I am one of those people who love lists, so I couldn’t resist Business 2.0’s recently published 7th annual roundup of 101 Dumbest Moments in Business . There were some doozies in 2006, but the one that sets my own teeth on edge is AOL’s “Harassment Department”—number 2 in the subcategory of the 20 Worst Moments in Customer Service.

In this PR nightmare, when AOL customer Vincent Ferrari called to cancel his membership, John the customer retention consultant pressed him for 21 minutes, even though Vincent asked 18—that’s right, 18—times to cancel. Of course, Vincent recorded the call and posted it on his blog. Now AOL limits retention offers to two per caller. This scenario is so dysfunctional it could be a sketch on the Daily Show. To be fair, it’s probably the unlucky collision of an under-trained and poorly supervised individual with a particularly provocative customer, rather than a company policy to beat customers into submission.

However, less-extreme yet-still-aggravating versions of the practice represented here are commonplace, especially in high-churn businesses like telecommunications and credit cards. I am fuming about a credit card company that offered me a lower interest rate after I wanted to cancel (because I was such a good customer) than during the years before, while I was such a good customer.) Did the company ever communicate with me before the day I called to defect? Not that I noticed.

Of course, customer retention is important—it’s one of three “Rs” that drive top-line growth, along with repurchase and referrability (which The Phelon Group helps clients to harness—see David Ambler’s post this week). But is this really the best way to go about it—trying to keep disaffected customers on board a little longer? How long do these customers stay? Do they metamorphose into the most profitable type of customers? What word-of-mouth do they spread and what affect does that have? Companies employing this practice must have run the numbers and believe the benefit is worth the risk. But in this age of social media, citizen journalists, and customer empowerment, the risk of becoming a poster-child for bad customer treatment is greater than ever.

Nancy Heifferon, Consultant
Nancy.Heifferon@phelongroup.com