| Companies and the customers who hate them. | |
| | |
MedLine Citation:
|
PMID: 17580650 Owner: NLM Status: MEDLINE |
Abstract/OtherAbstract:
|
Why do companies bind customers with contracts, bleed them with fees, and baffle them with fine print? Because bewildered customers, who often make bad purchasing decisions, can be highly profitable. Most firms that profit from customers' confusion are on a slippery slope. Over time, their customer-centric strategies for delivering value have evolved into company-centric strategies for extracting it. Not surprisingly, when a rival comes along with a friendlier alternative, customers defect. Adversarial value-extracting strategies are common in such industries as cell phone service, retail banking, and health clubs. Overly complex product and pricing options, for example, may have been designed to serve various segments. But in fact they take advantage of how difficult it is for customers to predict their needs (such as how many cell phone minutes they'll use each month) and make it hard for them to choose the right product. Similarly, penalties and fees, which may have been instituted to offset the costs of undesirable customer behavior, like bouncing checks, turn out to be very profitable. As a result, companies have no incentive to help customers avoid them. Tactics like these generate bad publicity and fuel customer defections, creating opportunities for competitors. Virgin Mobile USA, for example, has lured millions of angry cell phone customers away from the incumbents by offering a straightforward plan with no hidden fees, no time-of-day restrictions, and no contracts. ING Direct, now the fourth-largest thrift bank in the United States, offers accounts with no fees, no tiered interest rates, and no minimums. In industries where squeezing value from customers is commonplace, companies that dismantle these harmful practices and design a transparent, value-creating offer can head off customer retaliation and spur rapid growth. |
| | |
Authors:
|
Gail McGovern; Youngme Moon |
Publication Detail:
|
Type: Journal Article |
Journal Detail:
|
Title: Harvard business review Volume: 85 ISSN: 0017-8012 ISO Abbreviation: Harv Bus Rev Publication Date: 2007 Jun |
Date Detail:
|
Created Date: 2007-06-21 Completed Date: 2007-07-11 Revised Date: - |
Medline Journal Info:
|
Nlm Unique ID: 9875796 Medline TA: Harv Bus Rev Country: United States |
Other Details:
|
Languages: eng Pagination: 78-84, 141 Citation Subset: H |
Affiliation:
|
Harvard Business School, Boston, MA, USA. gmcgovern@hbs.edu |
Export Citation:
|
APA/MLA Format Download EndNote Download BibTex |
| MeSH Terms | |
Descriptor/Qualifier:
|
Commerce
/
organization & administration* Consumer Satisfaction* Decision Making, Organizational Economic Competition Entrepreneurship Humans Product Line Management United States |
From MEDLINE®/PubMed®, a database of the U.S. National Library of Medicine
Previous Document: Make your company a talent factory.
Next Document: Scorched earth: will environmental risks in China overwhelm its opportunities?