Category Archives: Revenue Risk Management

Feeling Morally Queasy at Work? Tips for Voicing Your Values

I’d like to encircle the workplace with yellow safety tape. Long ribbons of it. “Caution! Do not enter!” That would give others an inkling of the dangers lurking within. I’m not talking about back pain, eyestrain, and paper cuts. I’m talking exploitation, harassment, and passive aggression.

I’d use safety tape to protect people from the risks that threaten their personal values. Since 1943, Norman Rockwell’s Rosie the Riveter has inspired workers with her power, ebullience, and obvious self-reliance. Today she’d be tweeting #metoo.

In an uncertain world, we can count on one thing: our personal values will be challenged in the workplace. They will be challenged by what we witness, experience, and are asked to do. Mine have, many times.

Concern over this problem was revealed in a 2001-2002 Aspen Institute  survey conducted on a group of MBA students. “When asked whether they expected they would have to make business decisions that conflicted with their personal values during their careers, half the respondents in 2002 (and more than half in 2001) believed they would. The vast majority of respondents both years reported it would be ‘very likely’ or ‘somewhat likely’ that they would experience this as stressful,” according to Professor Mary Gentile, author of a book, Giving Voice to Values: How to Speak Your Mind When You Know What’s Right.

Predictably, that issue spreads risks across the organization like foul air propelled by the wind. “In 2001, over half of respondents said their response to such a conflict would be to look for another job; in 2002 that number declined to 35 percent, still a significant number.”

Nearly two decades on, the Aspen Institute findings corroborate what I see today: employees are under-prepared for responding when their values are challenged at work. Most business schools don’t teach techniques or approaches, and the few that do present choices through a moral lens that defines or prescribes right and wrong. That turns people off.

Professional development in sales and marketing is no better. Aside from the ambiguous demand, “put customers at the center of everything you do,” practitioners ignore the issue altogether. “Don’t lie. Ever.” Huzzzzahh! Easy to say at the sales kickoff. Looks nifty on PowerPoint. But Job #1 for business developers is customer persuasion. Such admonishments are flimsy, and don’t penetrate the thorny dilemmas employees routinely encounter, like choosing between pressuring customers to buy and keeping their jobs another quarter.

During my career, I have repeatedly contrived rationalizations and reasons for not speaking up when my values have been confronted. I’ve learned I’m far from alone. As we endeavor to preserve a self-image of high integrity, we have cultivated a parallel talent for sweeping concerns and better judgement under the carpet.

Not that business development culture would have it any other way. Put aside that creative mantra for a moment. In my experience, marketing and sales organizations are hives for conformity and group think: “Quit giving excuses!” “I want to know how you are going to sell, not why you can’t!” “We’re not a problems focused group, we’re a solutions oriented group.” “You’re either on the team, or you’re not.” There’s a theme to these edicts: check your personal values at the door before you begin work. Little wonder so many marketing and sales professionals find it nauseating to rock the organizational boat.

Instead of thinking, “well, I’ve already slipped on that ethical slope, so I guess I’ll just continue the slide,” recognizing past imperfections in ethical decision making frees us to move in better directions. There’s nothing to be gained beating ourselves up over workplace decisions that we’d rather re-do. Wearing egg has never been fashionable, but as a practical matter, you can’t hold a conversation about ethical choices if the person leading the discussion cops an attitude of finger-wagging judgment. And I’ve yet to meet a colleague, client, or direct report who doesn’t wear symbolic egg.

Which values challenges do business developers experience?

Pressure from management:

  • “You must not share information with [Customer X] about this defect, because it will delay their purchase.”
  • “We won’t offer [Customer X] the lower market price because it will cause us to miss our revenue target. They’ll never know.”
  • “We can give our customers verbal commitments not to raise their prices, but that information must not be explicit in our contracts.”
  • “When you prospect a C-Level executive for the first time, always make it seem that you’ve had an earlier conversation with them.”
  • “This product has high potential for misuse, but it’s too important to our profits not to aggressively promote it.”

Pressure from prospects:

  • “We haven’t made a purchase decision yet, but if you can promise a better price, I will share [Competitor X’s] proprietary proposal.”
  • “I’m willing to award your company the order, but I need a personal favor . . .”
  • “We need your developers to modify the quality algorithm so the defect rate we report to the government appears lower.”

Since 2014, dozens of companies have been inducted into the Annual Sales Ethics Hall of Shame. Theranos, Wells Fargo, VW, Takada, and Purdue Pharmaceutical became notorious because their business strategies became deeply infected with nefarious intent.

In September, 2018, Theranos announced it was formally “dissolving”, which suggests its downfall was less ugly than it was. Its two senior executives, founder Elizabeth Holmes and Sunny Balwani, were indicted the same year, charged with engaging in schemes to defraud investors, doctors and patients. Takata filed for bankruptcy. Wells Fargo got spanked with onerous restrictions on its asset growth. And VW, well, I’ll never buy a car from a company that gleefully sacrificed my respiratory system to pad their profits.

