The stock of Lumber Liquidators has been in free fall for nearly a month, dropping more than 55% since Feb. 24 and prompting The Motley Fool to ask if its “reputation may be far too impaired to recover.”
The genesis of the crisis was a 60 Minutes report that claimed that the company’s Chinese suppliers knowingly shipped flooring material with dangerously high formaldehyde levels, and that Lumber Liquidators failed to test the product, instead passing it along to consumers. The 60 Minutes piece did most of the damage, but the origin of the allegations was a blog post by a 25-year-old amateur investor from China last June who suspected that the products the company was sourcing from his home country might not comply with all US rules. The allegations he surfaced eventually cost the company nearly $1 billion in market value and quite possibly its future.
Welcome to the new age of customer activism. Stories like this have become all too familiar to the many brands that are learning to cope with an endless stream of commentary from customers who are newly empowered by their social tools. Two years ago I published a book, Attack of the Customers, which explained why attacks happened and how they can be prevented. But the frequency and severity of incidents has hardly slowed. For example:
- A GOP video campaign aimed at making Republicans look hip and diverse went off the rails shortly after launch last September when opponents hijacked the #IAmARepublican hash tag to skewer politicians and policies. The abuse continues on Twitter today.
- Tech journalist Ryan Block’s recording of a 20-minute phone call with a Comcast customer service rep who refused to disconnect his service went viral last summer, further embarrassing an industry that has ranked near the bottom of the American Customer Satisfaction Index for years.
- JPMorgan Chase & Co.’s efforts last year to boost its reputation by staging a Twitter chat with a top executive went horribly wrong. It turns out that a lot of people still remember the 2008 housing crisis to which JPMorgan was a major contributor, and they used the #AskJPM hash tag to lambaste the company for the financial industry’s excesses.
The good news is that many industries enjoy excellent reputations and strong customer advocacy in social channels. What do they do right? Many things, but here are five that I think we can learn from to avoid incidents like those I described above.
They know the customer is not the enemy. No matter what a company says about its brand, the customer experience at the point of contact is what matters most. If you espouse a philosophy of total customer satisfaction but then don’t train or empower your employees to deliver, then your words do no good. Ritz-Carlton authorizes every employee to spend up to $2,000 to satisfy any guest without requiring approval. That’s putting the customer first.
They treat a complaint as a gift. That’s the title of a wonderful 1996 book by Janelle Barlow and Claus Moller that argued that the most effective response to a customer complaint is “thank you.” Customers complain because they want permission to continue being customers, and many can easily be converted into advocates. Welcome them, thank them, listen and follow up. They like you. The customers you should worry about are the ones who go away and never say anything.
They sweat the details. Walt Disney World delivers on its promise of a magical customer experience in every conceivable way. Phone calls to housekeeping or the front desk in its hotels are answered on the first ring. Disney employees are not permitted to say, “I don’t know,” to a visitor’s question. They must find the answer. Every cast member is required to pick up trash, even the CEO. That kind of commitment infuses an organization’s culture. Can your organization say that?
They know their reputations. The incredible thing about the #AskJPM campaign is that the company had agreed to pay a $13 billion fine for making bad mortgage loans just a month before the event. How could it have expected that homeowners would have such short memories? If you’re in an industry that people associate with deforestation, obesity or the clubbing of baby seals, then don’t celebrate yourself, because nobody else will.
They use the channels their customers use. Customer-focused companies go where their customers are, whether it’s social media or somewhere else. Customers now make the choices about where to gather and what to talk about, and you’d better meet them on their terms. Listening is still the best form of customer engagement, but to listen you need to shut up first.
I don’t expect to run out of customer attacks to talk about in my lifetime, but I do expect many more companies to embrace the reality that customers are now in control. What does your organization do to improve customer satisfaction? Put customers first.