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When Good Customers Turn Against You

  |  February 1, 2012   |  Comments

How to avoid "morale costs."

I saw a post on Facebook from my friend and colleague Kip Knight. He was at San Francisco International Airport (SFO) trying to get home. You can guess where the story goes, but that's really not the point of this column. Instead, it's about the way in which social media raises the costs of morale hazards; those otherwise great customers who have turned against you because of your own business policies or practices. Airlines are hardly alone here. All businesses have this exposure.

Here's the background: American Airlines (AA) delayed Kip's flight because of a mechanical issue. Fair enough. Breaking down on the side of the highway is one thing; breaking down at 35,000 feet is quite another. Enter social media, and in particular AA's engagement practices with regard to its social points of presence.

For whatever reasons, social media (and hence, what to do with it) has entered most organizations through the marketing and public relations departments. Partially as a result, most of the tools and platforms that connect businesses and customers through the social channels have been built around the needs of marketing and PR. As well, the primary activities undertaken by businesses on the social web have been promotional, or at least aimed at raising visibility toward an end, which is best described in terms of some type of "conversion." All of this has worked well, and lots of great cases around social media-based marketing and brand building are but a Google away. No doubt you've read them.

But wait, there's more. Engaging customers through social channels means exposing business policies to public comment through the conversations (if any) that you choose to participate in. Taking it a step further, by claiming a social point of presence - for example, creating a branded page on Google+, Facebook, or Twitter - raises the bar accordingly. Creating a branded point of presence means your participation - or lack thereof - is entirely public. Which brings me back to Kip's post, and the situation at SFO.

Imagine 300 people standing around, wondering whether or not they will be going home this evening. Actually, you don't even have to imagine it. Kip posted a picture of the airport scene on the AA Facebook page. Here is the opening section of Kip's post:

"I'm a Platinum member and AA did a pathetic job helping us out after having us wait for 3 hours to decide what they were going to do. The best they could do for me is fly me out at 10am (the next day).

Called Ted Whitten at the Platinum desk to see if he could help me at least wait it out in the Admiral's Club while I wait for another flight (Virgin America) at 10pm but no can do. He wasn't able to do anything at all to help me out. If I had waited for their flight on Friday (fat chance), I was welcome to sleep in a chair at the airport.

If this is how AA treats their million mile fliers, is it any wonder they are in bankruptcy? They had the chance to be heroes today and totally let me down."

americanairlines-kipknight

So, after trying the various support options, Kip took to Facebook. An hour or so later, he asked (understandably) if anyone at AA was even monitoring the Facebook page. No response. Ultimately he flew home, on Virgin America, at an out-of-pocket cost of $850.

Comments to Kip's post like, "You are being ignored like most of the elite members below ex plat status" from "Max" are particularly hard hitting from a brand perspective. They essentially say, outside the chosen few, why even bother being loyal to a carrier? If you aren't Triple Unobtanium - and only a small percentage of the flying public travels enough to put them into the very highest levels of airline loyalty programs - then it's just a straight-up case of you versus them. That's no way to run an airline or any business. Keep in mind that Kip is a million-mile Platinum member. This isn't his first business trip, and given his international speaking schedule (on social media and its business impact!), it won't be his last. If I were an airline, I'd want this guy.

Note too that the issue here is not a case of "only the very highest" (aka "best") customers getting preferential treatment. Businesses can and should do "more" for their most valuable customers. But when it comes to delivering on the fundamental product or service expectations - in this case, leaving the airport, bound for your destination on the day and at the time you were supposed to -that's a proper expectation of all customers.

Nor is the problem the actual malfunction - in this case, an airplane's mechanical problem. Customers understand - albeit begrudgingly - that "stuff happens." The problem here is the lack of a public response to a public comment and the resulting brand damage that persists long after the actual event. Kips' story, along with the comments of others, are now part of the permanent record on the AA Facebook page. (Kudos to AA's social media team for leaving these comments in place. Lesser brands would have removed them.)

I was a product manager with Progressive Insurance, easily one of the best jobs in the world at one of the greatest companies ever. We were always concerned about creating "morale hazards"; in basic terms "good customers who turn against you." In insurance, there are two important customer types aside from the general risk profile.

  • The "moral hazard" (note: no "e" on the end of "moral") refers to someone who is intent on cheating at the outset. Example: the person who buys a flood policy after the river has run over its banks and into the house, hoping the application slips through unnoticed so that an after-the-fact claim can be filed. Avoid these customers at all costs because they are marked by an obvious character flaw and thereby not acceptable as "customers" in what is, at its core, a trust-based relationship.
  • By comparison, a "morale hazard" (note the presence of the "e") is an otherwise good person who has concluded "this game is rigged against me…" and so stops worrying about actively securing property against losses, resulting in completely legitimate - but absolutely needless - claims.

