Faculty & Research -Is it possible to do “bad” business and keep your customers?

Is it possible to do “bad” business and keep your customers?

“100% satisfaction or your money back”. “A 30-minute delay and get a free pizza next time around”. “If your order arrives damaged, just send it back and we’ll send a replacement and cover your postage costs”. Sound familiar? More to the point, are such service guarantees convincing and make you want to use the same company or supplier again?

The emergence of customer charters suggests that companies have had a serious re-think on how to keep their customers whilst maintaining their own reputation.
The traditional “service guarantee” has been in practice for many years and is now identifiable in approximately 40 different industries. They look re-assuring and are printed in official company literature and marketing tools to provide written proof that if the company doesn’t deliver, the customer won’t lose out. Even better, the customer becomes the sole judge of what is a 100% satisfactory product or service. What more could one ask for?! How about an efficient service or the correct product in the right condition in the first place…

Does it do what it says on the tin?
In reality, service guarantees are respected when a problem occurs but the irritation and inconvenience for customers is plain to see, to the extent that they may seriously re-consider using the same service again. The root of the problem, though, is not the respect of the guarantee but rather its conception and implementation in the first place. Not all companies have the requisite skills to properly monitor the market, consult the relevant management, or even measure performance and therefore assume responsibility for such problems. Worse than making a mistake is not learning from it, and companies guilty of this will lose in the long run, namely by losing customers.

How do you go about assuring quality?
A newer approach to have emerged is the “customer charter”, pioneered by the Australian general insurer AAMI and now in increasing use, especially within the banking industry. Like the traditional service guarantee, compensation is made clear from the start in the event of an error. Unlike service guarantees, any such errors are audited, reported on and made public. Visibility and accountability are the keys to the customer charter, whether everything goes smoothly or belly up. Whilst good service deserves public recognition, the company does not hide behind its mistakes or try to sweep them under the carpet.

A four-step approach
The current model for conception of an effective customer charter breaks down as follows: consultation, information, accountability, and re-dressing. In real terms, this means asking the opinion of stakeholders during the design of the charter, promoting the transparency of information, committing to analysing and publishing standards reports, and pledging to rectify any problems. This is no marketing construct designed to hang on to customers so that they continue to spend, of which service guarantees have sometimes been accused. This is about quality assurance, in the interest of the customer first and foremost but also the company or service provider and their reputation.

How do I set one up for my business?
In order to avoid making some of the mistakes mentioned earlier, managers will need to do their homework before even starting to think about drafting a charter. Collecting solid data and research, analysing the market and business environment, identifying staff opinion, talking with regulators, reviewing business plans, analysing competition, auditing current performance…. The process is a long and necessary one, after which one can start to define strategy and design an initial document. Regarding the document, feedback from consumers has resoundingly asked for clear and plain language on a one-page document. Screeds of fine print will not get the proper attention of consumers, at a potential cost to them as well as the company.
Whilst external communication of a charter is a crucial step in the process, internal marketing is just as important. Members of the company in question have to buy into the concept so that, in the event of errors being committed, they will react accordingly. It is then and only then that implementation should take place. This should be no solo effort – customers, suppliers and staff should be involved, opportunities for improvement identified and solutions found. A charter that comes across as a company simply trying to cover its back rather than an on-going, continual search for improved customer service is not doing its job. It is for this reason that companies who have gone down the charter route perform annual revisions, based upon their success (or failure) in reaching targets. Whether the customer is always right is debatable, but the company will most certainly get it wrong if it is unable to measure its own performance.

Managing customer expectations
One of the happy consequences of the charter approach, beyond an improvement in service, is a better understanding of the key person in the debate – the customer. Delivering on time and in condition is one thing, but the charter approach enables companies to dig deeper and gauge not only customer expectations but what their priority needs are.  Generally speaking, the advantage of the charter approach in comparison with the service guarantee is that it doesn’t wait for problems to arise and then try to buy back the customer’s loyalty. It tries to understand its target, tracks any errors that may occur, isn’t ashamed to go public with them but also makes clear its commitment to rectify them. In all walks of life, there is always room for improvement, as the shift from the service guarantee to the customer charter neatly illustrates.

This article draws inspiration from the paper We promise! Customer charters expand guarantees, written by Rod McColl and published in The Journal of Business Study – 2013 (volume 34, number 6).

Rod McColl is a Professor of Marketing at ESC Rennes School of Business, France. His research interests cover the effect of verbalised emotions on loyalty in written complaints, the effects of service guarantees and recovery type on service evaluations after a service recovery, marketing services – service quality, customer satisfaction and loyalty, and digital media and advertising.