THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, July 31, 1995 TAG: 9507290374
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY STEPHANIE STOUGHTON, BUSINESS WEEKLY
LENGTH: Long : 172 lines
Jeremy Dorosin had been steaming over Starbucks Coffee Inc.
First, it was the rude service. Then, he bought two espresso machines from a California Starbucks. One broke down. He claimed the other, which he had given to a friend, was missing parts and rusting.
So he complained. Then, he complained again. Later, he demanded an apology and the company's ``nicest machine.''
Seattle-based Starbucks refused, and Dorosin got mad. Soon, he began running advertisements criticizing the gourmet coffee company in the Wall Street Journal.
Sound familiar?
It's a retail nightmare come true - the Customer From Hell. He was the shopper who, if treated by the ``customer is always right'' mantra, might not have blasted his criticism from the pages of one of the nation's premier newspapers.
But was Dorosin right?
Maybe not.
A growing number of retail consultants say merchants make a costly error by assuming their customers are correct. The fact is, they say, consumers can be very, very wrong, costing companies oodles of money in unnecessary returns.
``I think retailers make a big mistake when they revert to the old cliche that the customer is always right,'' said Gregg Bedol, vice president of Neill Thall Associates, an Atlanta consultant. ``I believe strongly that you need to know who you are as a retailer, and you certainly need to go the extra mile. But you also need to maintain your own pride and respect.''
But that doesn't mean Customers From Hell should be treated lightly, because their complaints often ring true. Sometimes, a retailers' own failures - rudeness or disinterest - can turn mild-mannered shoppers into raging consumers. Setting fair customer service policies
One of Sam Walton's favorite stories was about a customer who returned an old thermos. The Wal-Mart founder said his company took back a customer's thermos even though it was aged and worn. The tale's ending: Wal-Mart never sold that thermos.
Today, Wal-Mart's return policies aren't as liberal. The company has concluded that its ``customer is always right'' slogan is costing too much money in some product areas.
Shoppers once could return anything to Wal-Mart at any time. Now, the company has a new return policy for electronics and home appliances. Consumers must return those items within 90 days, with a receipt needed for a refund or exchange.
``Some of our vendors were reporting millions and millions of dollars for items there were no problems with,'' said Betsy Reithemeyer, a spokeswoman for Bentonville, Ark.-based Wal-Mart. ``There are a very few customers who abuse (the return policies). They're ruining it for the rest.''
Retailers need to balance their loss prevention policies with customer service, according to a study by the consulting firm Arthur Andersen & Co.
For example, the study says the most successful merchants give only store credit when customers return merchandise without a receipt unless a gift sticker is attached. That way, they don't lose the sales.
Many in the retail industry consider 30-day return policies - with receipts for returns and exchanges without them - to be fair.
But the Arthur Andersen survey cautions that retailers should ask shoppers how they feel about return policies and keep an eye on the rival operation down the road. Unhappy consumers may leave and head for the competition.
``A retailer has to decide who you're competing against,'' said Earl Honeycutt, associate professor of marketing at Old Dominion University. ``You can't have a very limited return policy if your customer has a liberal one.''
In cutthroat industries like home improvement, companies are likely to be more generous, retail consultants said.
Lowe's Inc., for example, has no return limitations, said Cliff Oxford, a spokesman for the North Wilkesboro, N.C.-based company. Competitor HQ has a 30-day return policy. But the Virginia Beach-based chain says it's flexible.
After the 30-day period, ``the store manager has the authority to take it back,'' said Carol Walker, HQ's customer service manager.
Both HQ and Lowe's, however, said competition isn't the main motivation for their customer service policies. They said they were more concerned with making sure shoppers returning products will be pleased. Firing bad customers can save money but create more strife
But winning over dissatisfied consumers isn't always the best idea, some analysts believe. In fact, some think bad customers should be identified and fired.
``The unreasonable person is not going to appreciate that you're going the extra mile for them,'' said Gregg Bedol of Neill Thall Associates. ``That's the customer you don't want.''
