The Cost of Poor Customer Service...4 Mistakes

Every now and again, a real-world example of how terrible customer service can impact your business emerges to make it crystal clear. My Saturday afternoon encounter with the Extreme Fitness Dunfield Club (a fitness center location in Toronto) could not have been a better example.

Here's what happened...

I occasionally meet an old friend of mine there to play squash. He's a member of the Dunfield Club but I'm not. I've been meeting my friend at that fitness center 4-8 times a year for the better part of 4 years. So I have a pretty good idea of the guest drill. Until Saturday, it was this: pay $20, fill out a release form (which they inevitably use to call you to solicit a membership), go play squash. No big deal.

On Saturday however that changed. I went in expecting the old drill, paid the $20, filled out the release form, and was told that I had to give them my driver's licence. I thought: Oh, they want to confirm my identity, so I showed them my driver's license. They informed me that, no, they needed to keep my driver's licence. Why, I asked. I was told it was for "liability reasons". Hmmm. I explained that I thought signing the release was sufficient and that I was uncomfortable giving my driver's license to anybody given the amount of identity theft and so on going on.

It went from bad to worse. Essentially I was told, put up or get out. Thinking that perhaps this clerk was new, I asked to speak to her manager. Same message except now I was told this had always been their policy, my concerns were silly, and when I pointed out that the sign on the desk said merely "present ID", the manager told me she didn't need the sarcasm. (For the record, the Extreme Fitness Dunfield Club website says "show ID").

One might be inclined to think that this is a question of who's right and who's wrong. Not so. By the time it got to the point the manager was called, the Dunfield Club was already "wrong". They made four big mistakes: (1) they failed to acknowledge the discrepancy in their own policies, (2) they invalidated both me as a guest and my friend the member, (3) they made it personal instead of keeping it about business, and last, but by no means least (4) they ignored the future value of an existing and prospective customer.

The future value of a customer is by far the most important -- especially if a typical Dunfield Club Extreme Fitness member is paying something like $60 per month and remains a member for 5 years or so - that's a value of $3,600! But making it personal, by the invalidation, and failure to acknowledge their own problem, they induce a greater loss. Instead of just being frustrated with a change in policy, the personal nature of the manager's approach to solving the problem provided an emotional incentive to go further. The irate prospective customer (me, in this case) now writes a letter to the Extreme Fitness executive staff about this, promptly fills in two 1-star ratings of the Dunfield Club on various community sites (complete with commentary) and then goes home to write a blog entry, submits it to an article distribution service and waits for the decay of fitness center and sports club's future value.

What could have happened instead? The manager could have come out of her office. Listened patiently to my concerns. Calculated the future value of a prospective membership in her head and then carefully responded. She could just as easily have responded by (a) acknowledging that she understood how I might be concerned about identity theft, (b) acknowledging that it was a change in policy, that unfortunately they had not communicated very well, and (c) offering to retain the driver's license in her personal safe to ensure there would be no problem of identity theft.

It would likely have paid off. In one example in another business, New England Business Services (NEBS) demonstrated more than 20 years ago that customers that have had a problem resolved effectively often double their lifetime value over customers that have never had a problem!

Too bad Extreme Fitness hadn't read about that in training their staff to handle problems.

The moral of this episode is simple. Always keep the future value in mind. Keep personality out of the equation and then find a solution. The results will always be better.