Business Ethics, Bubbles and Customer Loyalty
June 3, 2008
Business Ethics, it’s more than just a class that I had to take at Xavier, it’s a very important concept that unfortunately seems too often to be relegated to the back when it comes to the bottom line. When there is a substantial profit to be made what’s a little white lie anyway. Companies always follow the market leaders naturally. However, due do business ethics or a lack there of, market leaders are not always the ones to follow. Discerning who to follow though is not easy. This is especially true when you consider time to market in relation to profit, thus compounding the fact that the window of opportunity in any given industry shrinks every day. This is why if there is one profitable yet unethical company then there is ten of them. Pretty soon it becomes the industry norm and all the sudden fundamentals are being left behind, in many cases thrown out all together. You know what we have then friends, a bubble. This happens when people get greedy, and they push the market beyond its means. You know, why sell something to someone for five bucks if they are willing to spend ten. Well if they’re willing to spend ten why not fifteen and so forth and so on. Bubbles, hear about them a lot these days.
Sure, maybe looking at industry bubbles and citing Business Ethics as the culprit is a bit too simplistic, yet it is a variable. Furthermore, we all seek as companies that exponential growth instead of a linear path and that can be attainable without chaos on the horizon. I might also add that just because a company is doing well does not mean they are unethical, merely that it happens. But as customers, do we want a company that promised us the moon, delivered, yet found that the strings attached completed negated the milestone to begin with, or worse. Or as customers, in any service or product we seek, do we want companies with the judgment, foresight and fortitude to see past the bend in the road and successfully navigate the oncoming cliff. 100 times out of 100 we will chose the latter. This is where Business Ethics and Customer Loyalty meet.
Shorting people, i.e. your customer is short sited and will always lead to negative word of mouth. If people like you, they will tell a few people. If they despise you and your business they will tell everybody. Like picking financial securities, customer loyalty comes down to value investing, which is preparing for the long run. Your business will grow as your customers do. At the same time, your business will die as your customers die. Your character is your destiny; and this is one of the few things in business we should never compromise.
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Andrew,
I agree with your comments about short changing customers.
Promising only what you can deliver and then delivering fully on your promises is not only simple ethics, but is the only way to build a business which is viable over the long term. If you truly offer a viable product or service, you should have no difficutly in generating sales without promising anything you cannot deliver.
I feel that the majority of companies (although not all) can understand that poor practices toward customers are poor for business, particularly in industries which are dependent upon repeat business. Sad to say, in industries such as real estate or used car sales, highly fragmented industries where commissions from individual transactions are large and prospects of repeat business with particular individual customers are not high, businesses are likely to be tempted to promise significantly more than they can deliver.
Personally, my own greatest fear in terms of business ethics is not treatement of customers, although ethical treatment of customers is essential for business ethics. Customers can harm companies by withholding business. My greatest area of concern is conduct in areas such as labor rights or environmental damage in third-world countries, where injured parties in respect of such matters are considered to be of little importance to the company.
Cheers
Andrew