The Customer Service Survey

Loyalty and Forgiveness

by Peter Leppik on Wed, 2013-09-18 16:37

One of the fastest ways to turn a loyal customer against you is with overly-aggressive collection techniques. Some of the angriest customer feedback you will ever read is in the general category of, "I was a loyal customer for ten years, but I was two days late paying my bill and they cut off my service."

So why do companies keep doing stunts like this, where BT interrupted the Internet service of UK publisher The Register with a collection notice? This burns up whatever goodwill the customer has for the company, not to mention the novice blunder of picking a fight with someone who buys ink by the barrel.

The answer, of course, is that it works. It works from the short-sighted perspective of increasing collections and reducing the chances that a customer will be late in the future. Much like touching an electric fence, most people won't want to go through that twice.

But while the CFO is celebrating improved collections, the company's marketing department is trying to figure out how to improve customer loyalty and retention.

The problem is that:

  1. Loyalty and forgiveness are two sides of the same coin. We forgive the minor mistakes and transgressions of those we are loyal to because those mistakes are less important to us than the overall relationship; and
  2. Loyalty is reciprocal. We are loyal to those who are loyal to us.

So when a company brings out the heavy artillery against a customer for an occasional and minor slip-up, it sends a very loud message to the customer that the company (a) will not forgive the occasional mistake, and (b) is not loyal to the customer, and therefore (c) is not deserving of the customer's loyalty.

In my personal experience this plays out very clearly. Only a handful of companies have truly earned my loyalty, and they are the companies which have demonstrated that they consider my business more important than the occasional mistake. I don't care if I wind up paying a little more, and I generally won't even bother checking out the competition. The peace of mind is worth any extra cost.

On the other hand, I am actively disloyal to my credit card companies and mobile phone carriers: whoever has the best deal at any moment gets my business. That's because those companies have proven they will take advantage of any mistake I make, and play "gotcha" games with their terms and conditions. Your payment is delayed by one day? That's $35 plus interest. Exceed your monthly bucket? Be prepared to pay through the nose for the overage.

While those strategies may have earned a small amount of extra revenue (especially in my younger days before I caught on), those companies are paying for it today through the discounts, rewards, and other programs they need to buy my "loyalty."

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