Don’t abuse your best customers Part II: Hertz #1 Club Case Study

November 11, 2008 by chu 

My first job out of business school was with Bain & Company consulting.  I spent six years at Bain and during that period and my longest non-travel period was two weeks. One of the first things I did after starting at Bain was to join every frequent flyer program and several hotel rewards programs. Although I do not remember the exact date, I also joined the Hertz #1 Club as soon as it was launched.

One of the greatest benefits of the Hertz #1 Club is you can usually avoid standing in line at the rental counter and proceed directly to the lot where your car is waiting for you.  Although I perceive Hertz to be more expensive than Budget or Alamo, I made the mental value calculation that the ease of reserving (call the 800 # 1 number) and picking up the car is worth whatever premium I may be paying.  I have also been able to rent some great vehicles recently, notably the Ford Edge on my frequent trips to Pittsburgh.

Last weekend, I planned to fly from Boston to Pittsburgh, pick up a Hertz car, drive to Morgantown, WV for two days of board meetings, basketball and football games and then on to Charleston to visit my father for a few hours before flying back to Boston via Charlotte.  I was originally planning to start my journey Thursday by flying from Boston to NYC for the OMMA Advertising Networks conference and then to Pittsburgh Thursday night.  But the LGA-PIT flights were canceled Thursday night, so I flew back to Boston and took the Friday morning 6 AM BOS-PIT flight.

On the way to the airport in Boston, I remembered I had not changed my car reservation, so I called the Hertz #1 line and re-booked. While on the phone, I remembered seeing a recent Hertz ad claiming that you could “reserve the car you wanted” at many Hertz locations, so I asked about this.  The reservations agent read a list of vehicles available and said I could “request one.”  Although the Edge was not on the list, I selected a Pontiac G8.

When I arrived in Pittsburgh later that morning, I was surprised when the #1 agent told me I would be renting a Honda Accord and not a G8.  No problem, I thought, the new Honda’s look like great vehicles as well.

As I approached space D4 underneath the Pittsburgh airport, I realized the Accord was not the new model, but rather at least one model old.  I was even more surprised to find out that the car smelled like smoke and had cigarette burns on the seats and door fabric.  On the seat next to me was a “Pre-Rental Vehicle Inspection Form,” something I had never seen before in any rental car.  The form noted that there were “dents” and “scratches” on the front, driver and passenger side of the car.  To complete the picture, when I started the Accord the odometer read 34,000 miles, another first in my rental car experience.

So, as an ex-smoker extremely sensitive to the smell of cigarettes, I found myself driving to Morgantown with a raging headache in a smelly car that was out of alignment.  For 20 of the past 27 years (the exception being my time in Canada when I was 100% loyal to Tilden/National, our AIR MILES Sponsor) I have only rented Hertz cars. Hertz has the data to know this, yet they give me a vehicle that is worse than I would expect from the lowest cost car rental company, and charged me $100/day for the experience.  Maybe given my last minute change this was the only vehicle available that could be dropped in Charleston, but if that was the case, they could have and should have apologized in advance.

My next steps:

  1. Check out Avis, National and or Budget “Number 1″ Programs
  2. Wait a few days to see if anyone from Hertz is monitoring their customer’s comments on blogs like this.
  3. Try to find Hertz CEO’s email address and see if he/she is interested in responding to this.
  4. Do the same thing with the Hertz board.

Here’s the back of the envelope loyalty math.  Assume I rent 20 vehicles a year for another 20 years at an average price of $50 per rental.  That’s $20,000 in lost revenue from breaking the virtuous cycle of relationship marketing and not using the information Hertz has in its database to treat a valuable customer well.  Hertz blew it at step 1, they know I am a loyal customers and instead of rewarding me with an upgrade or other amenity, the insulted me by giving me a brand damaging vehicle. Let’s see how they attempt to recover, if at all.

