Monday Mornings with Madison

When “Company Policy” Creates Lifelong Customers… for the Competition

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Estimated Read Time:  7 min.

There are three little words that help businesses create lifelong customers more effectively than practically any other phrase:  “It’s company policy.”  The problem is that those words create lifelong customers for the competition of the company saying that to its customers.   For businesses that want to drive their customers to the competition, have at it.  Use that phrase to your heart’s content.  Better yet, just close your doors now and save yourself the time and slow agony of going out of business the old fashioned way… failure to make money.

Let’s face it.  Saying “It’s company policy” to a customer is just a nicer way of saying “We don’t want your business.”   That is what a customer hears when an employee blames “company policy” for an unwillingness or inability to solve a problem or accommodate a request.  And when a manager says “It’s company policy” to an employee, he is saying “If you don’t like it, go work somewhere else.”  As technology and innovation continues to disrupt industry after industry, leaders and managers will be forced to decide whether they are going to stick-to-their-guns and cling to outdated company policies that kill business and alienate employees, or whether they are going to innovate and evolve with the times.

The “Company Policy” Mantra

The only time employees at a business cite “company policy” to customers is when they are refusing to give a customer what is being requested.   A customer will likely never hear an employee say “Yes, it’s company policy for us to give you an upgrade for free” or “Our company policy says I can offer you a better rate” or “Of course we will expedite your order.  It’s company policy.”  Perks, rewards and great service are never “company policy”, though perhaps they should be.  Generally, the “company policy” mantra is recited when employees tell a customer “no” to a request and it’s usually only after the customer continues to argue a point or push for an accommodation.  There are certainly many examples of how “company policy” is killing business in a number of industries and actually spurring new businesses into existence.

Case in Point:  The Hospitality Industry

Recently, a group of Millennial young women flew from New Jersey to warm and sunny South Florida for a weekend stay.  Upon arrival, they went to check in to the hotel where they had made reservations.  The hotel would not allow them to check in because they were all 20 year olds.  The hotel indicated that at least one person in the party must be 21 years of age to rent a hotel room.   Nothing in the reservation process indicated that they had to be 21 years old to rent a room, and the hotel’s own reservation system classified a hotel guest a child if the age was “17 and under.”  The reservation system also classified a guest as an adult who was 18 years old or older.  Yet, those women were refused the rooms they had reserved and no attempt was made to accommodate them.  The hotel employee cited that “it is company policy that customers must be 21 or over to rent a room.”  The ladies were within months of turning 21 and their appearance indicated that they were responsible ladies.  They also had credit cards in their name which reflected a high level of financial responsibility.  But, because of “company policy,” these customers were left literally without a place to stay for the night.

If this had happened a decade ago, those women would have indeed been in a bind.  But thanks to Airbnb, an alternative solution was just a few cell phone taps away.  Within minutes, the ladies had found a luxurious high-rise condo by the ocean to rent for their vacation.  The condo was more spacious, beautiful, and affordable than the cost of the hotel room.  And, most importantly, it could be rented by any adult — 18 years of age or older — with a valid credit card.  The women stayed there and had a wonderful vacation.  Thanks to the hotel’s “company policy,” Airbnb has likely acquired four customers for life.

There has been a great deal of analysis and discussion by economists and pundits about the effect that Airbnb is having and will have on the hospitality industry in the future.   Airbnb boasts that over 150,000,000 guests have used Airbnb to find a temporary resting spot, be it for a one-night stay or an extended month-long rental.  This is in just the nine years since the company launched.  They have over 3,000,000 listings in 65,000 cities (not even the top five hotel chains combined have that many available beds in that many locations).

For those who think Airbnb will never be a real threat to the hotel industry, consider this.  According to a recent report by Georgios Zervas, Davide Proserpio and John W. Byers at Boston University, a 10% increase in Airbnb supply resulted in a 35% decrease in hotel room revenue, which translated into a 13% impact on revenue in Austin, Texas.  Austin is home to the highest Airbnb supply.  They also found that lower-priced hotels and hotels that don’t cater to business travel were the most affected by competition from Airbnb.  As a result of these impacts, the researchers found, hotels are reducing prices in an effort to stay competitive.  This is empirical evidence that the sharing economy is making inroads by successfully competing with, and acquiring market share from, hotels.

