In his book, The Ultimate Question, Fred Reichheld explains the notion of “bad profits”. One way to describe them is “short-term profits (gained) by exploiting customer relationships by raising prices whenever they can get away with it.”
I call it “customer abuse revenue”. It happens when companies look for any way possible to increase revenue simply for the sake of increasing their profits. It happens when they increase revenue without increasing the value they offer to their customers. The phrase “get away with it” is a perfect way to describe the intent behind bad profits and customer abuse revenue. It reminds me of when I was a little kid trying to sneak cookies before dinner.
Companies abuse and manipulate their customers in many ways. For example, a few years ago, Ikea built a new store in the Twin Cities, where I live. It’s nice store and I like the products they sell. But I hate the way they sell them. It’s not the people or their policies. It’s the store design I hate. If you’ve been in an Ikea store, you know what I mean. It’s a trap. I feel like a rat in a maze when I’m in an Ikea store.
I know why they do this. They design their stores to lead people along one path – the path they choose. It’s because they want their customers to experience the whole store, rather than just pop in and out.
But, do most customers really want to experience the whole store every time? I doubt it. In fact, I’d bet my mortgage payment they don’t. Most of us would rather shop the way we want to shop. We don’t want to be led by the nose like an animal. We are fully capable of deciding where in the store we’d like to go. We don’t need to be coerced into seeing everything the store has to offer every time.
Whether you love or hate Ikea, they purposely manipulate their customers. Over time this will lead to less customer loyalty, not more.
Another example happens every day. I call it the “hotel safe gambit”. Some hotels will automatically charge guests a fee to use the safe in their room. You pay the fee whether you use the safe or not, They don’t ask. They just charge you. Some people never notice the fee. Some notice only after they check out. Either way, it provides a bad experience because you either pay for something you don’t use or you have to take the time and trouble to ask for a refund. The only people who benefit are those who would use the safe and, of course, the hotel.
In this case, the hotel management has decided to earn bad profits by taking advantage of their customers. The only way you can NOT pay is to ask for a refund.
How would you like it if every place you did business with treated you like that? You fill up your gas tank and you pay for a bag of softener salt whether you want it or not. You have lunch at a local restaurant and they charge you for a long distance phone call whether you made one or not. You get a haircut and they charge you for a bottle of shampoo and conditioner, whether you take it or not.