look at their policy in light of such customer behaviour but to companies like Zalando, this is apparently not an issue.

You might think e-commerce giants are different to small businesses, but believe it or not, this kind of behaviour is starting to influence customer expectations in other sectors.

Just think about it: how many of your customers also buy goods from firms like Amazon? It could be more than half, and as those customers become more aware of the extreme customer-centric policies implemented by these new style companies, I’m afraid they are going to expect you to match up.

Trust versus control

There are two extremes at either end of a spectrum for how to deal with such customers, and you need to work out what you should you invest most in: trust or control.

Traditionally, most companies invest more in control than in trust, whereas the growing trend in new style companies is to invest more in trust. The truth is, both extremes are expensive.

If you choose to invest in control you will need to set up rigid systems where numerous people will dedicate their time into making sure nobody is allowed to take advantage of certain customer service rules and policies.

On the other hand, investing in trust can potentially be just as expensive because you are allowing customers to take advantage of your rules, incurring costs that can easily snowball as customers become more aware of your leniency.

RELATED: How to turn your customers into your best sales force

A compromise: Trust within certain limits

The principle of ‘trust within certain limits’ offers a potential solution to problematic shift in power between companies and customers.

When we visited European online retailer Zappos, they told us like Zalando, they would also offer a full refund even if someone were to return a pair of shoes in a terrible state. However, they would also flag that customer in their CRM database.

If that customer began to become a problem and kept returning damaged shoes, that person would simply get banned and their custom rejected.

This decision, to remove bad customers from a customer list, rather than changing the system is becoming a very popular approach for companies looking for a compromise.

Companies that do change the rules and become less flexible run the risk that their customer service will become average, and if you want to be customer-centric in the extreme in order to stand out from the competition, you need to show your customers that you trust them.

Of course, as illustrated by ‘TripAdvisor Terrorists,’ power cannot shift completely towards the customer or they will start to misbehave.

A company like AirBnB have tackled this problem much more effectively than the hotel industry, applying mutual ratings for both the customer and the supplier. Both sides can make an informed judgement on whether the other party is suitable before a booking is confirmed, and if a customer starts to misbehave, they will simply no longer be allowed to book through AirBnB.

Just imagine how much more enjoyable a hotel stay would be today if the industry had implemented such a system early on!

About the author

This article has been written for ByteStart by Prof. Steven Van Belleghem, author of the award-winning book When Digital Becomes Human, published by Kogan Page, priced £19.99. Subscribe to his videos at www.youtube.com/stevenvanbelleghem or visit StevenvanBelleghem.com

Prof. Steven Van Belleghem is a regular contributor to ByteStart, and other thought-provoking articles he’s written include;

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