The Paradox of Neglect

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Rather than rewarding you for your loyalty, some suppliers tend to take long-term relationships for granted. Introducing the spectre of a little competition into the picture can spur your suppliers into adding more value. Martin Grunstein explores this concept from a consumer’s point of view. 

Example number one.

I have driven the same brand of car for 25 years. In that time I have bought seven or eight vehicles for me and my family. The cars were good, the servicing was very expensive but efficient and I was treated well as a customer.

Then the following happened.

My son, who drives an old car of mine, complained that there was a strange sound when he was driving and the oil warning light wouldn’t go off, even after he topped up with oil, so I told him to take it to the dealer and they would advise us what to do.

He was told by the service manager that the engine was “stuffed” and it would cost over $20K to replace it and the car wasn’t worth that much so we should sell it and buy another one.

I decided to get a second opinion from a mechanic friend of a relative.

He said the engine is fine. The oil had become sludgy and if it was cleaned out and replaced as it should have been at its most recent service, the car had many years left in it. He did exactly that for us. Cost involved – almost negligible.

That mechanic now services all of our cars and I have no intention of going back to my previous dealer for service or the purchase of another vehicle.

 

Example number two.

I had my financial planner for over 20 years. His fees were high but he told me that my plan was working perfectly (even though I had nothing to compare it to). He and his staff were always friendly and we were happy clients.

Then the following happened.

He suggested I should organise estate planning and recommended a firm to do that for me. We met with the people he recommended and they sent us a proposed fee that was astronomical. I got a second opinion and was quoted a fee that was way less than half of the original quote.

It made me think about my relationship with my financial planner. Why would he recommend someone who would massively overcharge me for what was a commodity item? So, on the recommendation of my accountant, I saw another financial adviser and got a second opinion on my financial plan.

I was told that the fees I was being charged were ridiculous for basically managing a superannuation fund and that I was massively overinsured and, by amazing coincidence, those insurance policies were delivering enormous commissions to the planner.

I changed financial planners.

 

Here’s the point.

Even though I had probably been ripped off for years by the car dealer and the financial planner, I probably would never have known until they tried to rip me off even further and it made me reconsider my whole relationship with them.

This kind of thing is happening every day in Australian business.

You go to your existing phone company or energy provider and say you have been offered a quote of 30% less by a competitor – and they match price immediately.

What about the twenty years before I complained when I was paying way over the odds for my power or phone bill?

My wife was actually told by our car insurance provider “you should have rung up when you got your bill every year and we would have always matched any competitive quote”.

What the hell is going on here?

Not only is the existing customer not being rewarded for their loyalty, they are actually being told to their face that they are suckers for being loyal and non-complaining!!!!!

I have been told stories like the above in customer service workshops I have been running for years and, in almost 100% of cases, when the customer finds out that they have been ripped off in the past, rather than accepting the price match from their existing provider, they take their business to the competitor even if it inconveniences them to do it.

Why? Because the ego drive is stronger than the money drive!

When I am humiliated by a car dealer or a financial planner or a phone company or an energy provider, no discount is enough to make me loyal again AND I WANT REVENGE.

For some people taking their business elsewhere is not enough revenge, these people will tell their friends (and sometimes anyone who will listen) how they have been treated and go on social media to tell (usually embellished) stories of how badly they were treated.

And in some cases the revenge does more damage to the original business than the money they made by ripping off the customer. I had a lady in a workshop tell me very passionately (and she said she had told the story HUNDREDS of times before) how she changed the venue for her $80,000 wedding reception when one of her friends told her they had a function there and were overcharged $500 for drinks.

 

Why does this go on happening?

All companies try to maximise their revenue but not all companies consider the repercussions of the ways they get more sales.

By offering better deals to new customers than to existing customers and rewarding disloyalty rather than loyalty, companies must surely know that, eventually, they will have more and more disloyal customers who will leave them when a competitor offers a better deal.

And by gouging their existing customers they know they will do their brand great damage IF THEIR CUSTOMERS FIND OUT.

Consider an alternative universe and one I am trying to create with my teachings.

My financial planner says to me. “You have been a client for many years now and we appreciate that. We think you should have your estate planning organised. We’d like you to meet with our preferred legal people and we’ll pick up the tab for the creation of your wills.”

My car dealer says to my son “This may or may not be a serious problem but your dad has bought lots of cars from us so we’ll get you back on the road at our own expense and we don’t care how much it will cost us to do that.”

 

Here’s what would happen.

I’d still be with my original financial planner paying his ridiculous fees and being overinsured and telling people what a great bloke he was for organising my wills free of charge. Depending on how long I live he could have made another couple of hundred thousand dollars from me.

I’d still be buying and servicing my cars at my dealer and depending on how long I live he could have made another couple of hundred thousand dollars from me.

I think most companies believe that the extra revenue they make from exploiting their loyal, non-complaining customers is greater than the cost of rewarding them for their loyalty.

I beg to differ.

And by rewarding them for their loyalty, I don’t mean offering their existing customers promotional prices on a permanent basis, I mean just doing nice things for them once in a while and seeing them as a source of future revenue for a long time rather than a cash cow they can exploit today.

Let me end with some positive examples, ironically from the financial services and motor vehicle industries, that clients of mine have done.

A financial adviser invites her top 50 clients and their families to a private screening of a new release movie. They get choc tops and popcorn and have a good time and the adviser thanks them for being such wonderful clients. No sell. No strings attached. Just thanks for your loyalty.

A car dealer knows that one of his clients, who has bought many cars from him, is a car racing fanatic so he organises the client to have a racing lap at Eastern Creek with one of his idols. No sell. No strings attached. Just thanks for your loyalty.

 

A business relationship is like any relationship. If I feel I am taken for granted, I’ll leave.

About Author

Martin Grunstein’s outstanding results with over 500 Australasian companies across over 100 industries has made him this country’s most in-demand speaker on customer service. He is contactable on 0414933249 or through his website www.martingrunstein.com.au

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