I have been very closely associated with call centres for a large part of my career and I now have overall responsibility for a small customer service centre.
Last week one of my staff called me up to say a customer had purchased one of our products, but at the loyalty rate when they weren’t one of our loyal customers. “Do I call and ask them for the extra money?” I said, “No, just process it”, to which she replied, “Yep, I thought you would say that, but thought I would check”. I am fine with that approach, but it reminds me of the people who have done differently.
I have been having a long-running argument with finance and administration areas for a long time about customers paying the right amount.
In my previous role at MYOB I managed all the pricing for their support and upgrade products. The first year I was there I worked with the General Manager to totally overhaul the pricing and increase the prices.
To all customer service and technical staff I said, “If a customer calls and asks for the old price, just honour it. Make yourself a hero by saying you can waive the price rise and take their money.” And they diligently adhered to this approach.
I spoke to the finance/admin people about this as well with a similar point. Imagine my surprise when I got told that the processing people were sending cheques back to customers! I almost yelled the building down! I stormed down to their area and said “Why are you sending cheques back to customers?” Their response: “Oh, well it’s a month since the price rise so we thought we should start asking for the right money”. While I wanted to scream, I didn’t. Clearly they believed they were doing the right thing, so I politely explained that we were just happy to get the money in and honour it.
The price rises, at the most, were $30 per year. The more people we got to pay, regardless of whether it was the old or new price, the better. But why did I say that – and continue to say so?
- Spending time trying to explain why they have to pay more ends up costing you more money. If they want to pay you, take the money and get off the phone as fast as you can while still giving good service to maximise profit.
- If you have recurring revenue like support or a magazine subscription, getting their money this year means you would probably get it again next year.
- Following up $10-$30 costs you more money than it’s bringing in, so you’re losing on all fronts.
- The customer is more likely to say good things about you – “Oh, they honoured the price” – and if you try and charge them more, they’re going to tell even more people about their bad experience.
- The customer wants to pay you. Do you think they will go to the effort of re-sending a cheque if there is a small price difference? Your customers are busy too and don’t have time for this.
Needless to say, every year I did a price rise after that I would check with finance/admin to make sure they weren’t sending cheques back to customers.
When doing price rises (which you should do and do regularly if the product/service allows but small incremental increases, not huge ones) think about the long-term effect on the relationship you are going to have with that customer. Is losing a small amount of money this year going to increase the likelihood of additional revenue for many years to come? Think about the customer’s lifetime value. Keep an eye on long-term profitability and revenue while ensuring cashflow for today.