Padding the Bottom Line with Cheap Profits
I think the two things that frustrate me the most about business these days are (1) a lack of good information available to the average consumer - an intentionally imposed asymmetry of information, in my opinion, and (2) the trend, or continuance, of the practice of padding the bottom line with cheap profits. I think they’re really the same issue, seen from different angles.
I define cheap profits to mean revenue a business receives while leaving a bad aftertaste with the consumer. In a capitalist marketplace, a business who has found a legitimate niche in the economy, and provides a valuable product or service, should have no trouble at all making at least a normal profit, assuming the market is not saturated from overcompetition. What bothers me is when you have companies trying to squeeze profits from areas other than their core business that are really alienating their own customerbase, giving a bad name to business in general by causing the general population to be overly skeptical and cynical (and rightly so, perhaps, given the circumstances) about the purpose or effectiveness of business.
Take, for example, banks who charge ridiculous nickel-and-dime fees for every finger they lift or even for every process auomated by a computer. You read through their account disclosures and you’ll discover that banks basically leave the door open to doing whatever they want - they can choose whether to charge fees or not to charge them, etc. Or look at how many gyms make thier money - by charging huge upfront fees, or tying you up in a contract that’s impossible to get out of without paying through the nose. Or a combination of both. Does a membership gym not provide a valuable enough service where they could just charge a monthly rate and nothing more and still make a profit? They may be collecting revenue from customer after customer who is signing up with them now, but where does it lead? To a huge, embittered customerbase, before long. Can they sustain a longterm flow of income with this type of business model?
Eventually the ’sleazy’ businesses are going to be weeded out, but during that time, which could be years, they are bound to tick off a lot of people, and I hate it when one of those people is me. Why can’t companies just be upfront about their fees, or return policy, or contract clauses, or hidden charges? Of course, it’s wishful thinking to believe that companies will willingly give up on their own volition what I think are sly business practices in lieu of more openness and honesty with its customers; but in the long run I believe it will only be those businesses with an upfront, honest, legitimate business model that will survive (long into the future).
This is one reason why I love the proliferation of the internet, and the conglomeration of consumer information. What it means for the consumer is that now you can have more access to information (granted, with varying levels of quality or legitimacy) on topics of all kinds, including purchase-decision information, information about companies’ business practices, and information on ways to protect yourself or seek legal action. Also, they have a place to vent, or warn other people about experiences they have had with a certain company.
For businesses, it would be smart for them to see this as an opportunity rather than a threat. Just like a good manager uses the ‘grapevine’ in the office, rather than tries to stifle it, to communicate effectively with his or her team, so too, should a good business use the consumer advocacy movement of the internet to its advantage. Businesses now have access to free consumer-opinion-survey information that they don’t even have to conduct. It may be slightly biased toward those who have a terrible experience with the company, but it’s still valuable in my opinion. A good business should take the opportunity to use this information to improve its business model and discover the areas of their business that can generate real profits - profits that customers don’t mind paying for because they are receiving a valuable product or service in return. It will be the businesses that understand this that will remain competitive, and will end up surviving.
Hopefully Consumption Rules can be a part of the consumer-information trend. It’s meant as a forum for highlighting and discussing business practices, and consumer experiences. Feel free to share your ideas and experiences by commenting on articles, or by registering and writing your own.
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