The “Client is Always Right” Fallacy

Having spent the last few days talking to companies about the status of their business, I seem to be hearing one common refrain on why we need to lower margins to get a sale or to invest more to upgrade products to meet client requests, etc…which is “The Customer is Always Right”.

Now being as pragmatic a businessman as any other, I do know it is important to listen to your clients, but I can think of several instances where the “customer” is not always right…and by “customer”, I mean someone or some company that has already done business with you before and not a new prospect.

1.  When the request is for a product or service you do not provide

This is almost intuitive.  If I go to a McDonalds and order a Big Mac and insist they also provide me with a haircut, I am pretty sure McDonalds isn’t going to create a haircut service just to accomodate a few such bizarre requests.  However, if this request turns into a trend, then management has to evaluate the viability of expanding its services into this non-core area, just as they would evaluate any business proposal.  The outcome may still be no because….

2.  It dilutes focus from core products or services

Resources in any organization are finite and have to be best allocated to focus on developing core products and services.  Even if the request is a possible feature to be added to the product or service, the broader industry direction and trends have to be studied before making a commitment because any additional features or functions made to a product has to be maintained and supported beyond the immediate time frame.

3.  The paradox of the dominant client

We should always do what our biggest client wants right?  Well not always.  I can give you the example of many factories to whom Walmart was the dominant if not only client.  Due to their order volume, the survival of the factory was wholly dependent on Walmart orders.  Margins were razor thin so when Walmart insisted on RFID tagging of cartons to help squeeze even more savings out of their supply chain, it actually put factories out of business as they could not support this additional cost.  So when your biggest client tells you to lower your prices or they will take their business elsewhere; listen, do the math, then make a business decision.  When margins become too thin and the client accounts for more than 70% of your business, be careful as you are turning into your client’s subsidiary without any of the benefits that come with it and the entire burden of risk upon your company’s shoulders.

Whilst we may not always accede to a client’s request, it is important to listen before making a decision, and that decision has to be made within a broader context than the very narrow so called “Client is Always Right” hypothesis.  You can sometimes gain a lot of brownie points with clients by recommending a partner that provides the product or service they are looking for or to be upfront that the prices being requested cannot be met and so as not to compromise on quality, delivery or service, that you will be pulling out of the deal.

Still trying to figure out Twitter

A lot has been made of Twitter, the social media platform that allows what is termed as “micro-blogging”. For the three people out there who have never heard of it, Twitter allows you to post status updates of not more than 140 characters (including spaces) long. Its somewhat like the status updates in Facebook and more recently, LinkedIn.

 

However, unlike Facebook and LinkedIn, thats all Twitter has in terms of functionality. You can obviously follow someone else’s Twitter or have your own Twitter followed. I’m still trying to figure out why there is a claim that Twitter will soon overtake Facebook and MySpace as the predominant social media platform. I’ve used it, read reports on it, read reviews on it, read the business plan, etc…..and yet I am still uncertain of its commercial or social value. Recently it raised US$35 million in a round of funding…inspite of having no revenue and maintaining a headcount of 29. Sure, Academy Award nominees and attendees such as Ashton Kucher were reportedly updating their Twitter while the Awards were going on, and sure, Obama is on Twitter, constantly updating the rest of the unwashed masses on his latest policies (usually links ), but at the end of the day, after taking away all this hype, if Twitter were to become a paid service or accept advertising money, where would the users go? Also, with their 140 character limitation, how much real information can be transferred in this manner?

 

I read of Twitter supporters claiming that they get the latest information updates via Twitter and that they couldn’t live without it. Isn’t that the internet in a nutshell? Our attention spans have become so short that we can only assimilate twitters and no longer have the patience for thoughtful, well researched articles. It panders to our need to be popular and have people follow our every move online or share our thoughts (albeit in a soundbite). Honestly though, are our lives so shallow and meaningless that a service like Twitter can become the next poster child of the Social Media revolution?

 

I was speaking with a business owner yesterday about Social Media and he swears by Twitter saying that he communicates with his customers on Twitter and that it has helped him grow his business. That said, his business has yet to breach the US$100K in revenue per annum and is some way from being profitable. Then isn’t the opportunity cost of the time he spends “communicating” with his Twitter followers very poor with respect to what he COULD be achieving if he spent more time on his business itself? When put to him, he acknowledged spending more time than normal on Twitter and communicating when he should have been at the factory floor supervising production throughput. His Twitter addiction has also seen him cut down on visiting customers overseas (obviously the time spent in an airplane and the deadair on Twitter is too much for him). So then, is Twitter a tool for his business or a hindrance to his growth? I think only he can answer that question.

 

For me, I maintain my Twitter account, but its not linked to my phone nor will I update it more than a couple of times a day. Of course once I see real value in it, I may change my mind. Good luck to the guys at Twitter….

Tong Hsien-Hui