All change is hard at first, messy in the middle and gorgeous at the end.
– Robin Sharma
The world of business has been changing so fast and unpredictable lately that sometimes it is hard to remember when this all started. Things have always started but nowadays no day passes without reading about some exciting new developments and novel approaches. One of the main changes that we have witnessed over the years, for example, stems from the way that clients and customers expect to be treated throughout their journey.
This trend has increased with the emergence of social media; just reflect on the recent United Airlines scandal where an unwilling passenger was forcefully dragged off the plane in an overbooking situation. This unfortunate incident went viral thanks to the social media, and it caused significantly reputational damage to the United Airlines. [1] Although the incident was settled in late April, it still leaves a bad taste in the mouth as it seems that people do not really have any common sense anymore, i.e. instead of calling the cops, what about raising the offer? However, one thing is for sure, the case of United Airlines is just a particular example of how social media affects everyday business and highlights what happens to those companies that are not playing nice.
If you treat your most important part of your business – namely the customers – poorly, you will most certainly face serious consequences. As Cato Institute’s Michael D. Tanner pointed out in an article published in National Review,
The market — not government — is often the best mechanism for addressing business misconduct. … In response, Mun[o]z [the CEO of United Airlines] has now apologized. But more significantly, United will change its procedures. [2] … It was the pressure brought by individual consumers and investors acting on their preferences (and self-interest) in a free market [that brought about the pushback against the status quo].
Sometimes, in the past, people might just have been dissatisfied with the poor service they received and bite the bullet. Maybe some of those displeased clients angrily called to the customer service, some might have told their friends and acquaintances about their hardships, and maybe, just maybe, a couple of people had the guts to call to the local newspaper about the unfortunate incident.
As for today, the power of gatekeepers in their capacity to control the public debate is waning as people can be and set up their own media. Daniel Miles’ story about the numerous difficulties encountered with a Finnish insurance company in early 2012 is very revealing as it brings to the fore a great change how consumers can almost singlehandedly force radical transparency upon virtually any business of their choosing. It’s not hard to set up your blog or Twitter account and start telling your part of the story. It’s very hard to control this kind of online narrative if the other side is being very reactive.
If a client is not happy with the service provider, he can take the issue further through multiple channels, but if companies are not listening and monitoring the social media, things can run out of control in a myriad of ways. Complaints and other feedback are valuable only as long as they can be captured, and the situation is encapsulated, i.e. no one wants a complaint to ruin a valuable client relationship. Janelle Barlow and Claus Møller argue in their newly revised classic, A Complaint Is a Gift: Recovering Customer Loyalty When Things Go Wrong, that the claims should not be shunned away as they can be used to grow the business. As they point out,
Complaining customers are giving us an opportunity to find out what their problems are so we can help them and they will be encouraged to come back, use your services, and buy our products. (Barlow & Møller 2008, 20)
Although it will take a lot of time for companies to become complaint-friendly, there is already new kind of services available that offer people the possibility to voice their concerns and give feedback so that others can see it too. This is just one way to introduce radical transparency mentioned before. [3]
American sociologist Richard Sennett is a very well-known for his studies of the contemporary work life, culture and city life. In his 1998 book, The Corrosion of Character: The Personal Consequences of Work in the New Capitalism, Sennett argues that we are on the brink of losing the sense of community thanks to the new “flexible” economy. Sennett maintains that some of the biggest problems with the constant change and demands for total flexibility are that people seem to feel more and more alienated both from their occupation (as a set of skills and talents) and from their workplace (as a social community). Whether this is true or not, it is something that we can observe at multiple levels of the contemporary consumer society.
Back in the days, people actually seemed to recognize their clients as their patrons tended to visit the same stores, order things from the same vendors and visit the local travel agency. People knew each other somewhat intimately, and occasions this helped to foster the feeling of trust, community, and kind of friendship. Retailers knew their clients personally as the number of customers was quite limited so that the local barber or restaurant had to do everything they could to keep people coming back, and to make them feel welcomed every time we paid a visit. [4] Word of mouth and paid advertising were the most important ways to influence people, but today newspapers and television don’t play such a significant role in everyone’s life as they used to.
Times have changed a lot since these nostalgic days, and the change has been quite fast for example in the brick-and-mortar retail. We still, of course, have our local brick-and-mortar stores, and some of us have a great personal relationship with the local shopkeepers, bank tellers, restaurant waiters, and street market sellers. The major trend has nonetheless been that for example local travel agencies have either disappeared or merged with bigger players, banks are closing down branch offices, restaurants are part of nation-wide chains, and grocery stores are not the same as they used to be. [4]
Consolidation, mergers, and acquisitions are the significant overall industry trends, and this had led to national and multinational conglomerates that we know today. Is this a good or a bad this? It’s neither. If the answer were straightforward and obvious, we would know it already. It’s subjective experience, i.e. do you like to pay a visit to a small or a big store, do you prefer shopping online or paying a visit to a store, etc. It’s obvious that particular stores of a big chain are not identical, but people tend to feel like that, e.g. I have certain expectations regarding quality and service when I visit McDonald’s in Helsinki or Dublin.
