A number of years ago I was creating customer strategy for a credit card processing company and as a result of some intensive customer analytics, I found a rather large customer segment that would gladly by two, three, even five times their current rates because they valued the company’s product and service so highly. I recommended they charge one- to two times more to compensate for the extra value received, which translated into $20MM annual incremental revenue.
However, the CEO focused on one other finding from my research: the selection of merchant services vendors was a once-and-done decision. Companies would select, conduct competitive analyses, perform due diligence, and choose a provider and having done so would almost never again review the rates, fees, or other statement items. The CEO decided to raise all fees AND charge an annual “Membership Fee” of $70.
There are three things wrong with this. First is that it is just plain wrong and unethical. Second, it penalizes everyone rather than capturing the value in play. Everyone is forced to carry an additional burden rather than just those who truly value the service. Third and worst of all, this decision emphasizes short-term revenue at the expense of long-term customer relationships.
As we all learned as children growing up, the foundation of a lie is that it works only as long as you don’t get caught. If your strategy is dependent on not getting caught, Murphy’s Law will inevitably prevail. If your customers don’t notice, your competitors will point it out with great glee! Consequences have a nasty tendency to catch up with us when we can least afford them.
There is a huge amount of research and tremendous anecdotal evidence proving that loyal customers generate anywhere from 5%-33% greater revenue than non-loyal customers. Trust is the foundation for this loyalty. If you destroy trust, customers feel they’ve been abused and taken advantage of. In the end, you sacrifice loyalty, revenue, and customers—it is just that simple.
The question for you is, “What are you doing to customers that you’re hoping nobody notices?” Just because you can do something to your customers, doesn’t mean you should.