Not all customers are alike - and some aren't even customers at all ...

Boy, I can't wait to share a blistering blog scandal with you. First, some background.

I was chatting with Jim Sterne, an eminent colleague from Canada who is also a customer strategist, while we were in Bogota at a recent CRM conference we were keynoting. I mentioned that I had been developing the five forces of customer experience management (think Porter's Five Forces, but through the looking glass ... ) that has as a pillar that a company's value is defined in part by networks of opinion. This is clear from detailed stock price research in financial services when a firm engages in fraud. The loss in total return to shareholders often far exceeds the actual fraud. 

You can also look at what happened when Egg, the online UK bank, was recently acquired by Citigroup. Citigroup promptly "fired" Egg's least profitable customers, sending them a letter indicating that Citigroup viewed them as a "risk". Big hullaballoo in the press, followed by threats by the UK government to look into it -- followed by the UK government actually looking into it. In the world of enterprise risk management, that means you've got reputation risks compounded by regulatory risks. Bad move, Citigroup. Forget the money you probably "saved" by firing those customers.

The point is, and Jim Sterne bore me out on this based on social network research he's done, your customers aren't all worth the same to you. Some Egg customers might not have been profitable, but because many of those actually paid their bills on time, they were rightly annoyed to be called "risky". Once you get to negative word of mouth, your "net promoter score" (Google(tm) that) drops like a cannon ball in jello. Splat. 

And, other folks who are not even your customers can pile onto this. This is negative network effect in action. 

Take the example of this thread on the very solid food blog Alosha's Kitchen. She wanted to share a potato salad recipe she had borrowed from a friend's site -- with some modifications of her own. She knew that the recipe she was borrowing had appeared in some form in Cook's Country (a publication of America's Test Kitchen, and Cook's Illustrated, the latter which I enjoy very much).

So she made her mods, gave Cook's Country due credit -- and promptly got called on the carpet by a public relations rep at ATK. You can read the entire exchange at the link.

The interesting thing is that this one incident has now generated literally HUNDREDS of responses just on Alosha's Kitchen blog. I suspect it will be echoed tens time over by the time it's all done, generating a signal in the blogosphere a thousand times bigger than ATK intended.

And, the question arises: What's the cost to ATK? First, you have to look at the brand values that are expressed in the company's behavior. Actions speak louder than words. Prior to this exchange, for many bloggers, ATK may have represented a quality assurance team, a bunch of heroic, practical cooks dedicated to helping us all avoid a bad meal, and to even ensure a very good meal when it really counts. Now that this exchange has been publicized, for many people the ATK brand values might be defined differently. Words used include "arrogant". 

Secondly, you have to look at lost future sales to current customers (discounted to today using the time value of money). Are we talking hundreds of dollars, or thousands? 

Thirdly, you have to look at the effect of the net promoter score, which is based in part on Reichheld's empirical (and generally accepted) observation that people who don't like your company will talk you down to other people. (New studies show that the negative word of mouth effect varies by sector and competitive environment, but the effect is still there). So, what is the loss of sales to customers you MIGHT have had? Some might argue you cannot know, but in fact, you can do a nice estimate based on Reichheld's work and multiplying by the discounted future value of the estimated number of lost future customers.

I'm guessing the cost of this exchange will be in the tens of thousands of dollars of lost future revenue. 

Now, when I teach the five forces of customer experience management, one of the points I make is that these forces make it REQUIRED that companies develop new core competencies, and chief among them:

Monitoring and dealing with bloggers in respectful ways. In fact, if you can, leverage them.

So, what would you recommend to ATK at this point?