Jim Ballou, a waiter and junior manager at Stormy's Pub in Norfolk, knows of one such customer who frequently complains about the food - and gets a free meal. Once, she asked for free lunch, in addition to her free breakfast.
``I could tell her, `I don't want your business,' but I would lose my job instantly,'' Ballou said. ``Sometimes it's easier to give it to a customer, letting them have a free meal rather than have them badmouth you.''
But consultant Bedol says bad shoppers can be weeded out with new technology that uses customer information.
``We use advanced technology to make authorizations on credit cards,'' Bedol said. ``There's no reason why you can't authorize returns.''
The device would tell a retailer how many times the customer has shopped at the store, how much was spent and how many products were returned.
If the shopper frequently returns undamaged merchandise and costs the retailer too much, the merchant may want to politely say goodbye, Bedol said.
It sounds dangerous. First of all, what if you fired the wrong customer? What if that person told 50 friends about that experience? Lastly, how would you get enough chutzpah to tell off a customer?
``For retailers, it's very difficult to fire your customers,'' said Earl Honeycutt, the ODU associate marketing professor. ``It's kind of hard to say, `I don't want to serve you.' I don't know how you'd go about it.'' On the consumers' side: bad service and merchandise
Consultants agree that merchants often create their own Customers From Hell.
Even Honeycutt and Bedol sheepishly acknowledge they've fumed on a few occasions. They aren't the only ones. There's something about a long wait, a snooty employee or plain indifference that riles plain Janes and regular Joes, turning them into loud, angry consumers.
``Everybody's angrier,'' said Bedol. ``Nobody has the time. Customers think `They're out to get me.' That's why service has become such an important differentiator.''
Customers returning products, he said, come in with their guards up. They expect a fight - which comes from their experiences at other shops, he said.
Even small stores, once the bastion of quality customer service, have failed do devote adequate attention to their shoppers, the Arthur Anderson survey found.
``Failure to deliver quality customer service will result in increased customer complaints, merchandise returns, and ultimately, lost customers,'' it said. ``It is more cost-efficient to keep an existing customer than to find a new one.''
Another danger is that customers might tell others about bad experiences at retail operations. For every complaint management receives, 26 more disenchanted customers will never make it back to the store, according to the Technical Assistance Research Programs Institute of Washington, D.C.
And how any people did Jeremy Dorosin tell about his experiences with Starbucks?
Hundreds of thousands.
For its part, Starbucks did offer to replace $299 and $169 coffee machines with $269 models. Starbucks says it also offered gifts and apologies.
``We often go above and beyond the call with our customers,'' said Cheri Libby, a Starbucks spokeswoman. ``In this particular case, the customer was unreasonable.''
Starbucks' gifts weren't enough. Dorosin said he wanted his friend to have the nicest espresso machines, which sell for more than $2,000.
When the company refused, Dorosin took our four ads in the Wall Street Journal. One ad read: ``Had any problems at Starbucks coffee? You're not alone. Let's talk.''
Starbucks mailed Dorosin's friend a new espresso maker and accessories. It gave Dorosin a full refund. He wasn't satisfied, so he asked them to take out an ad in the Journal apologizing to the public. Starbucks declined.
``There's only so much you can do as a retailer,'' Bedol said. ``You can't lose sight of the fact that you're a business that needs to make a profit.''
Yeah, but how much did Dorosin cost Starbucks? ILLUSTRATION: Color drawing on cover by John Earle
Color photos
Jeremy Dorosin
Cindy Payne and her son Kacy, 6, of Chesapeake, leave the customer
service desk at Lowe's home improvement store after exchanging a
bathroom sink. Lowe's policy has no return limitations, says Cliff
Oxford, a spokesman for the North Wilkesboro, N.C.-based company.
Customers can return anything at Lowe's even this fan.
Customers wait in line to return merchandise at HQ's customer
service desk.
Graphic
Customer tips
by CNB