In any business, there will be opportunities to make money by treating your customers as a mineable resource instead of a partner in production. This means the goal of your business should never be to extract every fee from your customer at every opportunity, but to build relationships instead. 

In the early days of my company, Kabbage, we struggled against requests from some potential partners. They wanted customers to be able to upload traditional loan paperwork like bank statements and tax returns.

We firmly believed that our value proposition was in processing real-time business data, offering approvals in minutes and access to capital 24/7. Had we acquiesced early on, we would have received more institutional investment and more customers, but we would have also had to surrender what made us unique.

By insisting on data connections, which in 2008 was usual, we lost some potential upfront revenue but prioritized a unique customer relationship and experience that would make us a more than $7 billion lending platform just a few years later. 

Investing in Relationships

When geography limited your choice of with whom to do business, that familiarity and depth of relationship promoted trust. Restaurateurs and retailers allowed their neighbors and regulars to 'put it on the tab.' Small town bankers and plumbers, shopkeepers and doctors all relied on community reputation and personal acquaintance to cement customer trust and loyalty.

By the 1960s, national companies could collect and process large-scale customer data, which they substituted for proximity and personal connections. Someone you didn't know collected certain categories of data -- credit score, income bracket, outstanding debt -- and offered standardized products. Flow charts and spreadsheets determined which options were available to you, whether for a grocery store, mortgage interest rate, pediatrician, or phone company.

Encouraging companies to see customers as variably profitable categories, instead of as individual relationships, results in short-sighted behaviors that alienate customers. Lost leaders and deceptive pricing encouraged more customer spending, even over-spending. Service providers offered discounts to coax in new customers, then built-in higher prices designed to recoup the rebate and then some.

If your customers are paying too much, borrowing too much, or spending too much, they're not as successful. Those who succeed despite you will buy from someone who treats them better, and those who fail won't be buying anything. Any business's fate is tied to the success of its customers, so pursue the best possible relationship. 

Thinking Long-Term

Even companies that don't rely on repeat business--remodelers or lawyers whom you might hire once a decade or once in a lifetime--still rely on the goodwill of previous customers. Saving costs by doing shoddy work, even in seemingly one-time transactions, harms their reputations, referrals, and ratings.

Treating customers fairly and kindly is an investment in your own future. That's what's made Lyft and Uber so successful, they turned perhaps the most anonymous and fleeting relationship in business--the taxi driver--into a far more personal customer experience backed by individual reviews, ratings and rewards.

At Kabbage, we're considering a cash-flow management product which we anticipate may result in customers borrowing less over time, but provides customers an experience which better meets their business needs and develops a deeper relationship. The strategy raised debate and questions, but we believe that building a product that's better for the customer is better for us. It's how we operate. Encouraging customers to spend less might seem like a loss, but that short-term thinking can short-circuit your (customers') success.

Treating people well, even taking little up-front losses for the sake of a long-term gain, fosters trust and shared growth. When you're building the next product, service, or business you can't wait to offer to your customers, design it not just to meet their needs but to exceed their expectations. 

My advice is to cultivate stable, successful customers--build relationships that convince each customer to stay with you longer and grow. This might require serving their needs first instead of your bottom line, but trust me, your bottom line's growth will follow. Satisfied customers are building blocks for your business in a way that nickels and dimes will never be.