CSD: Are Customers Always Right?

Discussion
Jan 26, 2012

Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.

As anyone even remotely associated with the service industry will tell you, the customer is king. But a new book is challenging that theory and takes a critical look at the true value of disgruntled customers.

For example, in a retail setting, the squeaky wheel almost always winds up getting the grease. They get discounts or free merchandise outright, not to mention calls from executives looking to smooth a tense situation in hopes of protecting the brand’s good image. There is a lot of merit in this strategy, especially in this era of social media where one remark on Twitter or Facebook could tarnish an otherwise pristine brand image.

"No one likes hearing a complaint, so when a customer complains, a business quickly and resoundingly rectifies the complaint," said Betsy Kruger, marketing consultant and author of Top Market Strategy: Applying the 80/20 Rule.

The problem with this strategy is that disgruntled customers bring in less profit than loyal customers.

"It’s wrong to reward complainers," Ms. Kruger said. "You should reward loyal customers since they reward your business with higher profit."

A retailer, Ms. Kruger said, can profit from the 80/20 rule by enacting these steps:

  • Distinguish your top customers. Identify ways the top 20 percent of your customers differ from other customers and what characteristics they have in common.
  • Target your top customers. Gratify your top customers with a top market strategy. Discontinue marketing to the bottom 80 percent of your customers by automating all interactions with that group.
  • Promote to top prospects. Focus resources on converting similar prospects into top customers. When you replace your less profitable customers with these new customers, you can expect your total profit from customers to quadruple.

"The top 20 percent of your customers magnifies your profit, whereas the bottom 20 percent of your customers magnifies your complaints," Ms. Kruger said.

Discussion Questions: Are retailers overreacting to disgruntled customers? How should stores handle high-maintenance shoppers?

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19 Comments on "CSD: Are Customers Always Right?"


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Tony Orlando
Guest
10 years 3 months ago
I have never subscribed to the “customer is always right” theory. Most complaints are legit, but the new wave of scammers and whiners is out of control. I could write a book on how many folks just want what they want, no matter what the policy is, and I diplomatically hold my ground, because it is not worth my time or profits to keep giving in to customers that just want a free lunch. It is our job to protect the customers from bad foods, and we do, but am I responsible for people who cannot cook, or leave ground beef in their refrigerator for 10 days, and than want their money back? A lot of experience, and common sense is needed to deal with each situation as it arises, and for the most part, the results are pretty good. I realize that not all issues will be resolved the way a customer may want it to, but I draw the line on crazy. Lots of fun, but it comes with the territory.
Ryan Mathews
Guest
10 years 3 months ago
Fire them! The great Sol Price was fond on talking about what he called, “the intelligent loss of business.” If somebody is costing you an arm and a leg and still will never be happy it’s time to cut your losses. You have to be sensitive to real, serious customer complaints but bending over backwards for folks who just like to kvetch isn’t worth the time or trouble. In fact, you should drive them over to your closest competitor and let them worry about how to keep them happy. That said, I don’t think most retailers spend enough time determining who their top customers really are. It isn’t just about gross aggregate spend but rather about the profitability of that spend. So, fire the nudges and take a hard look at those big spenders to make sure you’re really making money on them and not just rewarding bad shopping behavior like cherry picking. Again, this doesn’t mean one ought to turn a deaf ear to genuine customer complaints or not practice effective service recovery. Customers… Read more »
Steve Montgomery
Guest
10 years 3 months ago

It used to be that the disgruntled customer and the retailer had a reasonably private resolution to any issue. True there was always word of ought (good or bad), but if the issue and its resolution were not fodder for the world to chime in about. Today, with all the social media available, the dissatisfied customer has many forums to voice their concerns. In many ways this gives them a disproportionate platform for their views.

I do agree with Tony that there are lines retailers should not have to cross but where that line is does vary based on the situation. Sort of like art — you know it when you see it and need to act accordingly.

Max Goldberg
Guest
10 years 3 months ago

All three of the ideas for nurturing and caring for top customers are good, but when a customer has a legitimate complaint, it should be handled promptly.

