Every company wants to attract new customers, make them happy, and keep them. We claim to care about customer loyalty, and we love to survey people to see if they are likely to recommend us to friends. But when they have a problem, how far will we go to resolve it in the customer’s favor?
If a customer wanted a $5,000 refund that we didn’t think they fully deserved, is it worth refunding them to keep that customer? What if they wanted a $500 refund or a $50 refund?
What amount are we willing to spend to retain a customer even when we believe they are in the wrong or don’t deserve the refund?
We should be clear on this number, and then we need to train and empower our Customer Support staff to be able to make the call, and offer a partial or complete refund.
We might calculate this number based on average Customer Lifetime Value (CLV). If our CLV is $5,000, it doesn’t make sense to give a $5,000 refund just to keep one customer. If our CLV is $10,000, and they want a $500 refund that we don’t think they deserve, it could be worth extending a “one-time” courtesy refund try to keep them happy and retain their loyalty.
The earlier we lose a customer for any reason, the more likely it is that our CLV will decrease.
I thought about this after an extremely unpleasant experience with RentalCars.com and Avis rental car over $450 USD.
Even though I was picking the car up in Dallas, Avis claimed that they would not honor the reservation unless I could produce an Italian driver’s license. I told them that I live in Italy and carry proof of Italian residency, but do not yet have an Italian driver’s license. I explained that all of my other RentalCars.com reservations have never required an Italian driver’s license, only a valid driver’s license. Plus, I’m in America and I’m showing them an American driver’s license.
Ultimately, Avis decided that they would not honor the reservation. They would mark me as a no-show and cancel it. Since the reservation was prepaid through RentalCars.com, they told me to contact RentalCars.com to pursue a refund.
The next day, I contacted RentalCars.com and told them the story. They told me that they would consider giving me a $300 refund if I booked another car through them right now.
Is this extortion?
I have never seen any terms and conditions that require me to immediately do additional business with a company to get a refund on previous business done with the company. I’m angry. I’m dissatisfied. I’m asking for a refund. I do not want to book another car with RentalCars.com.
While I waited for the chat agent to escalate this and get advice from someone else, I checked the terms and conditions of my rental, which indicated that I only needed to show a valid driver’s license. I don’t need to show a license of any particular country. Ultimately, my rental car booking was cancelled by Avis because they invented terms and conditions that didn’t exist.
RentalCars.com would not back me up on this for reasons they could not explain. They just kept writing (in the chat), “We’re sorry, Deborah.” They would only offer me a partial refund if I booked another car with them immediately. This does not resolve my problem, and only served to make me angrier and more frustrated.
I lost trust for both companies.
But this ripples out. RentalCars.com is owned by Booking.com. I’m starting to think that my loyalty is best placed in the companies with whom I have had good experiences and my brand loyalty was rewarded.
I was loyal to RentalCars.com. I had recently decided to try being 100% loyal to Booking.com, booking every hotel room I needed through them. Now I’m thinking it will be better to go back to booking both my rental cars and hotel rooms directly with companies, and utilizing their loyalty programs.
Rental car and hotel companies can make this easier on me by charging the same or less than I would find on Booking.com or RentalCars.com because ultimately, this feels like a crappy game for everybody.
In this story, Avis loses a first-time customer. RentalCars.com loses a longtime customer. And although I’m just a few stays away from Genius Level 3 on Booking.com, they’ve probably also lost a customer.
I understand that none of these companies might care that they’ve lost me. They might not care that I’m talking about it or writing an article about it. And I don’t really expect them to care because I can tell from the way that my complaints were treated, someone decided that my $450 was worth playing games with what should have been clear terms and conditions.
Someone at these companies decided that it was better to keep my $450 than to make an exception, if they thought I didn’t deserve the refund.
Perhaps this indicates that on average, there is a very low CLV for Avis and/or RentalCars.com, and that people are generally not loyal. Because as we estimated earlier, a customer worth $10,000 might be worth giving even an undeserved $450 refund to smooth over a problem and win their loyalty. At a CLV of $1,000, perhaps it’s not worth it to give away $450 refunds when you don’t believe the customer deserves it.
These companies probably hold meetings asking how they can generate more customer loyalty and a higher CLV. I wouldn’t have all of the answers for them without researching their internal processes, quantitative data, and doing some qualitative research with potential and current customers. But I do believe that part of the answer lies in this story.
We can claim that we care about customers, but we mostly care about them in numeric form: the lines on a spreadsheet and the numbers we present in slides.
It is evidently more important for Avis or RentalCars.com to show my $450 in revenue this month, quarter, or year – plus the revenue of others in situations like mine, where they didn’t get a refund they deserved – than to consider the unfairness of the situation and give an appropriate refund where one is due.
Just to be done with this situation, I might have accepted a $300 refund from RentalCars.com, but that was extended with conditions that were unacceptable. Again, this signals a need to “make the numbers” versus prioritizing customer satisfaction, especially in a case where the terms and conditions were in my favor and I deserve a full refund.
Making a partial refund contingent on an additional purchase shows a desperation to inflate numbers like CLV or the total number of bookings the average customer makes in a period of time. This is where we see KPIs and metrics being treated as more important than customer experiences.
Make sure your teams and company are having conversations about the value of a customer. The customer should always receive a refund when they are in the right and the terms and conditions are in their favor. How much of a refund are you willing to give a customer who you believe is in the wrong and does not deserve the refund?
Also consider the power of loyalty and word of mouth.
Have you ever tracked complaints, disputes, and claims in your system and how often those customers buy from you again? Do you have a sense of what percentage of angry and frustrated customers return when they feel a sense of resolution versus when the situation is not resolved in their favor?
If you have estimated or calculated that, you have a sense of how likely it is that the customer who believes that the situation was not satisfactorily resolved will buy from you again. You understand the risk of knowingly leaving them unhappy. You’ve already made them unhappy. And now you’re going to leave them unhappy and – to them – unresolved. The ticket may be closed and marked “resolved.” But it is probably not resolved from the perspective of the customer.
It’s hard to estimate or calculate how much business you lose when an unhappy customer tells friends about their experience. That might be a Facebook post, a tweet, a blog post, or just a friendly conversation. Someone says, “Hey, we’re going on vacation, and we’re going to get a rental car.” And the other person says, “Well, whatever you do, don’t book with Avis or RentalCars.com. Listen to my story.”
Over 15 years ago, I heard the statistic that due to social media, an unhappy customer can quickly share that unhappiness with 3,000 people. That seems possible when we consider how many connections and followers people might have on social media sites, where they might broadcast unhappiness with a brand.
This then ripples out to people I don’t know. Someone says, “I have to travel out of town to go on a business trip, and I’m going to need to rent a car.” And the other person says, “Oh, I follow Debbie on LinkedIn, and she wrote this wild post about Avis and RentalCars.com. It sounds like you shouldn’t book with them.”
The people in all of these hypothetical conversations might still have brand loyalty and certainly have free will. They might still book with Avis or RentalCars.com. But we must consider the risk of negative word of mouth.
We have direct losses from the customer we couldn’t retain. But we might also have indirect losses from the people who heard a negative story first-hand, second-hand, or third-hand from the unsatisfied customer.
I’m not suggesting that you throw high-value, undeserved refunds at low-value customers.
While I care about customer satisfaction and the customer experience, I know that the bottom line is money, and we must make calculated and deliberate decisions. I’m suggesting that we be clear about the value of a customer whose loyalty we are hoping to win and keep, and how we empower Customer Support Representatives to provide more satisfactory resolutions to problems we caused or are ultimately responsible for.