A kind of pervasive non-personalization was a negative trend for some time, and this can still be seen everywhere: businesses went from having known and understand their relatively small group of clients, to trying to guess what everyone needed. Every issue could be solved with this or that product. It was all about products and services to be sold without knowing the real wants and needs of the clients. But once the Internet came along in the early 1990s and its possibilities have been better understood by both companies and consumers, we are witnessing something entirely new – once again, personalization and customization are playing a key role in the way companies serve their clients and compete in the marketplace. Consumers have access to information that was earlier unattainable, and most importantly people can interact and influence each other. At first, we had the opportunity to access and choose the resources as we needed them but now we can acquire solutions and outcomes at will.
In this new situation, sales have also been forced to adapt. The truth of the matter is that the old sales playbook doesn’t seem to work as well as it used to. A new paradigm, or mindset, has had to be discovered and formulated. Social selling, as an overreaching paradigm and set of techniques, processes, and approaches accompanying it, has been proposed as one potential way forward.
I personally think that the overall prospects of social selling look very promising. I don’t mean that every social media analytics tool, new fancy CRM systems or prospecting technique need to be adapted but rather coming up with a resilient sales mindset that relies on synthesis of multiple, somewhat discord ways of thinking.
Where does this all leave us? I will explore this and other questions in my next articles.
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[1] In fact, as Rafi Mohammed pointed out in an article published in the Harvard Business Review in April 2017, US airlines are protected by the contract of carriage and US airline regulations in the case of overbooking. Mohammed explains,
The regulation specifies that if a passenger is involuntarily bumped, airlines have to pay a penalty amounting to 200%–400% (depending on the delay length) of the one-way fare that they paid with a maximum cap of $1,350. This provides an incentive for airlines to bump passengers who paid the least amount for their ticket, often the poorest travelers on the plane. So while United was offering $1,000, the unlucky four who were told to deplane could end up receiving less than half of that amount if they were flying on discounted $200 roundtrip tickets. By setting such a low liability, the DOT is inviting airlines to excessively bump passengers. [italics added]
So what Mohammed is saying that the regulatory cap on maximum compensation for involuntary bumping affects the behavior of airline companies, and as we know from basic microeconomics, incentives matter. The maximum sum paid for involuntary bumping (1,350$) could be well below the price paid for the tickets by the passenger. More detailed US rules for carrier oversales are available for different cases.
It should be taken into account that a passenger subjectively values the airplane flight higher than the price of the ticket (if that were not the case, he would not have bought a ticket in the first place), and in the event of overbooking, a maximum compensation cap of 1,350$ is not actually reasonable (in the European Union, bumping regulations are bit different) as people might subjectively value the flight well beyond that particular sum of money. Please note that too that a voucher offered by the United Airlines is not the same thing as cash compensation and they are not valued equally.
[2] United CEO Oscar Munoz blames David Dao incident on ‘system failure,’ apologizes for rabbit incident (2017, 27 Apr). In CNBC Travel. Retrieved May 23, 2017, from CNBC; Oscar Munoz Won’t Get Planned Promotion to Chairman of United (2017, 21 Apr). In Business Day. Retrieved May 23, 2017, from The New York Times.
[3] It’s true that radical transparency certainly do not work in all the cases out there but it’s a good way to think things differently, i.e. instead of treating feedback and complaints inside out (customer input > corporate black box > customer output), there are numerous cases where outside inside (visible customer input > co-habitable opaque box > co-created visible output) thinking might actually work much better. Why is this so? If there are no non-disclosure agreement (e.g. private settlement between the parties), any client has the possibility to put all the discussion available online without the company even knowing about it. If things are done in a more transparent manner, it could turn out much better for the organizations affected too.
[4] There are various books and articles covering all the aspects of change in retailing, see for example
- Hultén B. (2015) “Relational Marketing Strategy in Corporate Chains-BCR’S’ Customer Specific Marketing’“. In: Spotts H. (eds) Creating and Delivering Value in Marketing. Developments in Marketing Science: Proceedings of the Academy of Marketing Science. Springer, Cham. [access]
- Deutsch, T. (2010). Building a Housewife’s Paradise: Gender, Politics, and American Grocery Stores in the Twentieth Century. Chapell Hill, NC: University of North Carolina Press.
- Zukin, S., Kasinitz, P. & Chen, X. (2016). Global Cities, Local Streets: Everyday Diversity from New York to Shanghai. New York, NY: Routledge.
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Photo credit: Clem Onojeghuo via Pexel.com / CC0