That said, if a regular customer is a chronic complainer, it’s okay to fire the customer by suggesting that she shop elsewhere.

Mark Heckman
Guest
10 years 3 months ago
There is no short, easy answer to this question. What a surprise! The reality is there are “complainers” that live and breathe for the chance to rip someone’s head off if their “perceived” needs have not been satisfied. Good, savvy managers learn how to deal with these folks and typically can turn lemons into lemonade more often than not, just by listening and offering some level of remedial reaction. As a store manager, many moons ago, some of my best long-term shoppers were those that I got to know personally following a service failure or some type of complaint. It is also true that there are other customers that will remain disgruntled no matter what. Those customers are expendable. But the author of the post makes a larger point in my view. Top shoppers are not only worth the time and effort to remedy a complaint or satisfy a request, retailers that have a means to identify their best shoppers should proactively seek their opinions and gauge their satisfaction through store focus-group panels, surveys and… Read more »
Richard J. George, Ph.D.
Guest
10 years 3 months ago

I don’t disagree with the premise. I have never been a fan of the statement the customer is always right. Instead, the customer may not always be right, but if we decide that this customer has value and we wish to retain same, than we need to dignify the customer by an appropriate and respectful response to any interactions, including complaints.

The key is determining “customer value.” The value of the customer will determine if and how the company needs to respond to customer requests and complaints. Also, I believe any responsible company can and should fire customers whose value to the company is less than the cost to maintain the relationship. Fire them with dignity, but fire them nonetheless.

Phil Masiello
Guest
Phil Masiello
10 years 3 months ago

The customer is not always right, but they are always the customer — period! Every executive can learn from speaking directly to their customers, both good and bad. I am a firm believer that when sales start to slip, rather than reacting by dropping prices or rushing into promotions, the CEO and every senior manager should call 5 customers and ask them what they like, don’t like, and would change in their company.

I do not believe retailers overreact to disgruntled customers. There is a lot of learning from disgruntled customers about how the stores are REALLY run, not how management thinks the stores are run by fly ins. Too many times excuses are made after listening to angry, frustrated or aggravated customers, about the real problem. Much of retail is broken and it won’t get fixed until the problem is recognized.

alexander keenan
Guest
alexander keenan
10 years 3 months ago

Decades ago I worked for Pay & Save in the hardware department. A man and his daughter brought back a snow shovel. He explained that the handle broke when he first used it. That was when his daughter said. “No daddy, you broke it when you ran over it with the car.” That was when I first learned that the customer is not always right. 🙂

Hayes Minor
Guest
Hayes Minor
10 years 3 months ago

Whether or not a disgruntled customer brings in less money, sometimes they make the most noise — both inside and outside the store. I do not subscribe to the idea that the customer is always right; however, these days, the customer holds the keys to social and viral word-of-mouth for a retailer. Better to sometimes pacify the squeaky wheel then to remove it altogether.

Camille P. Schuster, Ph.D.
Guest
10 years 3 months ago

Identify your most valuable consumers. Gather all complaints and do two things with them: identify which complaints come from your valuable consumers and identify patterns across all the complaints. Firing the chronic discontent consumers is a perfectly reasonable alternative. Complaints from your valuable loyal consumers need to be addressed. Complaints that are reported often should also be addressed. I can not remember who said it but the idea that consumers are not always right but that they should always be heard makes a lot of sense to me.

James Tenser
Guest
10 years 3 months ago

Is the customer right? Wrong?

Not relevant!

Right or wrong he/she is either a valuable relationship or not. The art lies in telling the difference. The science lies in understanding the distribution of shoppers along several dimensions, including lifetime value, likelihood to recommend and cost to serve.

An even trickier discipline is imparting these insights to your customer service people in the stores and giving them the tools and authority to make the right responses. Sure, the costs of fixing many grievances will outweigh the profits of the transactions in question. But successful remediation of some others will pay off in customer and brand equity.

Not every complaint is an opportunity to win the customer’s heart. Some shoppers will remain obnoxious lying chiselers no matter how we care for them. For the most part, these folks are outliers on the normal distribution curve. To allow them to dictate how we formulate policy for our remaining customers would be an utter failure in customer service.

