Monday, April 09, 2012

The tragedy of the commons: Why service businesses are killing themselves

As a customer service guy by trade, I have noticed something interesting recently: more businesses than ever are chasing their best customers away.

Put bluntly, I can no longer make a major purchase - and sometimes even a minor one - without getting aggressively hounded to buy upgrades, add-on warranties or services I don't want, to a degree I have never seen before. I often react to this pressure by never coming back. Multiply this by lots of others, and I can see why many retail and service businesses are going the way of lemmings marching off a cliff.

Take the time I took a business trip to the West Coast, and was browbeaten by the rental car agent for the entire transaction about upgrading to a bigger car - asking why I didn't want it, pushing the benefits of the more expensive car, and sighing and acting like I was stupid not to take advantage of such a deal. (Even worse was the time an agent said, "How would you like an Impala?" implying I was getting one anyway, and then silently upcharging me without my permission.) Nowadays I rent cars from firms with automated kiosks where possible, and avoid live agents like the plague.

More recently, I went to purchase some home exercise equipment. As soon as the dreaded extended warranty question came up, I made it clear I had no interest whatsoever. Not that my wishes mattered. The salesperson insisted on going over one "benefit" after another of his plan, as I kept saying no thanks.

Then he asked why I didn't want to buy it, and silly me, I told him: I rarely use coverage like this, and when I have actually filed a claim my service experiences have usually been horrible. Of course, he didn't actually want to know why I wasn't interested. He just wanted to keep me talking so he could yeah-but everything I said. Finally, as he kept blathering on, I walked away.

Same deal when I purchased a new computer this month. This time the clerk not only didn't give up, but called her manager over for yet another round of "Why don't you want to buy this service plan?"  I practically felt like I was going to be led away for an interrogation before I made it to the checkout counter.

In perhaps the stupidest example of all - and one I blogged about previously - I went to a bookstore for the express purpose of purchasing some expensive professional books I had once browsed there. Solely to be fair to the store instead of buying them online. My reward was to be ceaselessly hectored to purchase a $25 discount card I had no interest in, because my savings would cover half the fee I had no intention of paying. After at least five rounds of  "no thanks," with her visibly clucking and sighing at me in front of everyone about it, I silently resolved to click "add to cart" forever after.

In sociological terms, this is what we call the tragedy of the commons. It happens when individuals, acting in their own self-interest, ultimately destroy a shared resource - in this case, their paying customers - in much the same way that farmers let common lands get over-grazed as long as their own cows get there first.

Here is how the math works: Upselling improves a company's short-term bottom line. So some genius at headquarters orders everyone to do it aggressively or else. Then customers like me get hassled and shift permanently to buying elsewhere or online. Which makes them even more desperate.

It is often even worse for the employees than for the customers. Once at a chain jewelry store, for example, I saw a poster on the back of the stockroom door with a truly stupefying list of daily sales goals: close X amount of revenue, upsell Y number of customers, sell Z numbers of service plans, etc. Employees who don't "close" as hard, and are therefore liked better by customers, often lose their jobs or don't get bonuses. The ultimate impact of losing these less-pesky employees - and good customers - of course never gets measured.

Not every company falls victim to this trend. Take Wal-Mart: they offer extended warranties at check-out, but the cost is very reasonable, and at least at my store, they won't hold up the line pestering you if you aren't interested. And of all places, my favorite car dealer. We recently leased a new Honda, and the literature for their add-on services was just that: literature. No pressure and no problem. We'll be back.

Businesses today seem to have fallen into a vicious cycle of bullying people to make one-time sales, while chasing away the loyal long-term customers they need to survive. The solution? Start learning a basic concept from the world of dating: no means no.

1 comment:

Maureen Anderson said...

This doesn't even count the relentless quest to get your address and phone number! I once paid cash -- four dollars -- for a summer top on sale...and still the cashier wanted that information.

On an unrelated note but speaking of Hondas, that's why we love them. There's no bickering on price. “You want the new Accord? Here’s how much it costs. The end.”

Give me your best deal, and give it to me up front. I’ll either go for it or I won’t, but either way we can get on with our lives.