CAN it be 'bah, humbug' time again already? Every Christmas the appeal to our better nature serves to throw into ever more grating relief the mendacity, or at least deliberate ambiguity, at the heart of so many companies' business practice - and this one is no exception.
Thus the boss of GNER admitted last week that it was hard to find cheap fares on the company's website, adding coolly that it would take a year to make them more accessible. The next day British Gas was taken to task by the Advertising Standards Authority for a misleading ad campaign - for the seventh time in a year. Happy Christmas, suckers.
However, don't think that this is just festive behaviour:
* A leading mobile phone company worked out that it makes two-thirds of its profits by not telling customers they are on inappropriate tariffs
* Don't even try to pin down a 'real' air fare: airlines deliberately change their prices hundreds of times a day to make it impossible for you to find out
* Banks make much of their profits from extra charges on customers who overdraw - and have algorithms for paying in cheques that make sure they do so as often as possible
* Companies using 0870 or 0871 phone numbers for customer service profit from keeping customers on hold while they work their way through the dreaded automated answering systems
* Loyal customers are often worst treated, paying more for services than 'rate tarts' who switch every few months. Loyalty, in effect, is a mugs' game.
The cynical may shrug, but that's showbiz. Caveat emptor . As Groucho Marx put it: 'The secret of success is honesty and fair dealing. Fake that, and you've got it made.'
Yet the long-term costs of the Groucho model of business are catastrophic. Some of the examples above are taken from a book out next year ( The Ultimate Question , Harvard Business School Press). In it Fred Reichheld, a senior consultant at Bain who has made a career of studying customer loyalty, graphically maps the differing effects of what he terms 'good' and 'bad' profits.
Good profits are self-sustaining because customers not only come back again for repeat purchases, they become advocates for the company - a virtual marketing department. Apple customers are a good example. Bad profits are the reverse. Instead of creating value for customers, behaviour like that above appropriates value from them.
But it's a mistake to think that ripped-off customers are passive. They find ways of getting even that exert a huge toll on offenders. In a mirror image they become an anti-marketing department: an invisible army of detractors, each of whose negative comments typically cancels out several recommendations. Detractors complain more, make more calls on customer service and are a hidden drag on growth. They cost more and spend less. Angry customers depress employees, compounding the effect. And to neutralise their influence requires ever greater effort by the companies.
Figures in some industries - credit cards, mobile phones, cable TV and, sad to say, at least in the US, newspapers - are now so high that compa nies are having to pedal more and more furiously just to stand still. It makes the apocryphal customer-service director all too credible: 'Our new automated ordering system has sped everything up: we're losing customers faster than ever before.'
Statistician W.E. Deming said that the most important costs in business were unknown and unknowable. In this case it seems hardly coincidence that so many companies find it hard to grow consistently and so few provide a service that customers can be positive about. Yet very few managers are able to make the connection. The capacity for self-deception is stunning: while 96 per cent of directors responding to a Bain survey said their company was customer-focused and 80 per cent declared that they provided superior service, customers in other surveys rated just 8 per cent of the firms they dealt with as superior.
Bad profits are the result of short-term management by the numbers, aided and abetted by the notorious unreliability of conventional customer-satisfaction surveys. Instead, Reichheld proposes that managers should pay attention to a measure of, simply speaking, the ratio of promoters to detractors. Bain calculations seem to confirm that the relatively rare firms with a high positive 'net promoter score' have superior growth and profitability those with low scores - the vast majority - struggle to keep afloat, not least because their destructive tactics are generating as much negative as positive word-of-mouth advertising.
Reichheld's analysis of good and bad profitability rings horribly true - and the next month will doubtless bring many new examples of the latter to the surface. But, as readers of this column may already be concluding, the difficulty will be putting the score into practice without depriving it of its integrity. If it is made into a target on which pay and prospects depend, the 'net promoter score' will cease to be a reliable measure, however persuasive the initial concept. When 'making the NPS numbers' becomes the end rather than the means, priorities are likely to become distorted and people lose sight of the underlying purpose.
The best companies intuitively understand that good service is not about loyalty programmes, satisfaction surveys or CRM, it's about allowing customers to pull the value they need with the minimum of fuss and effort. If you provide that kind of customer service, you won't need 'customer service' at all. And the NPS will, deservedly, go through the roof.
The Observer, 11 December 2005