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January 24, 2011 Advice Squad

The power of opportunity | How to win over a customer when you've dropped the ball

Advice Squad is written by members of the Maine chapter of the Association for Consulting Expertise, a trade organization of 88 consultants around the state. This issue’s column is written by Arthur Fink, a management consultant and creativity coach from Peaks Island.

“The best time to win customer loyalty is when you make a mistake.” I heard this surprising comment from an IBM executive speaking at a professional conference, and not long after I had an experience that demonstrated exactly what he’d said.

My IBM Thinkpad laptop had developed a persistent but intermittent problem. I’d sent it in for warranty repair, but it was returned with the problem unresolved. When I called IBM, they offered to expedite another repair, again paying FedEx overnight both ways. But I was flying off to Europe in four days, so I explained that I needed a working laptop right away. The IBM representative promised to see what she could do.

A few hours later, she informed me that an IBM repair person would come out, by boat, the next day to our island home to repair the computer. This wasn’t normal practice, and she had to “borrow” somebody from another department. But no matter — I was visited by a knowledgeable repair person who quickly found the real problem, fixed it and got back on the boat.

IBM certainly didn’t have to incur the cost of sending a repair person to our home, but they chose to. But the much bigger cost (or benefit) was the opportunity cost. For years after, I raved to my colleagues and clients about IBM Thinkpad service. I know this generated more than a few additional Thinkpad sales. Had IBM not come through, my comments might have been cautionary rather than congratulatory.

How often we think of the transaction cost and totally neglect the opportunity cost. And yet it’s those times, when something went wrong and a vendor or restaurant or service provider came through, that have really cemented my loyalty.

Here’s a very different story, of exactly what should not happen. I went with a friend to a restaurant for lunch. The food was excellent, and we thoroughly enjoyed the $8 half bottle of wine. However, I was dismayed to find that we were then charged $10 for that wine. I protested, but the waitress explained that we’d been served the wrong wine, which cost $10, and said we should pay for that wine. When I told her to check with the manager, she left, and returned to put a new check on our table. This time we were charged $12. The manager later explained to me, “We’re not in business to give away wine.”

Here the transaction cost was only $2 or $4, but the opportunity cost represents meals purchased by a large number of diners, myself included, who avoided patronizing this restaurant from that time on. I was not surprised when they closed the following year.

Making a “mistake” may not seem like a good thing, but recovering from one, or even from what the customer sees as a “mistake,” can be a wonderful opportunity. However, just doing something positive and incurring a transaction cost may not be enough, as the following story demonstrates.

Years ago, I photographed a wedding for a well-to-do young couple. My fee included a base rate and a charge per image proof that I delivered to them. Several months after they received their proofs, the wife called me to order prints. At every step, she tried to bargain on price, as if she were annoyed at paying for the prints she wanted. When I asked what was wrong, she blurted out, “We told you we didn’t want pictures of people eating, but there were all these pictures of [she named lots of relatives] eating. And we wanted some good pictures of us, but you took so many. We didn’t need all of those, but you’re charging us for them.”

I immediately offered to refund the per-print charges for as many images as she felt I shouldn’t have taken. “But what would I do with all those prints?” she exclaimed. “Throw them out,” I suggested, “and just let me know whether you want a cash refund or credit toward proofs.” “But I can’t throw out good pictures,” she answered. The irrationality of this was clear, but so was her upset. I suggested that she send me all the pictures she didn’t want to be charged for, promising a refund for each and that I would then throw them out for her. This, finally, was acceptable. I scratched my head, but had a satisfied customer.

The lesson here is about listening. This customer needed more than a dollar refund for the amount she felt she was overcharged. She needed to be relieved of items she had paid for that felt burdensome to her. People are not always forthcoming about how they feel they were wronged, or about what will make it right. Our task is to listen carefully, to uncover the story and to act boldly on their behalf.

 

Arthur Fink can be reached at arthur@arthurfink.com. Read more Advice Squad here.

 

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