Published in the San Diego Union-Tribune
June 7, 2021
By Barbara Bry
Happy wife, happy life. Happy customers, really happy and successful company.
Your customer’s experience with your product and/or service — before, during and after the purchase — is an essential part of building a successful organization. You want to retain the customer because it is always more expensive to acquire a new one. And hopefully, that customer tells their friends and colleagues. Conversely, a bad experience can explode exponentially, particularly with the advent of social media.
This was exemplified recently by Peloton Interactive Inc.’s handling of problems with their Tread+ treadmill — a case study in customer service mismanagement.
I first heard about the difficulty in dealing with Peloton from a friend who had purchased the $4,295 Tread+ a few months earlier. Before the news of the problems, she simply wanted to have the treadmill moved to another room in her house, and she was willing to pay a Peloton installer. The company told her that they didn’t have anyone in the San Diego area who could do it — this is hard to believe since someone had installed it in the first place — and then sent her a confusing video explaining the process and warned her that if anything went wrong, she would be liable. She spent many frustrating hours dealing with Peloton customer service.
A few weeks later in mid-April, news of the safety problems surfaced when the Consumer Product Safety Commission (CPSC) urged consumers to stop using the treadmills and asked Peloton to recall them. This friend has young children and dogs, so she was very concerned and again contacted Peloton customer service. No response.
Then, finally on May 5, Peloton and the CPSC issued a joint statement in which Peloton CEO John Foley said, “I want to be clear, Peloton made a mistake in our initial response to the CPSC’s request that we recall the Tread+. We should have engaged more productively with them from the outset.”
What happened in those three weeks?
Most likely, thousands of angry customers bombarded the company, and in addition, the stock price fell from a high of $123 in early April to $96.70 on May 4, the day before the announcement. With about 269 million shares outstanding, that’s about a $7 billion loss of market capitalization or value.
What should Peloton have done, and when should they have done it?
How Johnson & Johnson handled the recall of Extra-Strength Tylenol, the company’s best-selling product, back in 1982 (long before social media and the 24-hour news cycle) is considered a case study in best management practices. At the end of September 1982, seven people in the Chicago area died after taking cyanide-laced capsules. Johnson & Johnson never hesitated. It placed its customers first and quickly recalled 31 million bottles (the estimated cost back then was $100 million) and offered replacements free of charge. Then, it redesigned the bottle to make it tamper-proof. The result: Tylenol has continued to be a popular analgesic with estimated sales of $379 million in 2019.
When I was at Proflowers.com in the early days, we experienced a Valentine’s Day disaster in which thousands of people received poor-quality roses. Valentine’s Day was our biggest holiday that put enormous stress on our website, our growers, and our distribution systems. Usually, we committed to a certain number of bouquets and once they were sold, we were done. That year, we went out on the open market to acquire more roses, and unfortunately, many arrived wilted. So the entire company, about 100 of us at the time, spent a few weeks after Valentine’s Day talking to angry customers, apologizing and offering a refund or a replacement.
This experience changed how the company operated and led us to offer a seven-day freshness guarantee, the first that we knew of in the floral industry. We tested all bouquets to make sure that they would last seven days, and we measured quality by each grower. Most importantly, we empowered our customer service representatives to offer a refund or a replacement to unhappy customers without having to ask a supervisor for permission. We turned unhappy customers into customers for life with a quick, “I’m sorry, and here is how I’m going to fix it.”
Peloton should have reacted quickly after their problems surfaced. Bad experiences linger. My friend says she will never buy a Peloton product again.
Rule No. 670: The customer is always right.
Neil Senturia and Barbara Bry are married, serial entrepreneurs who invest in early stage technology companies. You can hear their weekly podcast on innovation and entrepreneurship at imthereforyoubaby.com. Please email ideas
to Neil at [email protected].