How to lose customers…and maybe the business.

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My wife and I were having coffee in our local shopping mall recently. She was distracted and I asked what was happening. She motioned behind me to the open air nut counter. The proprietor was arguing with a young couple. The young lady claimed she bought a decorative glass jar of nuts from the vendor but when they had opened the jar, the lid was broken and the glass fragments fell into the nuts. She was asking for a replacement.

The manager (who I presume is the owner) was aggressive and stated that he “could not be sure that they had bought the nuts from his counter” despite the fact they were identical to many others on the counter. In spite of the insistence of the young lady and her partner, he refused to do anything for them and they went away with the young lady being almost in tears and her partner comforting her.

So the nut vendor saved money by not replacing the nuts…but did he “win”? Let’s consider it. For the sake of maybe $10 of his cost he alienated the couple who will tell everyone they know about the experience, the aggressive approach and his failure to acknowledge that it could have come from his counter. There were many people at the counters around them and they too overheard the altercation. By the look on their faces, they were not impressed either. They will question whether they should do business with him and tell others. Certainly I will not do business with the counter and from the look of others sitting at adjacent tables, neither will they. By the aggression of the vendor, one can only imagine that this is not an isolated incident. With this attitude and behavior, the business is in jeopardy. He lost, and the worrying thing is, he doesn’t realize it.

So what could he have done?

He should have listened to the young couple, asked for proof of purchase and when they said they didn’t have any, let them know that his policy is to exchange if there is proof of purchase. Having said that, he could have said that he would not like to see them leave unhappy. Without admitting liability, he should then have offered a replacement item to the same value stating that as a measure of good will, he would provide another product.

Even if they had not bought the product from him, for the sake of $10 ($5 for the original nuts and $5 for the replacement) he would have gained satisfied customers who would tell all their contacts how well they were handled, left the other customers at the counter seeing how well he handled the situation and had the people at the adjacent tables “singing his praises”. A very good investment of $10.

The lesson from of this can be summarized by the management guru Peter Drucker: “The purpose of business is to create customers”. In this case, the vendor destroyed customers, both current and potential. For the sake of $10, he destroyed good will with many potential customers. It would have been so easy to satisfy the couple and “create” many other customers.

Every business leader, at any level of the organization, needs to look at their business to identify areas where their businesses are acting like the nut vendor. How hard is it for customers to talk to someone when they have a problem? Do they get an interactive voice response system that only makes them more annoyed? Are our staff ‘defensive’, always pushing back on the customer? Are they empowered to satisfy the customer ‘on the spot’? Are they trained to respond and if necessary elevate to someone that can resolve the issue as soon as possible? Is the over-riding culture one of ‘creating customers’ as opposed to ‘saving every cent’?

Customers cost a lot to attract and sell to. It is all too easy to alienate them when some training and forethought would turn them from dissatisfied to advocates. Are you and your company like the nut vendor? I sincerely hope not!

All the best with creating your customers!

Philip Belcher, CEO, LSE Consulting Pty Ltd.