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STREET SMARTS

How to Lose Customers
 

It's easy. Just convince them that they're getting a lousy deal.

Norm Brodsky is a veteran entrepreneur.

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I have a little game I like to play. I keep track of the number of episodes of bad customer service I hear about, or experience, over a six-month period and use that as a rough gauge of the general level of customer service in my part of the world. Lately, I'm glad to say, I've been hearing fewer horror stories than I used to, but I'm still struck by the number of service providers who seem to believe that a customer exists only to help them maintain a comfortable lifestyle.

Take the dentist I went to when I needed to have my teeth capped a while ago. His office -- on Park Avenue in Manhattan -- was one of the most spectacular I've ever seen. The bathroom was all shiny black marble and chrome. On my initial visit, I was given my own "personal hygiene space," where I could keep my special toothbrush in a little locker with a key. The doctor did a thorough examination and took X-rays of my mouth from every angle. He then had me return a few weeks later to hear how he intended to proceed. He had an elaborate presentation planned. As I sat in his office, he started to explain to me in great detail what he was going to do, and why, and how. I interrupted him. "Okay," I said. "I believe you. What's this going to cost?"

"The total?" he said. "About $45,000."

I was floored. "Well, Doc," I said, "I was given a list of the four best dentists in the city, and you were right at the top, but that price is unbelievable."

"Do you mind showing me the list?" he asked. I gave it to him. He smiled as he looked it over. "This one was my student," he said. "And this one used to work for me. I trained him myself."

"Is he any good?" I asked.

"Yes, he's very good, but he's in Rockville Center, on Long Island," he said. "You could probably get your teeth done there for less, but you wouldn't get all this." He motioned around the office.

I got out of my chair and said, "Thanks a lot, Doc."

"Where are you going?" he asked.

"I'm going out to the guy on Long Island and see what he charges," I said. "But I've got to say one thing. This is a bad sales pitch you have." And I walked out.

No one else has ever asked me to pay for a Park Avenue office, but I've had similar encounters with other service providers -- especially interior decorators, who, as a group, seem to have perfected the art of making customers feel as though they're being taken advantage of. Then, a few months ago, a new decorator I hired showed me how one business's blunders can be another's opportunity. The lesson: You can gain a competitive advantage if you simply stop doing the things other companies do that annoy their customers.

My wife, Elaine, and I have considerable experience with interior decorators. We've used several over the years, and whenever Elaine tells me we have to hire another, I get chills. I know that by the time the job is finished, I won't be on speaking terms with the person. Given the conventions of the industry, that's pretty much inevitable. Typically, decorators earn their money by adding a commission -- usually between 20% and 40% -- to everything you purchase. They thus have a powerful incentive to have you spend as much money as possible.

Decorators insist that you use their painters and wallpaper hangers, and that you buy from their show rooms. The price you're quoted on any item or service includes the commission, and you can't negotiate it down. The decorator won't even let you talk to the people who are doing the work or selling the product. "The price is the price," you're told over and over. Whenever you suggest that a vendor may be charging too much, the decorator says, "Oh, but he's the best." The vendors, for their part, know that you're a captive market and tend to charge accordingly. Inevitably, you wind up feeling that you're being forced to pay through the nose.

Unfortunately, that kind of thinking is not limited to the interior decoration business. I see it all the time, especially when dealing with my suppliers and occasionally in observing my competitors. If they know you're locked in as a customer, they start taking you for granted. Even in my company, that's a danger. The only way we avoid it is by making an open and firm commitment that we will treat all of our customers the same way we treated them when we were trying to land their business in the first place.

At my company, we make a firm commitment to treat customers the same way we treated them when we were trying to land their business.

But it appeared to me that, among people who do interior decorating, the habit of taking customers for granted had been institutionalized, and I assumed I was in for another such experience when we hired a decorator for a new apartment we'd bought in Florida last year. Her name was Rosalie Modansky. She wasted no time letting us know that she didn't work like other decorators. Once we'd agreed on a budget, she explained that she charged a flat fee for her services. "I'll guide you in the buying," she said. "I'll take you places and show you things. But you can pick out anything you want from anywhere you want. It doesn't matter to me. I don't make money on what you spend."

