When Accountants Destroy Customer Loyalty

As a customer service consultant and teacher, it’s always fascinating to experience firsthand the very things we teach and preach, such as the companies that create long-term, loyal customer behavior. Of course, it’s better to experience this on the positive side, but a negative experience can sometimes be equally instructive. I recently had an experience with what Fred Reichheld would call “bad profits” — profits that fatten the bottom line now but destroy long term customer loyalty.

I’ve been delivering my Survey Design Workshops in various cities around the country for almost a decade.  Since I handle my own logistics, once I find a meeting location I like in a city, I stick with it — that is, until the venue drives me away. For a Chicago conference hotel, three times I’ve used the Hilton Indian Lakes Resort in Bloomingdale, Illinois.  It’s a very interesting hotel with nice architectural features, good restaurants, etc. within a half hour of O’Hare that just recently became affiliated with Hilton. I’d been pleased with it. But someone should tell their management there’s a recession hitting us here in late 2008.

Workshops like mine can be the canary in the economic mineshaft. They’re a pretty good leading indicator of companies retrenching. While I normally get a good headcount in my workshops, the Chicago class in October didn’t hit my targets. In fact, I had 2 cancellations in the weeks just prior due to companies putting holds on travel. I still held the class since I hate to disappoint my customers and I had a financial stake as you’ll see.

I had had second thoughts about using Indian Lakes. In the two years since I was last there they had:

  • Raised the meeting room rental price by 28%.
  • Nearly tripled the cost of a projection screen rental. (No joke, they want $95 per day to rent a screen. You can buy the same size projection screen at Staples for $120. I borrowed one from a friend. Let me be fair. The $95 includes use of power cords. Now there’s a value proposition!)
  • Most importantly, doubled the Food and Beverage (F&B) minimum purchase.

Clearly, when times were good in 2006 and 2007, they figured they could raise prices. Hello, Indian Lakes! Times aren’t good anymore!

What shocked me was that, despite my repeated use of the facility, Indian Lakes catering folks weren’t willing to work with me to reduce my financial exposure.

  • Could I apply the unused F&B amount to another event? Yes, as long as I held it before the end of 2008. Big help there! You don’t hold the same class twice in the same city in two months. That showed how much they understood my business.
  • Could I carry a credit forward to next year? No way!
  • Would they move my event into one of the hotel’s hospitality suites to cut meeting room expense? No way! That’s money in the wrong pocket of the same pants.

Were they losing money since they could have rented my space to someone else with a bigger crowd? No, the meeting rooms were mostly empty. They should have been thrilled to have me there.

To be fair, they would let any food I bought in the resort’s restaurants be applied to my F&B minimum. But that appears to be their standard practice. I wound up drinking some expensive scotch and eating some expensive dinners.  But I still would up with almost $300 in “attrition” — that is, unused F&B charges.

I recognize fully they had the legal right to the charges; I did sign a contract. But there’s a world of difference between legal rights and good business practice whose goal is to create long-term, profitable customer relationships. Here’s the explanation I got:

I am sorry we were not able to do more for you but from our side with you signing a contract for $XXX. This is revenue we have reported on receiving for the month of October. We were only able to offer that credit for this year so it would stay in this years (sic) revenues. As a business we have budgets and goals to meet (sic) we need to stick to the dollar amounts that was agreed upon and contracted.

Let me phrase that differently. As a business, they have a short-term profit focus. Promises to the accountants are more important that long-term customer relationships and long-term profitability. Ya just gotta love those accountants and savvy business managers focused on quarterly profit performance!

Would I ever use Indian Lakes again for an event? Given the concern they showed for me as a customer and for the success of my business, of course not! Actually, I have to backtrack a bit. I would use the conference suites the hotel provides — they’re wonderful and the hotel personnel seem most accommodating — but I will never darken the door of the catering office again. Indian Lakes catering called the unused F&B “attrition”, and that is the right word since it led to the attrition of their customer base.

To add insult to injury, I didn’t even get Hilton Points for holding my meeting there — and I am a loyal Hilton customer. Then again, maybe I’m not any longer…

~ ~ ~

Two other interesting points…

  1. Two weeks after my event, I got their survey — remember, I do survey consulting for my living — which included a pitch for future events at Indian Lakes! It was the same very poorly designed survey I’d seen in the past (and I had given them gratis feedback on it in the past). The survey did not contain a question that really addressed the area that has destroyed my loyalty to the hotel. It had one general question for satisfaction with Management, but that was it. Just another good example of a survey designed with internal blinders. Management thinks customers can only get upset about the food or the catering service. They don’t measure their own service. Is that ignorance or arrogance?I did not get a survey about my hotel stay from Hilton corporate, which surprised me as I have some knowledge of their surveying practices.
  2. My catering manager — a sales person — could not find time in the 3 days I was on-site conducting my workshop to walk a few feet and say hello. Amazingly, this is the third time this year I’ve had this experience in conference centers. Usually the sales person goes to the customer. In this case the customer traveled 1000 miles to the sales person.

This really makes me appreciate the fine, personalized service I have received at the Network Meeting Center in Santa Clara, Calif., Hilton Garden Inn in Scottsdale, Ariz., and at the Forefront Meeting Center in Waltham, Mass. They get it. And will continue to get my business.