Best Buy's Reputation Management Nightmare

Businesses often tout their commitments to great customer service. Sometimes they succeed in their endeavors and sometimes they fail. Okay, more often than not, they fail…and these days the bigger the business, the more prevalent stories of customer service nightmares seem to be. Think about it. If you sell 100 TVs, it’s pretty easy to make those 100 people happy. If you sell 10,000 TVs, chances are someone in that group of 10,000 is going to have an issue of some sort.

Maybe the TV doesn’t work because of a manufacturer defect. Maybe the TV is damaged when it is shipped from the factory, or while in your warehouse, or while in one of your stores, or during delivery, or even after it is loaded into the customer’s vehicle. Shit happens. How you address those, “Ah, crap…” moments will make or break your reputation, whether you’re a Fortune 500 or a Mom & Pop.

Face it, it’s gratifying to pat yourself on the back for great customer service when all your customers are happy and things go exactly as planned. The true test of great service is how the situation is managed when something, or everything, goes wrong. If your resolution is to say, “Sorry ’bout ‘cha…” when the shit hits the fan, your attitude in the face of conflict says a lot more about your commitment to service, or lack thereof, than any mission statement on your website or two-cent “I’m here to help…” button on your employees’ uniforms ever will.

The problem with big businesses, like Best Buy, is that they plan for a certain level of failure. If a store sells 10,000 TVs and 10 people are unhappy with their purchase, that’s a mere 0.1% dissatisfaction rate. On paper and in the world of big business, a 0.1% dissatisfaction rate is perfectly acceptable.

What can’t be taken into consideration or measured with any mathematical certainty is the potential damage to a brand when those 10 people share a nightmarish experience with friends and family. In the past, the scope of a disgruntled customer’s influence was often limited to their immediate friends and family. We live in a very different world today…

Bad Customer Service Stories Spread at the Speed of Light

I live in Jacksonville, but that’s not how I came across this story. My mom brought it to my attention. She lives in Indiana, more than 1000 miles from Jacksonville. She called me over to her computer to show me this: “Family’s New Big Screen Television In Pieces” – an article on Jacksonville’s First Coast News website. She found the story on The Consumerist, a consumer advocacy website that averages between 800,000 and 1,000,000 unique visitors per month according to Compete.com.

She proceeded to tell me of several other reports she’d read online about others’ poor experiences with Best Buy locations across the country. Had I not been here in person, she’d have e-mailed it to me. Or I’d have seen her tweet about it. Yes, my mom is on Twitter…and she has over 800 followers. Don’t look now, but your mom might be on Twitter. Or your dad. Or your aunt. Even Grandma may be tweeting. Hey, don’t laugh…it’s happening already.

Whereas the reach of a single bad experience might have been limited a decade ago, customer service horror stories today can make it to a virtually unlimited audience from coast to coast in a matter of seconds – literally. One well-timed tweet can send a shopper screaming out of the Best Buy parking lot and across the street to HH Gregg or Sears.

Do The Math

Let’s turn back the hands of time for a moment, shall we? We’re going to step back to 1995, before the Internet became such a big part of our daily lives and before the social web gave every individual the ability to disseminate information so quickly, easily and with a virtually unlimited reach. Even the limited impact of those 10 customers in 1995 was significant, from the standpoint of potential revenue loss. Here’s an equation to illustrate the potential reach of 10 pissed off customers back in 1995:

10 x 10 = 100 + 10 = 110
100 x 5 = 500 + 110 = 610
500 x 2 = 1000 + 610 = 1,610

The equation above represents 10 dissatisfied customers each telling 10 people, those 100 people each telling 5 more people and those 500 people each telling 2 more people. You can see how the potential reach of a single incident could grow rapidly, even without the Internet. Based on the example above, that’s 1,610 people whose image of Best Buy would have been tarnished. In a city like Jacksonville, with a population of well over 800,000 people, that might not seem like a big deal. But let’s look at that scenario based in today’s social web environment.

Here’s the potential reach of that same person today, assuming that they have, like me, about 2,500 Twitter followers:

1 x 2,500 = 2,500
2500 x 200 = 5000 + 2500 = 7500
5000 x 100 = 500,000 + 7500 = 507,500

See, if I tweet something to my Twitter following, more than 2,500 people have the potential to see that tweet. Now, let’s say my average follower has 200 followers and retweets my “Best Buy SUCKS” tweet. That’s 5,000 additional people who may see the tweet. Now, let’s say those 5,000 people have an average of 100 followers and they retweet “Best Buy SUCKS”, as well. Instead of having a reach of about 1,600 people as before, a single bad experience has the potential to impact the buying decisions of well over half a million people.

Granted, not all of my Twitter followers will see my original tweet. And of those who do see it, only a small percentage of them may choose to retweet it. Nonetheless, imagine the power of 10 separate bad experiences being shared via Twitter as in our original example. Using the aforementioned estimate above, the reach of those 10 poor service experiences balloons to millions of consumers. Now imagine the scope of 100 bad experiences nationwide. How about 500? Or 1,000? EGADS!

Let’s Talk Revenue

We’ll go back to the original example – before the social web existed. Let’s assume, for the purposes of this example, that this customer service failure results in all 10 dissatisfied customers not making a purchase from Best Buy for the following 12 months. Let’s also assume that 50% of those hearing the story second hand, 25% of those hearing the story third hand and 10% of those hearing it fourth hand decide not to make a purchase at Best Buy for the next 12 months, as well.

