Thursday, February 14, 2013

Make or Steal?


I’m apprehensive about the practice of pursuing market share by stealing away the best customers of your competition.   It’s a common practice - but it is based on the assumption that good customers (those who buy the most and require the least support) are available and inclined to be taken away from the firms that are currently serving them.   I have the vague sense there’s something fundamentally wrong with that assumption, and am trying to work it out.

I can’t disagree that having good customers is a benefit to the brand, and it seems only natural that a brand would want them – but the tactics they use to obtain them seem shady, in an ethical sense.  I have the sense that a good customer is developed over time – it’s not innate.  People aren’t born valuing products, understanding the way they relate to their needs, knowing how to apply the one to the other, and aware of all the various rituals around obtaining, employing, and replacing them.   These are learned behaviors, and they are learned because they are taught.

In grammar, the passive tense is a sign that the action is known but the actor is not clearly identified:  that is, to say “they are taught” means “someone teaches them” and we know not whom.   I would propose that in many instances, supply instructs demand.   A prospect who does not recognize their need must be taught to recognize it; one who recognizes their need but does not know how to solve it must be taught that a given product will satisfy their need; one who has made the vague connection between product and need must be taught how to obtain it and how to use it properly, i.e., in a manner in which the need will be efficiently satisfied.

Some of this teaching occurs through advertising, but even more is taught through customer support: the supplier demonstrates how the product should be used, instructions are provided in the box, and there is a toll-free number for questions or additional support.   It takes a lot of work to teach a prospect to become a good customer … wouldn’t it just be easier to steal one that a competitor has made?   That seems inherently flawed - but because the practice of stealing customers, by firms who are too incompetent and/or lazy to make their own, seems to be very widespread, so much so that they are likely to respond “so what’s wrong with that?  Isn’t that what everyone does?  It’s just the way business is done.”

"I'm just doing  what others do" has never been a valid defense of ethics - and it gives rise to the tragedy of the commons: you can steal good customers only if someone out there is making them – but when the vast majority of firms focus on stealing customers, few (and in some instances none) are making customers worth stealing.  The same can be said in the employment market: many firms complain that there are not “good people out there” who have the skills they need for a given position.  That is to say that they do not develop their own workforce to serve the growing needs of the organization, but hope that someone else is doing so, that they might steal their good employees away.   It’s faster, it’s cheaper, and everyone else seems to be doing it … but it is a parasitic practice that assumes the existence of a host.

For most firms, this results in a great deal of inertia and pessimism: If I work hard to develop good customers and good employees, other companies are just going to steal them away … so why bother?   I’ve heard this distressingly many times as an excuse to refuse to address the problem – maybe not in those exact words, but the thrust of the message is exactly the same.   It's not considered that customers are loyal to the firms that serve them well, and may be a leap of faith that many cannot make.

But on the other hand, that attitude may be an indication that a firm is not willing to take the effort not only to make good customers, but wishes to stop this effort as soon as the contract is signed, and make no further effort to maintain the relationship.  That is to say it is that investment in a relationship is not over when you have achieved your first success: if you want a second success, then a third, then more, you must continue to consider the needs and interests of the other party.  

If you train up an employee but do not pay him what a person of those skills are worth, you will lose him to someone else who will.   If you you train up a customer but do not offer him a price-value proposition that you taught him to seek, you will lose them to someone else who will.   For customers in specific, this is very clearly demonstrated in the level of attention (and sweetheart deals) given to new customers that is not extended to existing ones, who are neglected until they become susceptible to offers from firms who value them more.

Perhaps it’s just the optimist in me, beaten and bedraggled though he may be, that has the sense that there is an end to the vicious circle, and I have the distinct sense that customers and employees are desperate to give their loyalty to a firm that will earn it.   People stay in abusive or parasitic relationships in hope that things will get better, and it takes a lot of discouragement and neglect for them to get to the point that they are willing to abandon the investment they have made and move on.   That hope may sustain a customer or an employee for years, but it is not infinite.

To drag this meandering back to some semblance of a point:
  • There is value in developing customers.  You cannot count on stealing them from other firms, nor should that be your primary strategy because it is not sustainable – i.e., you can’t count on other companies to make customers worthy of stealing.
  • It takes effort to keep the customers you make.   Customers are loyal to a brand that serves their needs, and are generally accommodating and patient of its shortcomings, so long as they have a reason to hope that things will get better.
  • It takes no effort to lose the customers you make.   You can cruise on accommodation and patience, but even that has its limits, and a neglectful firm can break the hearts of those who love it, and send them into the waiting arms of another.
I recognize that common practices in most industries run contrary to these principles, but common practices are not best practices – there are firms that have fiercely loyal customers and employees, so rather than seeking to model yourself after the majority of firms (who get it wrong), you might consider modeling your own behavior after the minority of firms who get it right.


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