3 Easy Ways to Tell If a Business Puts Its Customers First
byJun 8th 2012 11:10AM
Friendly service, liberal return policies, and fair prices earn businesses high marks with customers. Then there are the true standouts -- companies that achieve an even higher level of customer service even when it negatively impacts their bottom line.
These businesses actively take consumers' best interests to heart and clearly demonstrate that they value your patronage. Here's how you can tell when you're dealing with a company that really cares about you.
1. It really listens to your desires and tries to deliver at all costs.
Negative publicity can create a strong temptation for companies to offer knee-jerk responses aimed at appeasing immediate outrage rather than thinking of solutions that reflect consumers' true desires.
Consider Starbucks' (SBUX) response to consumer outrage over its use of cochineal extract -- ground-up, dried insects -- as a food coloring. Some consumers were grossed out by the idea of that in their food. Others felt duped into consuming something they were led to believe was vegetarian that technically was not.
The negative publicity could have inspired Starbucks to make the easy switch to chemical coloring alternatives like Red Dye No. 40. But Starbucks explained that it chose the natural food ingredient because "it helps us move away from artificial ingredients" -- a move desired by its customer base. It then took the time to find an alternative that remedied the objections against cochineal extract and against chemical food colorings, settling on a tomato-based extract called lycopene.
2. It publicizes product risks and shortcomings, even if it means losing your business.
When a scandal compromises the reputation of a business, we've come to expect the company to hush it up. However, when a series of poisoning deaths were connected with Tylenol capsules in 1982, Johnson & Johnson (JNJ) did the opposite.
Even though the deaths resulted from tampering after the product hit the shelves, Johnson & Johnson focused its energy on protecting public safety rather than denying culpability. The company publicized the scare and warned consumers against using the product until the problem was solved. When Tylenol returned to the shelves, it came in tamper-resistant packaging.
J&J's response was a textbook study in how to manage the situation, one that actually benefited its long-term reputation.
Contrast this with Intel's (INTC) response to a 1994 scandal surrounding a flaw in its P5 Pentium microprocessor that could result -- extremely rarely -- in inaccurate calculations.
When the flaw was publicized, the company dismissed it as insignificant due to the fact that it would not impact most users. Not only did Intel fail to address the problem for current users, it also continued to distribute the malfunctioning chips. Intel offered to replace the flawed chip only if customers could prove the chip had been used in an application that would cause a malfunction.
While Intel may have been right that the error did not impact many users, the company's initial behavior demonstrated an attitude of dismissal toward customer demands for products that function properly.
Fortunately, some businesses buck the trend and create organizational structures that prevent consumer abuse. The Garrett Planning Network, for example, offers fee-only financial advising to ensure that its financial advisors do not have incentives to work against the goals of the client. Edward Jones trains its advisors to offer clients a clear expectation of how they are compensated so the clients might recognize where any conflicts of interest might lie.
3. It avoids conflicts of interests, or clearly spells them out right up front.
Some industries are rife with conflicts of interest that put consumer or investor welfare at risk. Take, for example, commission-based financial advisors.
These advisors carry out multiple functions that divide their loyalties. On the one hand, they work as advisors to individual clients who want to achieve financial stability and grow their assets. On the other hand, they work for big financial businesses that pay them commissions for selling specific products to their clients. This structure incentivizes financial advisors to sell whichever products pay the highest commission -- even if those products undermine the client's financial goals.
Businesses that avoid such conflicts of interest altogether demonstrate respect for their customers by reducing the risk of behavior hostile to consumer interests.
Our busy lives often force us to make quick shopping decisions and to count on the integrity of the businesses we support. But seeking out businesses that demonstrate respect for consumers can increase the odds of a positive experience.
In short, the best way to avoid sharks is to avoid shark-infested waters.
Motley Fool contributor M. Joy Hayes, Ph.D., is the Principal at ethics consulting firm Courageous Ethics. She owns shares of Johnson & Johnson. Follow @JoyofEthics on Twitter. The Motley Fool owns shares of Starbucks and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Starbucks, Johnson & Johnson, and Intel. Motley Fool newsletter services have recommended writing covered calls on Starbucks and creating a diagonal call position in Johnson & Johnson.