Why Goodwill Is Essential To The Survival Of Every Business

Organisations know that building goodwill and loyalty among customers is important to their businesses in the long run. But how many of them actually do anything useful about it? Bogged down by a stubborn commitment to existing roadmaps and paths that have already been forged, companies and whole industries are struggling to respond to threats that come from compelling challengers. This is particularly evident in, but not isolated to, the IT industry. We take a closer look at the idea of understanding what consumers really want.

Smiling customers image from Shutterstock

Conversations with IT professionals from all walks of life are always enlightening. One night at a casual gathering, an ex-IT administrator for a large organisation gave an honest recount about a multimillion-dollar technology implementation orchestrated by a major vendor that was rife with problems. He thought the solution was inefficient and outdated in the first place but his hands were tied as the company he worked for was deeply invested in the vendor already.

"I don't care now because I don't work there anymore," he said. "The arrangement with that vendor was made by people from a different generation and I know that when I move up to a senior position and am able to call the shots at a different company I wouldn't touch that vendor again.

"I don't think they'll be around in 10 years' time."

Nonetheless, the vendor in question, an established global conglomerate with a rich history in the technology industry, has already pocketed the money for the project. The company will likely continue raking in the money from old business connections, riding off a golden reputation that has long since passed. But it has failed to ingratiate itself with a new audience and has, in fact, made a few enemies along the way.

Sure the vendor is doing well now but it's vulnerable to disruption. In time, when senior managers that are committed to its offerings leave the workforce, their replacements will be more than happy to kill them off Caesar style if a better offering is available.

This fate isn't reserved to the technology organisation we're alluding to; industries are being upended by startups as consumers flock to adopt alternative offerings. This type of disruption was addressed by technology product design veteran Dan Maccarone and New York Times writer Bob Sullivan, who recounted the fall of video rentals giant Blockbuster at the hands of then-challenger, Netflix:

"Many folks erroneously think that Blockbuster was a victim of changing times and technologies. Not true! Blockbuster, a Goliath, was slayed by Netflix, a true David at the time. It’s business model in the early days sounds straight out of the Pony Express archives. It mailed movies to people. Consumers didn’t dump Blockbuster because Netflix was better. They dropped Blockbuster because they hated Blockbuster. With the passion of a thousand fiery suns. Blockbuster famously charged insane late fees, often far exceeding the value of movies rented, and went after “debtors” with the ferocity of debt collectors.   "Blockbuster had reverse goodwill; customers couldn’t wait to dump them and say goodbye to late fees. Incidentally, that was a big part of Netflix’s initial marketing."

Same goes with the taxi industry, which had been hated by the public for some time and refused to change its ways. When Uber came onto the scene, consumers were more than happy to stick it to taxi companies.

Uber and Netflix both capitalised on the ignorance and negligence of the industries they ended up disrupting. As Maccarone and Sullivan noted in a post on Medium:

"Nothing is more powerful than understanding. Anyone can take a fee; very few people "get it." If you simply sell a solution to someone, you will likely never see them again. If you sell them understanding, they’ll come back again and again. This is the best way to inspire loyalty, because no one has just one problem.   All industries face the challenge of serving customer needs versus barrelling over customers just to make money… [I]t’s because [sometimes] corporations can’t see what people want or need because they are blinded by their own agenda."

The risk adverse nature of big businesses is stifling their ability to change course on a battered ship that has been sailing for years, even decades. It's often hard to justify a change as well, given that these companies, like the technology we referred to earlier, are still chugging along and making money. The benefits in changing how a business operates to inspire goodwill among customers isn't exactly quantifiable and may not generate profits immediately.

Maccarone and Sullivan ended their post with a strong message to organisations:

"Companies that forget about the importance of connection are ripe for disruption. Yes, Uber is cheap and convenient. But Uber has risen to power so quickly in large part people really hated taxis, and for good reason. Everyone has the story of getting taken for a ride, not to mention the smell.   "Treat your friends like that, and you’re going to be lonely. Treat your customers like that, and your balance sheet is going to get pretty lonely, too."


Comments

    Ryanair. Australia Post. Dodo. Telstra. ANZ/CommBank/NAB/Westpac. Every Premium SMS Provider, ever.

    If you're cheap enough or big enough to have a monopoly / oligopoly - you don't need goodwill. Customers come because you're cheap, and they stay because they have little choice.

    There's a burn'n'churn model, and it's not dying anytime soon.

    goodwill is a dollar value to a business, for example a hotel, the hotel is just a building but the goodwill can be worth more than the building, pity some bigger businesses can just throw away loyalty for short term gains.

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