Posted by: joannabrandi | December 17, 2007

Bad Profits

I stayed in a beautiful Hyatt hotel last week in VA. The lobby was filled with pointsettias and the air was festive with holiday cheer. The front desk clerks were welcoming and the experience, for the most part, was very pleasant. Even a little neglect in the restaurant didn’t seem to bother me (in fact, the delay in the delivery of a dessert menu was probably a good thing for the waistline).

But there was one thing that really irked me – and always does when I am paying $299 a night to sleep – it’s the $9.95 I have to pay to get access to the wireless network so I can check my email. What is it that reporter John Stossel says on TV “Give me a break!”

Why is it that when I’m staying at a Hilton Garden Inn or a Marriot Courtyard or one of the other less expensive hotels I get internet access and even some bottled water for free? Why is it that in the high end expensive hotels internet access (not to mention $5 bottles of water) needs to be an extra charge. It’s really an insult! We know the bottled water distributor doesn’t charge the hotel more for the water – why is the charge being passed along to the consumer?

The last time I saw Fred Reichheld speak (he’s the granddaddy of the whole loyalty business) he talked about what he called “bad profits.” These are profits the company is making at the expense of the customer relationship – he includes high airline change fees, rental car companies that charge for gas at three times the going rate at the station, return check fees at the bank, and cell phone companies that give the best rates to the new customers while the loyal ones get charged penalties if they try to break out of old expensive contracts. The last time I tried to get home a day early after a long multi-state trip Delta wanted more money for the change than the ticket had cost – what is up with that? I got the impression while on the phone with the rep that even she thought it was ridiculous – there were open seats on the plane, but if I booked one of them I would be spending several times the cost of the original ticket. So I spent an extra night in a hotel – at least this one had free internet access.

Fred goes so far to say that bad profits are inconsistent with the golden rule. They alienate customers and they de-motivate employees (who usually think the charges are stupid too.)

When will companies stop being so short term stupid? If every coffee shop in town can offer wi-fi for free tell me again why YOU have to charge?

Read two great articles on “Sweating the Small Stuff” (the first one is mine.)
Sweat the Small Stuff
In Small Biz, There’s No Small Stuff

Advertisements

Responses

  1. Marvelous!
    Mr Reichheld put his finger on a major problem area: “Give me your hand and I’ll take your arm.”

    There are so many ways we can force a client to buy from us once he made an initial purchase. That is not the problem. It’s the ethics behind the pricing. Like selling a mortage loan at a low interest rate with a clause that tripples the rate three years later.

    “Bad profits” opens up a wholly new area for marketing decisions.

  2. Oh Hank you are so right… and it could open up a whole new discussion – and it should. Some companies seem so desperate for the dollar that they step over the line for what is right.

    The only problem is who sets the line? As a consumer I want to say “just use reason, just a dose of common sense, please.”

    As a business owner do I stretch the line of common sense just a l-i-t-t-l-e further?

    Ah… the art of the question…

    I do think Fred is right in raising the topic – since as a consumer, I can feel the sting.

    Thanks again..
    JoAnna

  3. Someone from the Hyatt did look at the blog and didn’t address the issue I did. She wanted to know why I scored in room dining the way I did. Guess she wants to fix what she can (??)

  4. Joanna
    Hooray for you…can we change the world now?LOL…..
    The worst part of the ‘bad profits’ issue is that employees feel ineffective and it is difficult to appear as a loyal and dedicated employee in these situations with customers.

  5. How right you are Marie. When the employee really believes the company is doing somethng stupid and making the customer angry (and they have to deal with the anger) they feel ineffective and disempowered and very often this leads to their disengagement.
    And then management blames it on them – personally – or worst – generationally.
    The problem is “them.” Oh my.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: