June 16, 2008

Don’t Believe Everything You Hear: Why Listening to Your Customers can be Hazardous to Your Health

by Freddy J. Nager, Founder of Atomic Tango LLC

Last week I hit the Digital Media Summit in the coolly atmospheric Hollywood Roosevelt Hotel. There I enjoyed several speakers providing intelligent and informed insights into the industry, including Zango’s York Baur, Quarterlife’s Mashall Herskovitz, and my MBA classmate Jake Zim of Safran Digital Group.

But many of the other speakers were so intently spinning facts and sidestepping questions, I thought I was watching a Bush administration press conference…

My favorite line came from a Hollywood agent who was clearly a grad of the Donald Rumsfeld School of Verbal Contortionism. One of his clients is Anhueser-Busch, and when asked why Bud’s Hindenburg-sized venture bud.tv failed, he responded, “Did they really fail or did they just not succeed?” Weasel boy then touted the fact that Bud scored millions of dollars of press coverage because of bud.tv, and I thought, yeah, right, next to the word “failure.”

Then there was the exec from Forrester Research. She was engaging and eloquent, with humorous anecdotes all presented in a clear voice — a welcome refreshment after the speaker who preceded her (a statistics junkie who had lulled the crowd into a coma). When she was done, the audience applauded her enthusiastically and lined up to buy her book. Too bad her simplistic advice would cost most companies an arm and both legs.

Her topic was the consumer “groundswell”: how the Internet has given consumers the power to take on corporations, whether by using the Web to organize fellow consumers, or by posting their complaints on YouTube. She gave several examples, including the infamous video of the sleeping Comcast technician:

She then noted that companies who try to remove such incriminating evidence and other critical media from the Internet have found that “it’s like removing pee from a pool.” I had to applaud her for that awesome line. Indeed, I thought she was spot on with her observations: the web has given consumers a lot of power (and that’s a good thing).

Then came her advice: Companies need to listen to their customers. Uh-huh. Could you be a little more obvious and clichéd, por favor? Yet, while that sounds like good advice on the surface, embarking on a corporate-wide campaign to listen to your customers can be expensive and even damaging.

Take the example that she herself presented: the TV series “Jericho.” When CBS tried to cancel the series because of its low ratings, “Jericho’s” fans organized a protest by sending 20 tons of nuts to a CBS executive. (In the last episode of “Jericho,” a character says the word “nuts.”) In response, CBS reinstated the show — only to have to cancel it again shortly thereafter when ratings didn’t pick up.

The speaker then moved on to her next amusing story, but I’m thinking, whoa, hold on: that’s proof that a company shouldn’t listen to its customers. So when Q&A came around, I asked her about it: A vocal minority cost CBS a lot of money — so how does a company distinguish a vocal minority from the true sentiments of the majority?

She didn’t answer my question. Instead, she mumbled something about CBS not actually losing money because they got a lot of publicity and were able later to re-air the show on cable. So I rephrased my question, hoping for a more general strategy on how to address consumer protests. And she still talked about CBS. Typical corporate researcher: great on facts and findings, not so great when it comes to solutions.

So how should a company approach its customers? Let me offer these suggestions:

1. Don’t try to listen to everyone.
Individualized customer service is expensive, and today’s large corporations have tens or even hundreds of millions of customers. Even relatively small, unprofitable web startups have millions of users these days. In order to listen to every single one of those customers, those companies would have to hire and train an army of customer service reps. That’s why so many companies use FAQs and user forums to meet most customer needs. It’s far from ideal — I know I get frustrated trying to get help from WordPress in publishing this blog, for example — but until intelligent customer service bots are invented, companies need to look at their finances before jumping into the “every customer is important” pool.

2. Determine who your most important customers are. The Pareto Principle states that 80% of effects come from 20% of causes. For many companies, the majority of their income comes from only a few customers, and these customers are not necessarily the most vocal ones. Anyone who’s worked in a service business, such as a restaurant, knows that not all customers are created equal, and some are downright annoying. As prolific marketing writer Seth Godin notes in his blog, most customers see themselves as “righter than average.” So analyze your CRM data and consult your sales team before deciding whom you should listen to. Otherwise, you could pull a Dunkin’ Donuts and do more damage than good.

Example of this selective attention at work: Each of the sales reps at upscale department store Neiman Marcus keeps a book on her customers. That enables Neiman to identify the 10% of their customers who generate 90% of their income. They can then cater product selection and services to that 10%.

3. Trust experience and expertise. Automotive-industry pioneer Henry Ford once said, “If I had asked my customers what they wanted, they would have said a faster horse.” And focus groups, that long-standing crutch of timorous and indecisive executives, have famously rejected the minivan, telephone answering machines, and “Seinfeld.” As BusinessWeek once noted, “customers don’t envision the future, they inform the present.” So rather than take customer input at face value, have your executive team and agencies process the information and generate strategic solutions — that’s what you hired these experts to do in the first place.

Before launching Red Bull, Dietrich Mateschitz hired a market research firm, who found that “People didn’t believe the taste, the logo, the brand name.” Indeed, they found the taste and sticky mouth feel “disgusting.” Had Mateschitz strictly listened to this research, he would have abandoned ship and ventured elsewhere. Instead, he considered this feedback, then used his own creativity and insight to develop a unique solution. He asked himself, where would consumers willingly pay a lot of money for a bad tasting drink that affects them physically? The answer: where they always do — bars and clubs. And hence, Red Bull as the cocktail mixer was born. Launching in clubs also made the drink hip and trendy, and enabled Red Bull to bypass the expensive supermarket-distribution costs that hinder most beverage startups.

4. Treat your customers like you’d want to be treated. Yes, it’s the clichéd golden rule, but following it is a lot cheaper than trying to repair the damage. So, Comcast, if you don’t like videos on YouTube that make you look like schmucks, stop treating your customers like proletariats in an old Soviet bread line.

Nobody needs to attend digital media summits in Hollywood — or buy some researcher’s new book — to know the right way to treat customers. Rather than spending millions of dollars on technical solutions to solve the customer complaint problem, how about eliminating the reasons behind those complaints in the first place?

P.S. If any of you have a suggestion on how CBS should have handled the “Jericho” situation, I’d love to hear it.

Related articles:


Tags : , , , , , , , , , , , ,

Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

8 Responses

  1. As far as Jericho goes, I would have gone for Internet distribution options. Many TV shows are downloaded via iTunes, CBS already streams many of their shows via the Net. How hard would it be to have a web only version of the show? Granted the costs for developing the show are likely to be pretty high but instead of pushing it back out to their main channel I would have attempted the alternates first.

  2. So very true Freddy. I could write a whole book of advice with material we have from work about how to treat customers and what to really listen for when your customers give you feedback. You can’t please everyone all of the time.

  3. Hey Freddie, I enjoyed reading your piece. I think you hit the nail right on the head. Our customers may not always be right. Probably our intention for letting them believe that they are is to keep us in good standing with them all or most of the time. As a customer care person and an MBA student, I appreciate your candid expert opinion.

  4. TV was a bad example to show listening to your customers is important as ratings can be manipulated to help save a failing show or kill a semi-popular one. Case in point is NBC’s Star Trek which fans wrote in to save–only to have NBC cut the budget and put it into a time slot guaranteed to kill the show based on the demographics. Then it came out that the show had been wildly profitable for advertisers but by then it was too late and NBC would lose out on the money that they could have made on a four season.

  5. I think the customer is a human being and so he has fears, ideas and worries.
    It should be listened but the analysis should be not emotional.

Leave a Reply

Your email address will not be published. Required fields are marked *