Doug Pruden
Guest
Doug Pruden
10 years 3 months ago
I absolutely agree that 20% or less of customers are generating the profits for most businesses. But when it comes to complaint handling things get more complex. In the real world: 1) Most large retailers have no way to differentiate between profitable customers and costly customers at the moment the complaint is being presented. 2) Most complaints don’t involve either the top 20% or the bottom 20% of customers. More likely they involve the actual majority of customers (the “break-even” folks) who by their volume cover much of the overhead. 3) Senior executives are seldom the ones interacting with the customers, so policies and training must take their place. But since knowledge of who is a profitable customer and who is a costly customer is not readily available to the line employees, and since every complaint can be different, in the end we are often dependent on the judgment of lower level staff. Why not identify and provide special care for those most profitable customers? Encourage legitimate complaints and provide a process — make it… Read more »
Craig Sundstrom
Guest
10 years 3 months ago

“…especially in this era of social media where one remark on Twitter or Facebook could tarnish an otherwise pristine brand image.”

I won’t comment on the more general issue of customer satisfaction, but thinking like this should be ignored: anyone (who has more than a handful of customers) who thinks they can preclude EVERY complaint is delusional … what’s to prevent “complaints” that have no legitimacy at all, but rather are stoked by ulterior motives?

Herb Sorensen, Ph.D.
Guest
10 years 3 months ago

“The customer is always right” is a very good PR stance, but not very intelligent for a rational retailer. I wrote on this some time ago, “No, the Customer is NOT Always Right!

Doug Fleener
Guest
10 years 3 months ago

Love James Tenser’s comment saying it isn’t relevant whether the customer is right or wrong. When I was a young retailer, a wise customer told me that I could be right, or I could be profitable. Loved that advice.

I think it’s important to ensure that you constantly win and keep the customers you want, and politely lose the customers you don’t. I don’t care if a shopper is high-maintenance as long as their highly profitable!

Ralph Jacobson
Guest
10 years 3 months ago

It depends. If the retailer has historical evidence that the shopper is valuable, then, yes, do what it takes to keep them loyal. If the shopper has no history, the retailer has a unique opportunity to capture a new, loyal shopper by responding to their concerns with a high-service offer to settle the dispute. Of course, the “offer” will vary from product segment (food, apparel, etc.), however an offer should be made, unless the complaint is completely unfounded or ridiculous.

Tim Henderson
Guest
Tim Henderson
10 years 3 months ago
Merchants should never confuse the actions taken to reward the brand’s best customers with the actions taken to address and rectify a complaint. There’s nothing wrong with focusing more attention on the most valuable customers and rewarding them for being so valuable. That’s just smart retailing. But a customer complaint should always be addressed, regardless of whether the customer falls among the 80% or 20%. Upon further investigation, legitimate complaints should be rectified, and that can take various forms, including a future discount or refund. Such actions are not rewards. They are one of various, potential remedies retailers can take to address a legitimate complaint, win back or maintain a customer relationship, and/or improve the business. There are several downsides to not fully addressing a complaint. At a minimum, it’s a missed opportunity to improve the brand experience. It’s also a missed opportunity to help move those in the 80% bucket to the 20% bucket. It’s an invitation to spread the incident via word of mouth and/or social media. And there’s potential that those in… Read more »
RICHARD BOWDEN
Guest
RICHARD BOWDEN
10 years 3 months ago

In this discussion, one has to be able to clearly differentiate the “complainer” from the client with a legitimate issue. If this can be done and it is clear that you have developed a relationship with a “complainer,” you must bring this to an end as quickly and politely as possible. The big fear in this process is that you or one of your staff incorrectly identifies the customer as the complainer…nothing good can come from this. My advice: always go slowly.

Matthew Keylock
Guest
Matthew Keylock
10 years 3 months ago

I like what James Tenser wrote.

I would add that knowing your best customers is a little harder than it sounds. A focus on profit or even sales may create a very misleading view, but getting this right is the cornerstone.

While technology is now enabling us to know who our best customers are in the store and also online, few retailers have the basic building blocks in place to effectively exploit these new tools.

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