Just Because You CAN Doesn't Mean You Should
What are you doing to customers that you hope nobody notices? Once upon a time I was creating customer strategy for a credit card processing company and as a result of some intensive customer analytic...
What are you doing to customers that you hope nobody notices? Once upon a time I was creating customer strategy for a credit card processing company and as a result of some intensive customer analytics, I uncovered a significant customer segment that would gladly pay two, three, even five times its current rates because it valued this processing company's product and service so highly. I recommended that the company charge this segment one to two times more than current rates in order to capitalize on the extra value received by these customers. This rate increase would have translated into an incremental annual revenue increase of $20M.
However, the CEO focused on another finding from my research: the fact that the selection of merchant services vendors was a once-and-done decision. Typically, companies would identify potential vendors, conduct competitive analyses, perform due diligence, choose their provider and then, having done so, almost never again review the rates, fees, or other statement items. The CEO decided to take advantage of this systemic customer oversight by raising ALL fees and, in addition, charging an annual "membership fee" of $70.
Before we even get into the ethics of such a decision, the strategy behind it is just plain wrong. Firstly, rather than capturing the maximum value in play by customer segment, it treats all customers as if they're the same. Those who don't derive additional value are forced to carry the burden of those who do. Secondly, and worst of all, this decision emphasizes short-term revenue at the expense of long-term customer relationships. At the end of the day, it's unsustainable.
As we all learned growing up, a lie is only successful as long as you don't get caught. In this day and age, with both information and transparency increasing exponentially, that's a pretty risky strategy. Even if your customers don't notice, can you be sure your competitors won't? And which fallout would be worse? Consequences have a nasty tendency to catch up with us when we can least afford them.
Both research and anecdotal evidence have proven that loyal customers generate anywhere from 5%-33% greater revenue than non-loyal customers. Trust is the foundation for this loyalty. If you destroy trust, customers will only feel abused and exploited. In the end, you sacrifice loyalty, revenue, and customers. It's just that simple.
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ABOUT THE AUTHOR
Curtis Bingham is the recognized authority on CCOs and the first to promote this role as a catalyst for competitive advantage. Creator of the CCO Roadmap, a groundbreaking work containing 100+ strategies essential for customer centricity, as well as an international speaker, author, and consultant, Curtis is passionate about creating customer strategy to sustainably grow revenue, profit, and loyalty.