It’s about market efficiency

Via Instapundit, here’s an interesting blog post about the consequences of bad customer service.

What strikes me is that the Internet has rendered the word-of-mouth marketing variable extremely efficient.

Years ago there was a so-called rule of thumb that if someone had a bad customer experience, he’d share his experience with, on average, 10 other people.

I have no idea if that is fact or myth, but for the sake of argument suppose it’s accurate.

Each of those 10 people, in theory, might pass the anecdote along — but like the kid’s game of “telephone,” it is likely to lose some of its impact, and perhaps be distorted outright, after it’s been passed down the line a couple times from its original source.

Contrast that with how things work today. Today the original story — with all its hair-raising details — can be shared with the click of a mouse — not only to people you meet physically, but to hoards of total strangers. And since it’s passed along intact, it loses none of its impact.

Delta’s customer base, according to the Bureau of Transportation Statistics, comprises 11.2 percent of the 659 million Americans who will fly in 2007. Instapundit gets what, 100K hits a day? And that’s only the people who see Professor Reynold’s original post — you also have to add in the people who visit when he brings the story up again, plus the people who visit all the sites who link to his story, like LB’s Rambles did today. Seems to me that could easily add up to a measurable impact on Delta’s business. It’s not like these airlines enjoy big fat margins after all.

This is about more than the need to monitor what bloggers are saying about your company. This is about a change in the variables that can impact a company’s reputation and, ultimately, its bottom line. And there’s only one fix — prevention. Good customer relations has to be a top corporate priority, because once you’ve broken faith with the wrong person, it’s too late, you’ve just opened a vein and the red ink is starting to pour.

[tags] blogging, customer relations [/tags]

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3 Responses to It’s about market efficiency

  1. “And there’s only one fix — prevention.”

    In an honest world, that might work. In today’s mostly anonymous blogosphere and chat rooms and forums, I could MAKE UP a story about an outrageously bad experience with a company (like, say, the Kentucky Fried Rat) and it’s likely that enough people would believe it (like how many urban legends?) that the red ink just might flow. I don’t know what the fix might be for that.

    But yes, one bad experience that’s shouted abroad will overcome the impression formed by one’s own positive experiences. And all the GOOD customer relations acts and GOOD customer service that occurs rarely gets reported to the world. There’s little market for good news, but tell one horror story and the world will rush to hear it and repeat it.

    Sorry. I must be in a cynical mood.

  2. Kirsten says:

    I thought about inserting a caveat about how people have to use this new power thoughtfully, John, but decided to keep my post a bit more streamlined.

    The fix is still the same though, really, because if you have a solid reserve of good will it is easier to overcome those sorts of events. It’s a lot like disaster preparedness — you hope it will never happen, but if it does, you want to be operating from a position of strength if you possibly can.

  3. Point well taken. I work at a plant that processes oil into carbon. We are always at risk of an event that could harm the environment — or even harm people. I’ve undergone training in how to deal with the aftermath of some bad event… especially with the media and public opinion. In the training we were told that the BEST defense is years of good, positive public relations and the image of being a responsible corporate citizen in the community. Lacking that, look out for the tar, feathers, and the ride out of town on a rail.

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