According to Discovery’s Planet Green e-Waste IQ quiz, the average household spends about $1,200 on electronic gadgets annually – ranging from cell phones to cameras to gaming systems, so we’ll use that data. Keep in mind that the average expenditure for gadgets doesn’t take into consideration the purchase of DVDs, Blu-Ray discs, video games or other products that are part of Best Buy’s product line…so $1,200 is a conservative annual estimate. Here’s the equation:

10 + 50 + 125 + 100 = 285 x $1200 = $342,000

There you have it. A single poor customer experience, even before the rise of the social web, could potentially cost a local Best Buy store more than $300,000 in lost revenue over a 12 month period.

Now, the flip side – assume that turning horror stories into “knock your socks off” customer service experiences would have cost that Best Buy store $1000 per incident, which is a high estimate. The total cost of turning those 10 reputation management nightmares into happy customers and potential Best Buy brand advocates would cost a total of $10,000. It doesn’t take a Masters in business to figure out that taking a $10,000 loss to make those 10 customers happy is a much better option than taking a $342,000 hit in lost sales revenue.

Changing Fundamental Philosophies Isn’t Easy

I’ve spent much of my career training front line teams to provide better customer service. And, to the surprise of many, creating epiphanies and light bulb moments for front line teams is the easy part. The hard part is conveying the notion to the powers that be that losing revenue on a single transaction is better than losing a customer for life and having that customer tarnish the reputation of the entire company by sharing their bad experience.

See, the people sitting in the board rooms of corporations are pretty detached from the front line employee experience. They’re even more detached from the experience of their customers. Executives spend their days staring at numbers and moving those numbers from one column to another trying to figure out “what would happen if we [read: the front line] stopped doing X and started doing Y instead…”.

They ask questions like, “how much revenue would be saved by adopting a “once it’s out of the store, it’s out of our hands…” policy with regard to damaged products?” and make their policy decisions based solely on the bottom line. If a customer spends $1,000 on a television only to realize it is broken once the box is opened when they get home, the newly adopted “out of our hands…” policy means Best Buy’s obligation ends once the product leaves the store.

They’ve made their $1,000 sale. Why should they care? In the boardroom that SOP makes business sense. From a customer loyalty and brand advocate standpoint, it’s an absolute nightmare and a recipe for disaster. Convincing a know-it-all dude in a $3000 suit that he’s got it all wrong isn’t easy.

To executives, customers are nothing more than numbers on a page. They create standard operating procedures based on a “we generated this much profit from this single transaction” perspective, with little regard for how the customer’s experience determines how much profit will be made on future transactions over the long term. They don’t care if a sale is made to a first time customer or a 100th time customer, provided the sale is made.

And there will always be more people to sell to…even if you’ve pissed off 1,000 people previously, right? From a numbers standpoint, management can’t account for brand advocacy and customer loyalty in a budget forecast. So all that matters is what can be measured tangibly in the short term – not what may or may not occur in the future based in the hypothetical realm of customer experience. Peering out the windows of a corner office being willing to have faith that doing the right thing will create brand advocates and ultimately lead to more sales in the long term is quite a gamble.

What they don’t seem to understand is that, in business, it’s as close as we can hope to get to betting on a sure thing. It seems that marketing has a grasp of consumer psychology while most other aspects of the corporate structure don’t understand consumers at all. Marketing departments have mastered the art of manipulation, but they seem to miss the opportunity to parlay that mastery into an effective means of building customer loyalty. Creating brand advocates is as elusive to them as the Holy Grail…something they speak highly of and that they’re sure exists, but believe to be perpetually unattainable.

The High Cost of Being Right

Even in circumstances where the company or an employee of the company isn’t at fault, the customer’s perception is their reality. Regardless of what actually transpired, if the customer’s perception is that the company has done something wrong, that’s the story they will share with their friends, family, co-workers, acquaintances and these days, their social web circles. Regurgitating corporate policy and hiding behind a curtain of standard operating procedure may be an easy way to protect bottom line revenue on a transaction by transaction basis, but it doesn’t come without long term consequences.

You stuck to your guns. You maximized the profit from that single transaction. You’ve shown your ass and made your point. Congratulations. That customer will never do business with you again. And they’ll do everything they can to make sure no one they know ever does business with you either. Oh, and they’ve contacted the local consumer advocate reporter who proceeds to run the story on the 11 o’clock news.

You could have stopped it. You didn’t. Does it still make you feel better knowing you’re not at fault? Does the profit margin you protected by sticking to your guns make up for the untold sales you won’t make to those who saw the story on the news last night? That’s called the high cost of being right.

Firing off the “we didn’t do it…” and “not our problem…” cannons in the face of an unhappy customer might seem like the right thing to do. Sticking to your guns when you know you haven’t done anything wrong might be good for your ego. But don’t sacrifice the long term reputation of your brand in favor of an overweening ego or to make a point. A customer who has had a problem solved is often more loyal than a customer who has never had a problem at all.

Be their saving grace. Make them feel as though their problem is your problem. Because, in reality, it is…whether you’re at fault or not is a moot point. Only you can decide what’s more important: being right or building loyalty. Here’s a tip: creating customer loyalty and a network of brand advocates is more profitable in the long run than stroking your own ego by proving how right or how not at fault you are.