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Do You Know What Bad Profits Are?

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Profits Made Annoying Customers are Bad Profits Made Annoying Customers are Bad

If you do not know the difference between Good Profits and Bad Profits, then this article could change your career.

Bad Profits are any revenue or cost driven activities that annoy, anger or infuriate your customers. In today’s social media world, a furious customer can do a lot more than complain to their friends and go to a competitor. They can and do broadcast their displeasure on Twitter, Facebook, Google+ and online review sites to thousands (or tens of thousands) of people. One furious customer today has a bigger megaphone that ever before, and potential customers often give more weight to online reviews than all the carefully worded text your PR agent can generate.

Bad Profit activities are common and we see them every day. There is the customer service agent who is too eager to finish the call because they are being measured on ‘call resolution time’. There is the franchised veterinarian clinic that seeks to upsell you tests and services so that a routine annual checkup for the family cat runs into hundreds of dollars. There are the online subscription companies that make it extremely hard to unsubscribe from a service.

When I was at General Electric we reserved large deposits for engine maintenance of leased commercial aircraft and inadvertently made it cumbersome for the airline to recover the deposit when the maintenance work was complete; which meant that when we were visiting a valued customer, often the first thing we were hit with was “Where’s our money?!” - not a great way to start a customer visit. We needed to allocate more resources to clearing maintenance deposit draw requests.

When the local video rental company charged you double for being five minutes late and $40 for losing a DVD or tape, they were earning Bad Profits and they were eventually destroyed by Netflix whose initial sales pitch was “No Late Fees”. What a relief, even though you had wait several days to get the DVD by mail. And you didn't have to deal with those grumpy counter people.

Have you been to a hotel where everything goes smoothly and your issues are handled quickly and gracefully? And then on the same trip have you been given a lot of back talk at another hotel where there seem to be ‘gotchas’ and extra fees at every turn? It is not just good vs bad management or five star vs three star service. One company is focused on delighting customers and the other on Bad Profits.

Good Profits are earned delighting customers and Bad Profits are earned pissing them off.

If you want to transform your career right now, turn your attention to delighting customers and make it as easy and pleasurable to do business with you as possible. Stop paying attention to the accounting profits and start developing metrics around customer satisfaction, customer loyalty and customer delight. Reallocate your time, thinking, focus and resources on solving customer problems in a way that makes them more loyal rather than infuriating them. Hire more enthusiastic people with deep integrity and give them good information so that they can serve customers well. In some ways it simply requires flipping a mental switch.

You say you are in admistration and don't have any contact with customers? You are in severe danger. Think again and reorient your activites to support the front line of acquiring, retaining and delighting customers.

Take care of your customers and the profits will take care of themselves.

For more on Bad Profits, see The Ultimate Question 2.0 by Fred Reichheld and Rob Markey, Bain & Company, published in 2011.

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Ted Pryor
Ted Pryor
Ted Pryor is a Managing Director with Greenwich Harbor Partners and focuses on senior level executive recruiting in Media, Technology and Business Services including general management, sales, marketing and customer service. He has over ten years of experience as a senior executive at GE Capital and over 20 years of experience in corporate finance. Prior to executive recruiting, he served as CFO and CEO of a venture backed start-up company.

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