Daemon Customers

Nick Hodges commented on the San Francisco Gate article about Daemon Customers.

Long ago, in another life I was a technical support rep for a computer company. We used to joke that before someone could order a computer they would have to tell the sales rep what time their VCR clock said. If their response was "12:00, 12:00, 12:00" then they were not allowed to buy a computer. These "12 o'clock flashers" were always calling tech support for trivial things like how to install software. Individually they cost more then we made on their single computer sale.

Prior to that I worked for a bank. I am not sure if you are aware of this or not, but most banks loose money on individual customers with free checking. If you never pay any fees then it costs them more to service you then the value they gain by having your pay check in the bank for the 3 days it takes you to spend it.

One day we had training on customer service. In the training we watched a video where all these individual customers came into a bank for typical banking services, and they received poor customer service. The service was laughable. At the same time the bank was putting on a good show for a businessman who represented a large, profitable account. At the end of the video you see the businessman setting down to dinner. He announces that he has chosen this bank for his business. From off camera you hear a response of shock, and the camera pans out to see all the individuals sitting around the table with him. The point of the training is that customers talk to each other. If you alienate a customer whom you don't think is worth much money then they may turn away a customer who is worth a lot of money.

Now what does this have to do with the daemon customers described in the article? Well, the ones that are sending in for refunds and then returning items are blatantly committing fraud, and should be prosecuted. But the ones that only shop at Best Buy for sales? I think they should be left alone. They are not doing anything wrong, and they may turn into profitable customers, or refer others.

I am reminded of the time we had State Farm auto-insurance. They offer roadside assistance. Like many people, I am not the type that calls for help at a drop of a hat. Due to a couple unfortunate events we ended up using the roadside assistance twice in a few months. It was a really stressful time. Our car had actually broken down and was going to require very expensive repairs. To add to the stress we get a letter from State Farm warning us that the roadside assistance was for emergencies only, and that if we used it again they would cancel our coverage. So they were insinuating that the times we used it were not emergencies, when at least in our eyes, they were. The result, we stopped using State Farm, which may not be a big deal to them, but I have also related the story to a number of people who may now also not use State Farm. End result may end up being a lot more money being lost then the cost of us using our roadside assistance.

So what is a company to do? My suggestion: Reward profitable customers. Mail them a rebate check for no reason. Send them special promotions that are not available to everyone else. The only possible side effect is they might tell others who may in turn become profitable customers too.

One thing that makes me laugh about Jacob Thurman's post is where he says:

To the "demon customers" who are causing the problems in the first place: you are an affront to the fundamental values of western capitalism. Shame on you.

That is like asking someone to hold still so you can hit them. Capitalism goes both ways. It means a business can try to make as much money as possible, but it also means that a consumer can try to get the greatest value for their money possible. If a business chooses to offer loss leaders then consumers should be able to choose to only buy those. Both should obey the laws, but as long as they do that is capitalism in action!

When companies or customers break the laws / ethics of the marketplace then everyone is hurt. Just look at the example Microsoft sets.