Bill Carroll, a professor at the School of Hotel Administration at Cornell University, suggests that for hotels to prevent customers from choosing Airbnb over a hotel, they will have to provide customers with either greater value or lower prices.  For some customers, the idea of staying in a stranger’s apartment is distasteful enough to keep them using hotels.  But if the hotel is not accommodating the needs of its customers because of basically indefensible “company policies”, Airbnb hosts will be happy to accommodate – figuratively and literally – the needs of those customers.

Indeed, even hotel chains with a reputation for the highest level of service have been known to invoke the “company policy” mantra when dealing with a dissatisfied customer.  The Ritz Carlton chain, which is renowned for its Five-Star Anticipatory Service, made the unfortunate mistake of telling a customer that he and his family could not invite some friends over to visit them at the hotel during their stay.  The customer was told that while hotel guests were welcome to lay by the pool, a few visiting friends of the hotel’s guests were not welcome anywhere except the customer’s room.  The hotel’s manager’s use of the phrase “It is company policy”, and his unwillingness to offer any accommodation, alienated and offended the customer.   Unfortunately for that manager, that customer happened to be a savvy social media marketer and Blogger.  Not only was Ritz Carlton the recipient of a lot of bad publicity, but the company policy converted that Ritz customer into a W Hotel customer-for-life.

In the book, Customer Romance:  A New Feel of Customer Service, J.N. Halm sagely states, “Great companies know that customer relationships in these times call for more than just having a great product (or service) backed by a great sales team. Customers have to be wooed until they fall so deeply in love with your offering that they will ward off advances from potential suitors. No matter how well you perform as a business, there are little things that can cause the relationship with your customers to suffer. The companies, products and/or services that we love are those that “touch” us in the right places at the right times. After all, that is what “romancing” the customer is all about—feeling your way to the customer’s heart.”   In those key moments, companies can either step up to wow their customers with solutions or they can cite “company policy” and possibly lose them forever.  Marilyn Suttle, author of “Who’s Your Gladys?:  How to Turn Even the Most Difficult Customer into your Biggest Fan” suggests that for every dilemma a customer faces, a company must find at least three or four possible solutions. Citing that there is no solution because it is “company policy” just repels customers in a way that no amount of future sales and marketing can reverse.

Case in Point:  Employee Retention

It is similarly damaging for a manager to cite “company policy” to employees.  Enforcing rules by saying “It’s company policy” has a chilling and dooming effect on how an employee connects with the employer.   According to airline mogul Sir Richard Branson, founder of Virgin Airlines, “I have always believed that the way you treat your employees is the way they will treat your customers, and that people flourish when they are treated with respect.

Every company has some policies that range from odd to downright ridiculous.  Many are based on traditions or strategies used in other fields…. such as bell curve ranking, a practice used in education.  This policy pits employees against one another by ranking them on a bell curve so that only a few can be considered the best.   If grade school strategies are used to evaluate employees, then staff are being treated like children.  When a manager treats employees like children, they will either behave like children, take off for greener pastures, or keep the job and stop caring.  None of those outcomes is good for business.

Rather than citing company policy as the reason behind a decision, managers should review all policies and be able to explain why the policy is needed.  If that cannot be done, the policy should be eliminated.  Talent-repelling policies don’t just de-motivate current employees, but also keep smart people from coming aboard.   Instead of managing employees by citing “company policies,” it is better if HR manuals are purged of inane policies and managers treat employees the way they want to be treated.

Company Policies Should Never be Quoted

Neither managers nor staff should ever quote company policies to anyone.  Policies should be created to ensure that everyone knows what is and isn’t allowed.  Beyond that, each person needs to have the common sense to adhere to policy, in general, but be able to deviate from it in select situations, as long as it doesn’t create problems or safety concerns.   Only by being nimble, flexible, responsive, genuine and transparent with customers and employees alike can businesses connect with people and keep up with innovations.

Quote of the Week

“Traditional corporations, particularly large-scale service and manufacturing businesses are organized for efficiency. Or consistency. But not joy. Joy comes from surprise and connection and humanity and transparency and new…If you fear special requests, if you staff with cogs, if you have to put it all in a manual, then the chances of amazing someone are really quite low.” Seth Godin


© 2017, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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