Dave Lee

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The “Net Loss” Clause to Excellent Customer Service

In order to give great customer service you need to be willing to take a net loss on certain transactions.  For many this is difficult to accept.

Yesterday I dropped off my car at the dealer for a repair and they called today saying that the repair will cost an additional $300 because they broke a part.  I thought, shouldn’t they pay for a part that they broke?  After 90 minutes of back and forth calling and talking to their manager, I managed to haggle a slight discount.  But they had me by the balls… my car was in disrepair and I needed it fixed.

What struck me was the service advisor and the service manager’s absolute refusal to lose any money on this transaction.  They should have just covered the cost of the part they broke but that would mean a net loss on the transaction.  I would have been a happy, loyal customer, but instead I’m an angry, dissatisfied customer unlikely to go there again.

Companies that do great customer service understand that it’s okay to take a net loss on a transaction if it’s going to change a bad customer experience into a good one.

Amazon loses money when I return items.  They change a bad experience into a good one, even if they lose money on the transaction.

A few weeks ago, my wife and I waited 40 minutes for our pizza at California Pizza Kitchen.  The manager covered the entire bill without us asking (she also asked us if we wanted wine, appetizers, extra entree… all free of charge).  It changed a bad experience into a good one.

Starbucks will take back (and throw away) any drink you don’t like and will remake one to your exact desire.  And they do this without making you feel bad.

If I don’t like the food in a restaurant, I shouldn’t have to pay.  Or I should be given a choice of another entree for free.  Sure, some people might take advantage of it, but if you let the customer leave your restaurant having a bad experience the chances are they are never coming back.  But if you take a net loss on one meal because the customer isn’t happy, you might have won them over for life.  In other words, take the net loss of $20 in exchange for the possibility of winning that customer over as a lifetime happy customer ($1000+ value).

But it’s not just about the money.

Being willing to take a net loss in a transaction shows our customers that their satisfaction is more important to us than making a quick profit.  It shows that we care about people first.  And people appreciate that.

(Read some of my other Thoughts on Startups)