"That's interesting," I said and inquired about her fee. She wanted $20,000. I negotiated her down to $15,000.

On our first visit to a decorators' show room, I realized that I was in for a different type of furniture-buying experience. I asked Rosalie about a price that seemed ridiculously high. "That includes the decorator's fee," she said. "You can take off 30% or 40%, whatever they've added."

"They let you do that?" I asked.

"Yes," she said, "but it took me a long time to convince the show rooms that this way works better."

Subsequently she took us to Home Depot Expo, which had beautiful but relatively inexpensive lamps. Most decorators would have been furious if we'd shopped there because they wouldn't get their commission. Rosalie also told us about a show room that was changing its displays and offering a discount on floor models. The discount turned out to be 5%. "That's not much of a sale," I said. "I want to talk to them."

"You can do whatever you like," Rosalie said. Clearly, discussing price was a new experience for the manager, who became flustered when I approached him. "We don't negotiate," he said.

"If you want to sell this set to me, you'll negotiate," I said. "For one thing, I'm not paying a shipping fee. We'll pick it up ourselves."

"The shipping fee is mandatory," he said.

"No, it isn't," I said. "And 5% off is ridiculous. I have to get at least 15%." He protested. I told him, "Look, I'll make this easy for you. You want X dollars for this set. I'm willing to pay you Y. Take it or leave it."

"I'll get back to you," he said.

He called Rosalie and told her that the show room didn't negotiate. She passed the message along to me. I said, "Rosalie, I love you, but that's all I'm paying. Either he'll sell it to me at that price or he won't. They're having a sale for a reason. If he wants to get rid of it, he'll take my offer." And he did. It was, he said, the first time he'd ever negotiated a price.

As we went along, I found myself actually enjoying the experience. I had none of the tensions with Rosalie that I'd had with other decorators. Somewhat to my surprise, I discovered that the show rooms loved doing business with her as well. So, for that matter, did her service people. Evidently they all preferred to eliminate the middle woman and charge sensible prices. I thought Rosalie, on the other hand, probably wasn't charging enough, and I told her so. "You forget that I asked you for $5,000 more, and you negotiated me down," she said. She was right: I had forgotten. "But I feel comfortable with what I get. The way I do it, I have more time than most decorators. I can run eight or 10 jobs at once."

Was that why she had decided to take a different approach to the business? "No," she said. "To be honest, I did it for my own convenience. The paperwork you have to do when you're working on commission is miserable. You have to hire people to handle the billing, the collections, the problems with customers wanting to do exchanges or turning things back in. You have to keep track of all the bills. Do I leave a few dollars on the table? Probably. But it doesn't matter because I can take more jobs, and I'm just working on the parts of the business I love."

That's not unusual. A lot of good business ideas happen accidentally. You don't realize all the ramifications until you put them into action. However she did it, Rosalie had come up with a business strategy that gave her a competitive advantage -- if only by allowing her to get repeat business. I know that I'd use her again.

As for the dentist, I went to the one in Rockville Center who charged half of the Park Avenue dentist's fee. I said I'd come at the latter's suggestion. He didn't believe it. I told him the whole story. He laughed and asked how much the Park Avenue guy had wanted. "I'll tell you," I said, "but only after you finish the job."

"Why?" he asked.

"Well," I said, "you're probably going to raise your prices, and I don't want you to do it now."

He laughed -- but he didn't deny it.

Norm Brodsky (brodsky13@aol.com) is a veteran entrepreneur whose six businesses include a three-time Inc. 500 company. His co-author is editor-at-large Bo Burlingham.

Last updated: Jul 1, 2005

Street Smarts columnist and senior contributing editor NORM BRODSKY is a veteran entrepreneur who has founded and grown six businesses.
@NormBrodsky




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