Bad Customers Are Bad for Your Business

Herb Kelleher: “Dear Mrs. Crabapple, We will miss you.”

Herb Kelleher of Southwest AirlinesSouthwest Airlines is a paragon of superlative customer service. Southwest’s happy and engaged employees routinely go out of their way to delight their customers. In spite of such remarkable devotion to customer satisfaction, there have been times when Southwest had to decide that some customers were just wrong for their business.

In the very entertaining and enlightening Nuts!: Southwest Airlines’ Crazy Recipe for Business and Personal Success, authors Kevin and Jackie Freiberg narrate how Southwest had to let go of a customer who couldn’t be less satisfied with her travel experience. This customer relations-story is best appreciated in light of the fun-loving and gregarious nature of Southwest’s legendary founder and ex-Chairman/CEO Herb Kelleher.

'Nuts- Southwest Airlines' by Kevin and Jackie Freiberg (ISBN 0767901843) A woman who frequently flew on Southwest, was constantly disappointed with every aspect of the company’s operation. In fact, she became known as the “Pen Pal” because after every flight she wrote in with a complaint.

She didn’t like the fact that the company didn’t assign seats; she didn’t like the absence of a first-class section; she didn’t like not having a meal in flight; she didn’t like Southwest’s boarding procedure; she didn’t like the flight attendants’ sporty uniforms and the casual atmosphere.

Her last letter, reciting a litany of complaints, momentarily stumped Southwest’s customer relations people. They bumped it up to Herb’s desk, with a note: ‘This one’s yours.’

In sixty seconds, Kelleher wrote back and said, ‘Dear Mrs. Crabapple, We will miss you. Love, Herb.’

Bad Customers: Wrong for Your Business, Wrong for Your Employees

Bad Customers: Wrong for Your Business, Wrong for Your Employees

Customers are the lifeblood of any business. Customer satisfaction begets loyalty, and loyalty begets revenues and profits. Businesses can therefore never place too much emphasis on their customers.

However, with slogans like “the customer is always right,” many businesses fall into the trap—and the slippery slope—of trying to satisfy every customer’s every wish.

Although your business may need all its customers—even the irksome ones—the reality is that some customers can actually be bad for your business. You can’t sustainably run a business without trying to satisfy every customer—particularly those cranky, annoying, or unreasonable ones.

Be wary of customers that fall into these categories:

  • Customers who require high maintenance but cannot be charged more
  • Customers whose demand for price destroys your profitability
  • Customers who want a lot more (better product, better service, better schedule) but are tightfisted
  • Customers who require supplementary services or products (especially those that are not part of your business’s core competencies) and tailored solutions that you don’t provide and can’t profitably offer to the rest of your customer base
  • Customers who don’t subscribe into the future vision of your business or your industry, which they’ll need to strategically commit to as some point in the future
  • Customers who tend to be aggressive and hostile, and disrespectful to your employees, regardless of how well they serve the customers

Strategic Customer Management Involves Being Tough Minded with Some Customers

Strategic Customer ManagementConsidering your long-term business goals, sifting through who should and who shouldn’t be your customers is an important element of strategic leadership.

With every product or service you offer, focus on who you want your customer to be, what expectations they have of you, and what you can profitably provide to them. Once you have figured that out, customers who don’t fit well need to be managed judiciously and decisively.

Without strategic customer management, you run a risk of disrupting your ability to converge around the needs of your principal customer base.

Remember the notion of opportunity costevery ‘no’ is a ‘yes’ to something important.

Idea for Impact: Let Go of Some of Your Troublesome Customers

Sometimes, it may be better to lose certain customers by turning them down than to dilute your ability to serve other valuable customers profitably. Stop trying to delight every customer. Take a hard look at the past, current, and future of every customer and prioritize whom you can going to serve better and more successfully.

Why Mergers Tend to Fail

Corporate mergers tend to fail because of conflicting corporate cultures

Many corporate mergers and acquisitions (M&As) fail to realize their wished-for synergies, and eventually fall short of producing value to the stakeholders. Some years ago, a KPMG survey estimated that 83 percent of all mergers fail to create value and half may actually destroy value.

M&As invariably produce disappointing results because of a variety of reasons. One of the principal reasons has to do with the failure of management to integrate successfully the operating cultures of the individual companies. During M&A deals, the due diligence processes tend to focus more on the corporate matters (market synergies, product or service offerings, financial projections, legal and regulatory matters, etc.) and overlook the organizational and cultural challenges.

Integrating Conflicting Corporate Cultures

Undoubtedly, the biggest barrier of post-merger integration is the conflicting corporate cultures of the individual companies. Management consultant Rick Maurer likens corporate mergers to the marriage of two single parents each with their own children — “just because mom and dad are so in love, they fail to see that the kids don’t get along.”

During a merger, two organizations with unique cultures cease to exist and a new organization is supposed to establish. The erstwhile individual organizations simply will not let go of the past and move on. In time, when the “stronger” partner tries to thrust its culture on the new combined organization, employees of the “weaker” partner resist change. This impairs cooperation among employees, as was case with AT&T’s unsuccessful acquisition of NCR in the early ’90s.

Forcing Employees to Mesh

Ill-fated Daimler-Chrysler merger suffered from cultural differences If cultural differences are far apart, the merged companies often fail to compromise and stick to a middle ground. The ill-fated Daimler-Chrysler merger suffered immensely from differences in the engineering and corporate cultures of the supposedly equal partners, Daimler-Benz and Chrysler Corporation, as well from differences in the national cultures of Germany and the United States. Within years of the merger, the dominance of the Daimler culture did not go well with employees in the United States. In December 2001, DaimlerChrysler CEO Jürgen Schrempp exclaimed, “What happened to the dynamic, can-do cowboy culture I bought”

Conflicting corporate cultures between US Airways and America West Combining two individual cultures and intricate administrative processes is very difficult to execute and manage successfully. Forcing employees to mesh behind the scenes is often ineffective because differences in organizational cultures are indiscernible to the top management. Take, for example, the merger of the Phoenix-based America West and Washington, D.C area-based US Airways in 2005. Many years into the merger, US Airways’s managers spoke of the “east side” (referring to the former US Airways) and the “west side” (referring to America West.) The unions continued to squabble over pilot seniority. Even though the company obtained a single operating certificate, two distinct cultures functioned internally resulting in poor employee morale, unhappy customers, and unpredictable financial performance.

Retaining Key Talent

Sagging morale and employee disorientation about job insecurity, company structure, seniority, decision-making processes, and promotion and growth opportunities often constitute another barrier to successful post-merger integration. Employees of the “weaker” partner or the acquired company tend to distrust the management of the “stronger” partner or the acquiring company. Fears of layoffs and new power equations in the merged entities often result in the exodus of key talent from the acquired company.

Forcing employees to mesh » why mergers fail

Engaging the Rank-and-file

Human due diligence is every bit as important as financial due diligence. Ultimately, every deal will succeed or fail based on the collective efforts of the individuals who make it up.”
* David Harding

The success or failure of a merger results not from what happens at the top management level, but from what happens at the rank-and-file level. The importance of engaging the rank-and-file employees in the merger process and retaining key talent during the initial transition period cannot be overstated.

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