Should customer satisfaction always be a priority? Not when satisfying customers has a negative impact on your profitability.
That’s what an Amazon’s customer, Nir Nissim, recently discovered when he was banned from the e-commerce platform because he had made too many returns.
His escalation to Jeff Bezos eventually allowed him to be brought back in the big family of Amazon customers. Yet, this kind of experience is likely to leave Mr. Nisim with a great dose of frustration and dissatisfaction.
Unprofitable customers can be a real issue for businesses and pose some serious marketing problems. Michael Hänlein, a marketing professor at ESCP, has published several studies on the subject (see one example here) and shown the positive effects abandonnement strategies had on a business.
In the case of Amazon though there is one additional issue I’d like to bring forward, namely the brand image problem.
Amazon has built its reputation on its flexibility, on its no-question-asked return policy. Amazon has in fact probably contributed to the rise of the free return policy which is the basis for modern e-commerce’s success (read here our analysis for further details and its impact on profitability).
When banning customers because of their taking advantage of the return policy, a cornerstone of Amazon’s strategy, we may wonder whether this doesn’t lead in fact to brand image being damaged. My poijnt is that profitability analysis take only cash flow into account and not brand image valuation.
A more holistic valuation of the profitability, including cash flows as well as more intangible assets like brnd image may in my opinion to a better perpsective on this problem.
Image : shutterstock
Posted in Marketing.
