INDUSTRY ANALYSIS

Legalizing Respect for the Consumer

Look long enough at any company’s Web site, C-level presentations, earnings conference calls or marketing efforts, and you’ll find the phrases like, “customer-centered,” “The customer comes first always,” and “The customer is the center of the business.”

They are all noble thoughts to be sure, but too often the exact opposite is true: Companies hold entire series of customers in contempt and disdain.

Worse, the leaders of companies openly and harshly speak of these unprofitable segments in private as if they were literally bleeding the company dry of profits.

This is especially true when company executives look at the cost of their investments in customer-facing strategies including sales-force automation (SFA), customer relationship management (CRM) and services applications. Armed with analytics, marketing, sales and service executives are starting to figure out how much it costs to serve customers, often finding out that many of their present customers have been unprofitable for years.

Anatomy of an Ethical Meltdown

At the heart of what has happened in so many high-profile indictments, businesses have shown contempt for the customer, the investor — even the government and taxes.

Listen to the rationalizations from many of these scandal-crossed executives, and it all boils down to their perception of customers and how the unprofitable ones – the ones that generate the least margin – need to carry their fair share.

So if it means lying to investors about returns, overcharging for electricity, utilities and services, and lying about how funds are allocated – all is rationalized by pointing at investors and customers who cost too much to serve and extrapolating this as a great excuse to bilk everyone else.

More Than a ‘Material Event’

And isn’t a material event also a customer, channel partner or supplier event?

One of the most well-known parts of compliance legislation authored by Sarbanes and Oxley is the reporting of a material event within 72 hours of it occurring. Wouldn’t an event that changes a business somehow need to be communicated to partners, customers, suppliers — or at the very least, investors?

Of course, many companies liken unfavorable news to losing a major customer, deciding that offshore production in full implementation is more expensive than continuing to produce in their own facilities after all — or that hostile takeover bids should be held in confidence.

Yet all these events can and will change how a business responds and interacts with its customers forever.

From a customer-relationship standpoint, legislating the reporting of material events is akin to saying that, despite a vendor’s contempt for those small investors and customers, every customer has a vested interest in knowing the truth — even if the U.S. government has to enforce accountability.

This sounds pretty harsh but consider the converse of this – phantom pricing strategies and millions of kilowatt hours of electricity that never existed, traded by Enron – while jacking up energy costs at the expense of the “poor widows in California.”

That quote from recent Enron proceedings shows just how far a business’ contempt for small, marginal and unprofitable customers can go.

Legalizing Respect

The irony of the ethical meltdown that has become blatant during the last few years is that the very mantra that so many of these companies and their CEOs have repeated ad nauseam on network television shows is what could have saved them.

Respect for customers, and — in the case of unprofitable and marginal ones, taking on such segmentation strategies to trim costs of services and support through innovative CRM and services strategies — could have potentially stopped rationalizations that the most profitable customers needed to more than cover the costs of serving them.

Credibility Is Like Ice

For the many companies that always talk of being customer-centered, their credibility is like ice. It’s going to take some time to solidify and build. What’s also true is that it only takes ice a few minutes to melt when the heat is on – and the same goes for any company’s credibility with its customers.

If anything, compliance needs to compel companies to get their customer strategies right the first time and realize that the world is leaning towards skepticism and not trust. Therefore, CRM’s broader role needs to be used to hold onto the credibility companies have.

That may very well be the truest test of best practices ever.


Louis Columbus is a former senior analyst with AMR Research and is actively pursuing career opportunities in research and consulting.


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