Questions:

  • What data do you have on your best customers that you are taking advantage of today?
  • Are there similar examples of “best customer abuse” happening in your company?

Don’t abuse your best customers Part I: Amazon Case Study

November 11, 2008 by chu 

I have a love-hate relationship with Amazon.  Love their product selection, user reviews and especially the ease and price savings of Amazon Prime.  Hate the fact that for some reason Amazon refuses to use the data they have about their own customers in the most simplistic “pre-web 1.0″ ways.  We wrote about this in the white post “The 4 R’s,” but here’s an even better example.

I love the Amazon Kindle (e-newspaper, blog, magazine and book reader) so much that I recently sent my own glowing review of the product to everyone I know, something I had never done before, despite my genetic need to tell people about great products and services I encounter.  My wonderful wife bought me a Kindle for our August wedding anniversary and within days I had uploaded 5 newspapers, 10 blogs and 4 books. I am clearly one of Amazon’s better customers and even became an “Amazon Associate,” so when friends buy a Kindle after reading my review, Year Up, my favorite nonprofit, gets a 10% rebate.

Despite all of this data that Amazon has telling them I am a Kindle owner/maven, look what Amazon greets me with when I recently logged to their site:

Amazon is using perhaps their most valuable online real estate – their home page – to tell me what a Kindle is.

But wait, there’s more:

What happens when you don’t use the data you collected to recognize and reward (or at least don’t abuse) your best customers.

A few weeks after I received my beloved Kindle, I fell asleep reading it.  When I turned it on the next morning, the screen had several thin lines running across the top.  At certain points, the cumulative effect of the lines was to block out almost ½ inch of text.  Up until this point, I had good experiences with Kindle customer service: their number is easy to find; the service agents speak English well; and they had been able to answer several questions, including helping me find an AC adopter in NYC when I forgot mine on a recent trip.

So, I called Kindle service with high expectations.  I volunteered that I had fallen asleep with the device and most likely rolled over on it and damaged the screen.  I asked if there was a program to replace, repair or offer discounts to “clumsy customers.”  To my surprise, the agent responded:

“We have many customers who have slept on, stepped on and even dropped their Kindles in the bath tub.   Amazon used to have a program to replace damaged Kindle’s, but we are not running that right now.”

Somewhat stunned, I asked for clarification, asking something like;

“Are you saying that if I had broken my Kindle at another time earlier in the year, Amazon would have replaced it or at least offered a discount?

He confirmed this was the case, but went on to say:

“If you would like, I can have your name added to our email list and if we bring back that program, we will contact you.”

Only then did he ask for my email address, which could have and should have alerted him to the fact that I am heavy Kindle user and also spent over $10,000 on Amazon last year for business and family purchases.

So, despite having the data to identify me as a very good Amazon customer, the customer service agent was not instructed or trained to use that information to at least recognize and thank me for being a loyal customer.

Not only did Amazon fail to recognize me as a good customer, they added insult to injury by telling me that I had to spend another $350 to replace the Kindle, something other – and presumably less profitable customers – did not have to do, due entirely to the unfortunate timing of my clumsiness.

In the white post “Amazon, Facebook, Eons and the 4 R’s of Relationship Marketing,” we introduced the concept of the 4 R’s using a hand written version of this virtuous cycle:

We believe that companies who collect information about customer purchases through their direct sales businesses, reward programs, or “convenience” programs like Amazon Prime or Hertz Number 1 (see Part II) need to recognize that they are rewarding both the purchase of the good or service and the sharing of information by the customer to the business.

Customers are sharing information about what they buy and when they buy it.  We also believe that customers know businesses are collecting that information and will increasingly expect those companies to recognize and reward them for their loyalty.  At a minimum, they will expect to be treated as well as other, less profitable customers or will become highly susceptible to being poached by a competitor.

Questions:

  • What data do you have on your best customers that you are taking advantage of today?
  • Are there similar examples of “best customer abuse” happening in your company?