Three Thoughts on Business Relationships

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Today I ordered two pizzas from my local Domino’s Pizza. We are having a birthday party and, because it’s a big family party, we are cooking and cleaning. Pizza fits nicely into our lunch plan (or lack thereof). We have ordered pizza from this Domino’s for as long as we have lived in this neighborhood, which is just over ten years, and we have always written checks.

Today, something changed.

Instead of accepting my check, the delivery person asked me to write my telephone number, my date of birth, and my driver’s license number on the check. When I inquired why this information was necessary, the delivery person explained that they have a new owner who changed the policy because their store accepts about 8 bad checks a month. Grudgingly, I agreed to write the information on my check (identity theft be damned).

There is a lesson in this story that I can’t help but point out.

On Treating All Customers the Same

We order two pizzas from this store each week. That means we have ordered well over 1,000 pizzas from this particular store. In each of those preceding 1,000 interactions, my check was accepted without question. Today, however, I was treated as if we had no prior relationship. I was treated as though I was a potential threat to the store’s profitability and not as a longtime relationship.

I understand the reason this decision was taken; every business owner has a duty to protect his company from unnecessary risk. And I don’t disagree with a policy that requires additional information be added to a check. I don’t even disagree with a policy that forbids checks altogether.

Where I disagree with my local pizza franchise owner is on implementing a policy that treats all customers the same. The new check policy, while making the business a little bit safer and a little bit more profitable, treats every customer as if they cannot be trusted, as if they have no relationship.

On Lifetime Value of a Customer

Worse still, the decision to treat all customers the same makes no accounting for the lifetime value of a customer. I don’t know the pizza franchise store’s metrics.

There are many pizza stores in the neighborhood, and refusing my payment preference may be costly. At and average order price of $25, I spend a staggering $1,300 per year with this store. Over the last ten years, I have spent approximately $13,000 at this store.

This figure, the lifetime value of the customer, is the metric on which the store-owner should be concentrating.

On Policy Changes

Existing customers understand that policies change, but this end is better served with phone call or an explanation. Policy changes are more easily accepted when they take into consideration the customer’s payment preferences. No policy change that affects the customer should ever be made without considering the customer’s preferences and why those preferences exist.

Conclusion

This policy change, and the way in which was handled, damaged my relationship with the franchise. Before today, we trusted each other. Today, I was treated like a stranger, like we had no relationship worth an explanation.

Policy changes, including which types of payments a business may refuse, are necessary. These changes should never be made without the thoughtful consideration of your relationship with your existing customers; they should never be made without considering the lifetime value of customers and what their potential churn may mean to your business; and they should never be made without advance notification to the customer.

This is true even if you are selling pizzas. During each interaction with the customer, you may really be selling $13,000 worth of pizzas.

Questions

1. Are we easy to do business with?

2. How will the policy change that we are considering impact our relationships with our customers?

3. How will they respond to this change?

4. Is there a reason to enforce this policy across all customers, or can the same result be obtained by segmenting our customers?

5. How much value do we place on our long-term relationships?

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