logo

U.S. PIRG Consumer Blog

« FTC rejects consumer group request for KMart disgorgement of ill-gotten gift card gains | Main | Some tips for tenants about tenant screening blacklists »

August 18, 2007

HBR: Companies and the Consumers Who Hate Them

There's a fascinating article by Gail McGovern and Youngme Moon in the June Harvard Business Review: Companies and the Consumers Who Hate Them (long summary is free, download full article for a fee). The article picks on practices including tricky bank fees, cell phone early termination fees, unfair longterm health club contracts from Bally's and others, Blockbuster's business model built on late fees, not rentals and a variety of other scams. Then, it points out that ING Bank, Virgin Mobile pre-paid cell phones, Curves and other health clubs and Netflix are among those firms that have taken advantage of the large pool of disgruntled "defecting" consumers who simply want to be treated fairly in the marketplace. These firms and others have a business model that puts "customer satisfaction and transparency first." From the summary:

Why do companies bind customers with contracts, bleed them with fees, and baffle them with fine print? Because bewildered customers, who often make bad purchasing decisions, can be highly profitable. Most firms that profit from customers' confusion are on a slippery slope. Over time, their customer-centric strategies for delivering value have evolved into company-centric strategies for extracting it. Not surprisingly, when a rival comes along with a friendlier alternative, customers defect.

Posted by Ed Mierzwinski at August 18, 2007 06:48 PM


Comments

Post a comment




Remember Me?



218 D. Street, SE Washington, DC 20003
Phone (202) 546-9707

E-mail: