Thursday, 27 May 2010

Lies, spin and goodwill

Whether you work in a trading business or a service business, your profitability is determined by your customers. It is easy to think of the profitability of a shop or a firm of architects being determined by how much money is received compared to how much money goes in costs and that is obviously the case in each individual accounting year. But what about next year? What you do this year and did in past years can have a significant effect on how well you do last year through the invisible power of goodwill.

The goodwill of a business is named aptly. Repeat business comes from keeping your customers happy and hoping they tell their friends about you. You generate goodwill among potential customers and that goodwill translates into custom in the future. When a business is sold it is common to find the price broken down between property, stock, debts owed to the business and goodwill. Ripping people off might turn a few quid now but it dissuades them from patronising your business again. So too if you are in a service business and provide a shabby service. The customer who has already engaged you might keep you on to finish the job because it would be more trouble to hire someone else to take over, but he won't use you again and might warn his friends and neighbours that you are to be avoided. This is all pretty obvious stuff.

The more competitors you have, the more you are likely to suffer in the future by letting down a customer today. That is one of many reasons why we have laws and regulations to limit the number of monopolies and place restrictions on those that do exist - give a monopoly free-rein and you create ideal conditions for a modern equivalent of the wartime spiv. The best explanation of this phenomenon I have ever come across came from the old television comedy Dad's Army. One of the characters is a spiv, a black marketeer, who offers something for sale for five shillings (I think it was knicker elastic, it usually is in English comedies) only to be faced by the comment "but it's only two shillings in the shops", to which he responds "ah, but you can't get it in the shops". Because only he could supply knicker elastic he could charge the highest price he felt his customers would be prepared to pay. Monopolies lead to higher prices, competition leads to lower prices because suppliers have to fight for your custom. Some suppliers will charge more and be busy because some customers value not just price but customer service, that's all part of the same thing - they offer something extra that people enjoy and are prepared to pay for.

My question today is: given all that I have written above, why do so many people lie to their customers when there is a problem rather than telling them the truth? The reason I ask is that I was talking to someone I know who has written and self-published a book, a "how to" guide to a particular craft. She keeps a stock of books in her garage and posts copies to individuals and craft shops as and when orders are placed. Every year or so she has to have a few thousand more printed and lets the printer know how many she needs. She's a well-organised person and arranges a reprint months in advance of the date she is likely to run out of stock. This year she ordered another five thousand and was given a date for their likely delivery. Two weeks before that date she telephoned and was assured everything was in place for that date to be kept. The date arrived but the books did not. Over the next few weeks she was given all sorts of promises of imminent delivery. In the end she received them three months late.

She had received an unusually high number of orders and her existing stock was exhausted a week after the original date set for delivery of the new print run. Being a sensible lady who wears sensible shoes, on receiving a new date from the printer she told her waiting customers of that date, only to have to do so again and again as lie after lie was told to her by the printer. Fortunately no one cancelled their order but the interruption to efficient delivery might have an effect in the future.

The true position was that the manager of the print shop had suffered a family misfortune which required him to spend a lot of time away from work - a fact only divulged once the books were printed and dispatched - causing the printing of everything in their catalogue to be delayed. Had the truth been told, her customers would have been told the same thing and everyone would know it was just one of those hitches that occurs from time to time through nobody's fault.

Customers make all sorts of allowances when they are kept informed of a problem that has arisen, allowances they will not hold against their supplier provided they do not later discover that the information they were given was simply a lie. Had the printing firm said "Mr Snodgrass's son is very ill and Mr Snodgrass can only be here a couple of days a week, we are running on 50% capacity so there will be a delay" the author would not have known when she would receive her books but she would have an explanation she could pass to her customers and the likelihood is that no goodwill would be lost between printer and author nor between author and putative reader.

As it is, she is looking for another printer because she was told numerous inconsistent untruths including: "we've started, it won't be long", followed by "it's next on the list, it won't be long" and then "we're waiting for paper supplies and yours is the first one to be done once they arrived". All of it garbage, all of it lies, all of it has lost goodwill.

That is just one example but I have encountered many examples of the same thing in recent years. Something goes wrong and there is no apology or truthful explanation, instead a load of deflective spin is spewed out to try to buy time. It does buy time but so would telling the truth and the latter would also retain goodwill.


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