Why you should listen to customers even if they're wrong

Even companies who believe "the customer is always right," if there are very many of them left, don't mean it literally. They mean something like, "We try to accomodate the customer, even when they are wrong." But beyond addressing the immediate symptom (the heart of "the customer is always right" philosophy), there are valid reasons why you shouldn't dismiss (or disregard) customer stories that you don't consider accurate:

1. There is truth in their perceptions, even if the facts don't add up. Customer outcry is emotional, not logical, in nature. If they complain, they are feeling pain, and even if they can't articulate the reasons to your satisfaction, the root issue is very likely significant to you.

2. Customers have more credibility than companies. Recently, in my town, there's been a conflict between the private water provider and the town government over a proposal to raise water pressure and whether that might be causing an increase in water main breaks. In an "open letter" to customers, the regional president of the utility tried to dismiss criticism of the program. Who was more credible to town residents: the elected town representatives, or a water company regional president?

3. Being factually correct is overrated. In marketing, perception is reality. Brand is an accumulation of perceptions. Jochum Stienstra discussed in a recent post how those perceptions create a profound, cognitive reality for customers. So, in focusing on the data and dismissing the perceptions, you may be missing the point.

4. They may, in fact, be right :)

Perhaps advertising isn't the money pit people thought it was

The July-August Harvard Business Review contains a provocative article from Prof. Leonard Lodish of the Wharton School of Business and Carl Mela of Duke University on the decline of product brands ("If Brands Are Built Over Years, Why Are They Managed Over Quarters?").

We've looked at the phenomenon before from the private-label goods perspective, Lodish and Mela approach the problem from a different angle: rather than blaming Wal-Mart and other retailers for squeezing the value out of branded products by their price-cutting philosophy and private-label strategies, they fault the brand managers themselves, who favor price promotion strategies—-which bring a rapid response from customers—-over brand-building activities, such as advertising, which only work over the long term.

By examining data on baseline sales (i.e., sales levels without promotions), and performance during promotions periods, they document persuasively how certain brands fall into a spiral of commoditization by relying on discounted sales for an increasing percentage of their sales volume. Customers learn to stock up when the product is on special, and their perceived value of the product declines accordingly. Brand equity is eroded.

[Why do brand managers prefer promotions? Lodish's and Mela's reason, perhaps good fodder for another post, is that purchase data is useful immediately, while brand equity information is less tangible and takes years to identify trends.]

By contrast, companies who hold firm on price and invest in long-term brand-building activities, such as advertising, development of new distribution channels, and product innovation (exhibit A: P&G), show higher baseline sales levels and therefore more unit profit per sale.

Think it can't be done? Clorox bleach (a product ripe for commoditization if I've ever seen one) was able to raise retail prices 30% and turn a trend of revenue decline into growth by cutting promotions budgets and increasing advertising.

So, television networks, radio stations, newspapers: take heart. Perhaps marketers will fall in love with advertising all over again.

marketing brands advertising pricing promotion distribution innovation Harvard Business Review