Monday Mornings with Madison

The Power of Promises in Business – Part 1

What Happens When Companies Break Promises?

Every day, businesses make promises to its internal and external customers.  Throughout the relationship life cycle, from entry level clerks to the top brass, employees at every level of every company make promises to customers regarding work to be done, deadlines to be met, or issues to be resolved.  Some of those promises are explicit.  “I give you my word….”  “Count on it.”  “Rest assured, it will be there on time.”  Other promises are implied.  Implied promises can be just as powerful as expressed ones. Everyone recognizes a commitment has been made when a business advertises that it has “the fastest turnaround times in the industry,” or a salesperson says “I’ll send you that proposal by the close of business today.”   There are countless implied promises that a business makes in its marketing materials, sales pitch and customer service.

It is fairly well-accepted wisdom that each promise made ultimately affects the success or failure of the business.  Indeed, it is commonly understood that while nothing builds customer confidence and loyalty more reliably than a history of well-kept promises, it is equally held as truth that nothing undermines a business’ brand or bottom line more than a string of broken promises.  That imparts a great deal of power to promises… promises kept and promises broken.  But is that really true?  Do broken promises impact business?  Is just one broken promise enough to lose a customer or does a business have to repeatedly break promises in order to impact loyalty?  And do broken promises impact all businesses and industries the same way and to the same extent?  Just what impact do broken promises have on sales, repeat business, and customer loyalty?  Research sheds some light on this commonly accepted yet little understood occurrence.

The Promise Problem

The biggest problem with promises is that they are easily made and just as easily broken.  Sometimes a promise is made with the full knowledge that it cannot and will not be kept.  More often, a promise is made with the best intentions and plans to follow through but is unmet due to extenuating circumstances.  Whatever the case, management often has no idea that its employees are making casual promises to customers and then just as casually breaking those commitments.  It is believed that the impact of repeatedly failing to meet those commitments erodes trust and diminishes the brand’s reputation with that customer.  But what is the true cost of those broken promises on the bottom line?

That is the question that Accenture decided to look at more carefully after its annual 2012 Pulse survey of 12,000 consumers revealed that a growing percentage of respondents were dissatisfied that companies were promising one thing but delivering another.  To further explore this broken promises phenomenon, they did another study looking at the impact of broken promises on sales and service.  They considered not only how often companies were breaking promises, but what kinds of promises were being broken.  They also looked at whether broken promises by a company caused customers to switch to a competitor. The findings were quite interesting.

Are Companies Breaking Promises?

The simple answer is a resounding yes.  It appears that broken promises are pervasive in the customer-company relationship.  Most respondents said a company had promised something within the last year, and 40% of those said at least one promise had been broken.  Of those who had experienced a broken promise, 38% reported at least one broken promise while 62% reported that companies had broken two or more promises.  Companies that broke two or more promises were perceived by those customers as “habitual promise breakers.”

What Kinds of Promises Are Companies Breaking?

There seemed to be a number of sales and services areas where companies were breaking promises.  Topping the list of broken promises was the failure to deliver a product or service on time followed by a failure to have no hidden or unexpected costs related to the purchase.  The list of common broken promises included a failure to:

Deliver a product / service on time 55%
Disclose hidden or additional costs related to the purchase 51%
Resolve issues/complaints on time 45%
Provide simple, easy procedures and processes 43%
Deliver easy interaction with service technicians / agents 43%
Fulfill obligations as outlined in a service contract 42%
Deliver uninterrupted service 42%

How Are Broken Promises Impacting Businesses?

As might be expected, a company that broke a product or service promise at any point in the life cycle of the sale resulted in such drastic steps as cancelled orders, an upsurge in complaints, and other actions involving customer service.

There seemed to be a strong relationship between certain service and sales inefficiencies and problems and broken promises.  The key complaints related to broken promises included:

Customer had to repeat the problem / issue multiple times to different staff. 43%
Customer service rep lacked knowledge / understanding. 33%
Problem related to the product / service was not resolved satisfactorily.  33%
Disputes about charges / bills were not resolved satisfactorily. 30%
Service request wasn’t delivered / completed in a timely manner.   26%
Processes for the customer were frustrating / cumbersome. 26%
Self-service process and technology was difficult / cumbersome.     15%
Customer kept receiving unsolicited advertising for products and services.  13%
Customer’s solution was not personalized / customized to their needs.  13%

Are All Industries Breaking Promises?

The Accenture study did not examine every industry, but it looked at some of the major ones.  While many of the biggest industries did score some amount of broken promises, some were bigger offenders than others.  Topping the list was the telecommunications industry, with 22% of customers reporting broken promises by their telecom carrier.  The next industry breaking the most promises to customers was consumer goods retailers which had 11% of its customers reporting that they had experienced broken promises.  Falling into the single digits, only 8% of customers of retail banking and insurance companies reported experiencing broken promises by their banks or insurers.  Even further down the scale, just 5% or less of customers reported experiencing broken promises by companies or businesses in the government sector, automotive industry, healthcare field, travel and tourism industry and utilities.

Clearly, some businesses and industries are making — and breaking – promises more than others, but most companies are doing it at least occasionally.  Next week we will look at the impact of broken promises on the business bottom line and how businesses can do better in making and keeping promises.

 

Quote of the Week

“Keep every promise you make and only make promises you can keep.” Anthony Hitt

 

© 2014, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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