Yesterday British Banks Gave Up The Fight Against Compensating Their Customers
Yesterday the British Banks (HSBC, Barclays, Lloyds, RBOS…) that ‘own’ the retail banking market gave up, reluctantly, their legal fight against compensating the millions of customers who were ‘mis-sold’ payment protection insurance (PPI): ‘Millions in line for PPI redress’.
The British banks are notorious for delays especially when it comes to handling complaints and refunds. Today the FSA has instructed these banks to accelerate compensation payments: ‘Financial Services Authority wants banks to speed up PPI payouts’.
Was it ‘mis-selling ‘ or deliberately ‘ripping-off’ customers?
Whilst the newspapers use the term ‘mis-selling’ consumer groups and others describe PPI as a ‘rip-off’ or ‘racket’. ‘How the PPI scandal unfolded‘ makes it clear that “Britain’s banks have been aggressively selling ‘ineffective and inefficient’ – but highly profitable – payment protection insurance for more than a decade.”
This is what the Citizens Advice Bureau said about PPI: “Payment protection insurance (PPI) is sold to borrowers with the promise of peace of mind and reassurance that credit or mortgage payments will be covered if their personal and financial circumstances change for the worse. However, many CAB clients find that they cannot make a successful claim on their policy because of exclusion clauses and administrative barriers to making a claim. Premiums for PPI policies can add 20 per cent or more to the total amount to be repaid on a loan agreement, thus increasing people’s indebtedness rather than preventing it.”
The one key question that lies at the heart of the customer-centric orientation
If you read widely you will see there are all kinds of views on what it means to be customer-centric and no shared agreement. As such all kinds of people and companies are claiming to be customer-centric. If you believe you are customer-centric then I put this question to you:
- Is it ok for you to make money by taking advantage of your customers trust, ignorance, biases and other cognitive weaknesses?
If it is ok for your and your organisation to take advantage of your customer then you are not and will never be customer-centric. Why? There are two ways to answer this question.
The blunt answer is that you are self-centred and selfish. Given that, it is simply not possible for you to be other-centred including customer-centred.
The polite answer is that long term relationships are central to a customer-centric orientation and these relationships rest on trust. Trust, in turn, rests on the three key pillars: honesty, fairness and competence. As Peppers & Rogers say in Rules to Break & Laws to Follow:
Customers may forgive honest mistakes but will never forgive dishonesty.
This point is articulated rather well by Nils Pratley in the following piece: ‘The moral of this PPI tale: don’t rip off your customers’.
Incidentally, dishonesty literally sucks the heart out of many of your employees: how many people genuinely want to exert the best of themselves in dishonest activities?
If you wish you can stop reading right here. However, if you have the interest then follow me and lots explore/probe the customer-centric paradigm a little further using the Be-Do-Have framework.
Have: what you want to get out of your ‘relationship’ with the customer
What does top management (‘Tops’) really care about? They care about what they are measured and rewarded on. And what is that? Ultimately it comes down to exceeding analyst expectations on revenue, margins and profits. This and the behaviour that it generates are discussed in this HBR interview with Roger Martin.
Do: the actions that you take to get what you want
Things get a little trickier when we get to the Do part. What do you have to do to get the results that you want? You can make the numbers through a whole array of actions. For example:
- locking customers into longer contracts for example by moving from 12 to 18 month contracts for mobile phones (e.g. telecoms);
- take advantage of your customers ignorance and sell them products (e.g. PPI) that are not fit for purpose (e.g. banks);
- deliberately making it difficult for your customers to work out which product is the best fit for their needs so that they buy the more expensive product (e.g. telecoms);
- making it difficult for them to stop doing business with you and switch to another supplier (utilities, broadband, financial services, hi-tech..);
- cutting the investment in customer service by making it more difficult for customers to contact you and if they do then having the call handled by someone in a distant country;
- ensuring that your products do what they are supposed to do, that they are easy to use and have high resale value (e.g. Honda);
- making it easy for your customers to do business with you (e.g. Amazon, eBay); and
- standing for a set of values, practices and products that connect with a specific segment of the population (e.g. Virgin, Apple); and
- viewing yourself as being in the business of ‘delivering happiness’ (Zappos).
Given the breadth of choice that you have, limited only by your imagination, how do you decide what is the right course of action? You may be thinking that brand values might help here. They can if they are lived in values. They are useless if they have been dreamt up for marketing (influence / propaganda) purposes.
The BE domain is the source of all guidance on what courses of action are ruled in and ruled out. So let’s take a look at that.
BE: existence, stance, character and values
The BE domain is NOT concerned with the personality you put on for show – to seduce the people that you wish to seduce. Nor is it concerned with what you say or your intentions.
The BE domain IS concerned with your authentic self. Specifically it deals with the issues of purpose, stance, character and values as an integrated whole. A different way of looking at this is to examine how you behave when you are under pressure: what are you willing to do or not to do no matter what the personal cost?
At the organisation level you face a fundamental choice. To BE the kind of organisation that prospers through honest dealing and creating superior value for customers. Or to BE the kind of organisation that does whatever it takes to make the numbers – treating people (customers, employees, suppliers..) as objects to be manipulated for one’s own benefit.
The default setting, as illustrated by the British banks in relation to PPI, is that customers are seen as objects to be manipulated for the benefit of the organisation. Where concessions are made to customers it is because of regulatory pressure or because competitors force that move. In Martin Buber’s view this is the ‘I- It’ orientation.
Are your customer efforts simply an exercise in putting lipstick on a pig?
You and your organization become customer-centric when you refuse to make money by taking advantage of your customers. That means practicing and living honesty and fairness. Until you do that all of your Customer experience, customer engagement and loyalty initiatives are simply an exercise on putting lipstick on the pig. You might reap the rewards now yet sooner or later the pig will show through and you will pay the price. Let me end by quoting from Peppers & Rogers once more:
If being fair to customers conflicts with your company’s financial goals, then fix your business model or get a new one.