4 Customer Service Mistakes that Will Kill Your Business

Last Updated Aug 4, 2011 11:21 AM EDT

Never underestimate the importance of customer service. But just in case you are tempted to, drive to your nearest Borders bookstore â€" or what remains of it â€" for a reminder.

Borders, once the nation's second-largest bookstore chain, began liquidating last month after filing for bankruptcy protection in February.

And while Wall Street may find plenty of reasons for the company's failure, the one that resonates with this consumer advocate is this: It stopped listening to its customers. While people migrated from dead-wood media to the Internet, Borders doubled down its bet that customers would buy CDs and DVDs in its stores.

You know what I bought the last time I visited a Borders? A really good cup of coffee.

Turning a deaf ear to your customers' wishes can kill your business. You don't need an MBA to know that. Just go to your nearest mall, past the shuttered Borders store, and I'm willing to bet you'll find another retail store that for one reason or another, didn't meet the needs of its customers and paid the ultimate price.

At the Oviedo, Fla., mall I frequent, a half of the retail spaces are empty â€" some the casualties of the recession, but others the victims of their own bad business decisions. Times changed; they didn't.

What else can do your business in?

Outsourcing or marginalizing your customer service functions. Remember the old US Airways? Not to be confused with today's airline that bears the same name, the former air carrier, which was acquired by America West in 2005, did everything it possibly could to cut its customer-service functions. It routinely ignored perfectly legitimate grievances from passengers. It slashed its customer service departments and outsourced them. The message to customers was clear: We don't care. Customers rewarded that behavior by driving it into bankruptcy.

Thinking your customers are wrong. Consider the sad, lonely fate of the W. T. Grant Stores. The department store chain, which was founded in 1906, quickly rose to become the dominant retailer in America's urban centers. But as its customers migrated to the suburbs in the 1960s, the 1,200-store chain fell on hard times. Instead of adapting it stood firm, insisting its customers would return if properly incentivized. In a bold but foolish move, W.T. Grant offered store credit to "anyone that breathed." It didn't work. The company went under in 1976 with the second-largest bankruptcy filing in US history.

Having a customer-hostile business model.
Some might say the Blockbuster implosion (it narrowly avoided being liquidated earlier this year) was all about shifting technology, moving from DVD rentals to streaming movies. But I see it differently. Blockbuster made a significant chunk of its revenues from charging late fees. As my CNET colleague Don Reisinger observed back in 2007, "For years, it was hated by those people who saw it as a monolithic organization that enjoyed charging exorbitant late fees and had little or no care of what the customers wanted most." That's what I call a customer-hostile business model. It is hardly alone. And you can be sure the other businesses that do this will be held accountable someday.

I don't want to oversimplify my case. It may be difficult to argue that these customer-service SNAFUs were entirely to blame for the demise of these companies. But it's hard to imagine the businesses failing if they hadn't listened to their customers - and hadn't done right by them.

Related: Christopher Elliott is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He's the author of the upcoming book Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals, which critics have called it "eye-opening" and "inspiring." You can follow Elliott on Twitter, Facebook or his personal blog, Elliott.org or email him directly.
Photo: Dave Dugdale/Flickr
  • Christopher Elliott

    Christopher Elliott is a consumer advocate and journalist. A columnist for National Geographic Traveler magazine and the Washington Post, Elliott also has a nationally syndicated column and blogs about customer service for the Mint.com. He is at work on a book about customer service issues.

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