Morale hazards can be created in all types of businesses: for the airlines, the proliferation of "hidden-city tickets" in the '80s and '90s - booking two overlapping Saturday stay-overs at ultra low fares and then throwing half of each ticket away - came about when business travelers realized they were paying far more than double for exactly the thing (air travel between two cities) as leisure travelers. So good customers gamed the system. Airlines took punitive measures, denying boarding if a prior ticket hadn't been fully utilized. Travelers found new ways, and the customer relationship spiraled downward

Flash forward: seen anyone recently trying to carry more onto the plane instead of paying a fee, degrading the boarding experience for everyone else? Or instead of putting actual clothes on now just boarding the plane in gym shorts or a Snuggie? A lot of flyers - think morale hazard here - have given up and now do all of these things. Assume the worst, behave that way, and then be happy when your plane is on time and the flight is pleasant. Surprisingly, most flights are on time and the majority of flights are very nice.

Question: Is your business creating its own morale hazards? Are your customers canceling subscriptions, moving to a competitor, and then moving back, just to lower their monthly bill, all at a cost to you? Are the "coupon queens" collecting and exchanging coupons en masse and driving your margins to zero? These are all examples of morale hazards. Moral hazards can devastate a great quarter in a single blow, but are obvious and therefore easy to guard against. Morale hazards eat at your margins like a fungus, slowly and over long periods of time. They are virtually impossible to stop, especially if your business policies encourage them to form.

And that's the real irony: most flights are fine, and the customer-facing professionals at leading airlines are generally very nice and genuinely helpful. I've seen, experienced, and read about countless (literally, and I was a math major) stories of human compassion involving airline employees. In my first book, I recounted a story from Ant's Eye View cofounder and colleague Jake McKee, in which an American Airline gate agent at DFW asked for volunteers to take a flight the next day based on those who had families at home that were expecting them versus those with more flexibility. Passengers quickly did what you'd expect good people to do. They thought about her request, thought about the plight of the person sitting next to them, and then made a choice. Volunteers were quickly found, and people felt good about how it was handled. I opened my second book with a story about Continental (now United) and a scheduling error that I had made (right flight, wrong day). Without hesitation, Continental replaced my ticket with a new one at no charge. Continental stepped in again more recently when Expedia wouldn't. A couple of weeks ago, on a Southwest Airlines flight heading back to Austin from Denver our flight attended (Christa) was simply wonderful. I landed in Austin thinking "wow...that's how all flights should be."

Stories of brands doing the right thing in the "real world" abound. So why do many of those same brands falter on the social web? For starters, the social web - especially as it applies to customer care - represents a radical paradigm shift. Phone-based support centers handle hundreds of millions of calls daily. Twitter gets about as many posts, every day, and a lot of them are service related. Now suppose your company has 500 customer service agents spread across three continents. And now suppose that it also has five or 10 people monitoring Twitter and Facebook. See the problem? As customers increasingly turn to the social web to request help, your social care team will get crushed. Completely, totally crushed, melted, and de-molecularized off the face of the earth. I'm not exaggerating. It's coming. In fact, it's happening now.

This is where a responsive, scalable, and robust social presence is essential. If you could satisfactorily resolve - in public - the majority of customer issues that were raised in public, how much would that be worth? That's the question that a lot of CMOs - and CEOs - are going to start asking, and not a moment too soon. Because right now, social operators are not standing by. They need to be.

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ABOUT THE AUTHOR

Dave Evans

Dave is the VP of social strategy at Lithium. Based in Austin, Dave is also the author of best-selling "Social Media Marketing: An Hour a Day," as well as "Social Media Marketing: The Next Generation of Business Engagement." Dave is a regular columnist for ClickZ, a frequent keynoter, and leads social technology and measurement workshops with the American Marketing Association as well as Social Media Executive Seminars, a C-level business training provider.

Dave has worked in social technology consulting and development around the world: with India's Publicis|2020media and its clients including the Bengaluru International Airport, Intel, Dell, United Brands, and Pepsico and with Austin's FG SQUARED and GSD&M| IdeaCity and clients including PGi, Southwest Airlines, AARP, Wal-Mart, and the PGA TOUR. Dave serves on the advisory boards for social technology startups including Palo Alto-based Friend2Friend and Mountain View-based Netbase and iGoals.

Prior, Dave was a co-founder of social customer care technology provider Social Dynamx, a product manager with Progressive Insurance, and a systems analyst with NASA| Jet Propulsion Labs. Dave co-founded Digital Voodoo, a web technology consultancy, in 1994. Dave holds a BS in physics and mathematics from the State University of New York/ Brockport and has served on the Advisory Board for ad:tech and the Measurement and Metrics Council with WOMMA.

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