For all these companies, the proximate cause for their bad fortune wasn’t a cliché risk like rabid competition. It wasn’t warp-speed market disruption. It wasn’t onerous government regulation or economic chaos. Instead, it was unchecked greed.

Opining greed in the C-Suite won’t make it go away. Nor will moaning about high pressure sales tactics. After all, sales forces are predominantly paid on revenue production, and as we know with incentive compensation, the goal is to get what you pay for.

Instead, risk mitigation for corporate malfeasance begins at the grass roots. Employees who are prepared and equipped to voice their values provide the most effective way to stem corporate misbehavior. Put another way, we have met the responsible party, and it is each of us. Time to take the bull by the horns and wrestle it to the ground.

Some tips for voicing your values:

  1. Know what your values are. Write them down – it doesn’t need to be a long or complicated list. Own them. This is essential, because they are yours, and that makes them unassailable.
  2. Believe that your values deserve to be taken seriously. It doesn’t matter whether you’re an intern or board chair.
  3. Prepare yourself for situations where you know you will need to draw the line. This means anticipating challenges such as the ones described earlier and developing a response ahead of time.
  4. Don’t judge the action of others or presume to understand them. If you assume a manager or colleague has malintent, you will come across that way, and will be less likely to change his or her mind.
  5. Invite conversation about the issue. For example, “This doesn’t work for me. I don’t think it’s right. Do you see it differently? Help me understand.” (reference Giving Voice to Values, page 157).
  6. “Frame choices in ways that align them with broad, widely-shared purpose.” (Giving Voice to Values page 159). It’s easier to redirect a problematic request when you can gain consensus on a larger goal.
  7. Craft a description that focuses on the advantages of your recommendation or role, rather than the disadvantages.
  8. Practice, practice, practice your responses to values challenges. Reflect on your experience and that of others, figure out what you’ve learned, hone your tactics, and practice some more.

“Once we identify the common challenges in our particular line of work, it is especially useful to look for and note any examples of individuals who have effectively voiced and acted on their values in this type of situation,” Professor Gentile writes. Examples are abundant online. It’s also important to familiarize ourselves with common rationales for not resisting. The top four, according to Giving Voice to Values,

 

Expected or standard practice: “Everyone does this, so it’s really standard practice. It’s even expected.”

 Antidote question: “If the practice is accepted, why are there often rules, laws, and policies proscribing it?”

 

Materiality: “the impact of this action is not material. It doesn’t really hurt anyone.”

 Antidote question: “Does the apparent small size of this infraction make it any less fraudulent?”

 

Locus of responsibility: “This is not my responsibility; I’m just following orders here.”

 Antidote question: “Is the issue likely to cause significant harm, and are there few (or no) others able to act to prevent it?”

 

Locus of loyalty: “I know this isn’t quite fair to the customer but I don’t want to hurt my reports/team/boss/company.”

 Antidote question: “Am I being truly loyal to the company if I perform this task/operation/process and it undermines trust and credibility?”

Paraphrasing the immortal words of Glenda, the Good Witch from The Wizard of Oz, “You’ve always had the power to act on your values, my dear. You just had to learn it for yourself.”

“We are beginning from the position that we want to act.” Professor Gentile writes. “Therefore we are trying to answer the question: “How can we do so most effectively?”

Five Elements that Create Service Stress for Customers

Despite rigorous measurements and sentiment analysis, the number of bad customer experiences that occur every second isn’t known. How many living trees currently populate our planet? We should know these things. For now, I’ll speculate that they are both large numbers, and one is escalating while the other is declining. You know which is which.

Instead, I’ll explore more scrutable questions. Poor customer experiences occur in every industry. Why do some create nary a ruffled feather, while others cause everyone to go bat-poop crazy? Dr. Dao knows what I’m talking about. Is there a “perfect storm” of conditions where a weak spark of customer letdown will ignite an inferno of pain and outrage? Finally, how much repeat vendor ineptitude, crassness, inefficiency and apathy will consumers accept before saying “enough!”

The answers impact the profits for every organization across every industry. Customer service delivery carries uncertainty and risk. Some issues are cheap to mitigate. Clear directional signage for airport car rental return areas are inexpensive but avert headaches for harried travelers arriving late to catch a flight. Others are costly. Rapid product delivery involves capital investment for sophisticated logistics and IT infrastructure.

“Customers expect perfection every time.”  That admonishment has been beaten into our heads for so long, we’ve forgotten to question whether satisfying this alleged truth really matters. We need balance. How about, “don’t waste the company’s money on projects that don’t bring meaningful improvements.”

Not every business can address every CX risk. Fortunately, not every business needs to. Some CX outcomes can be plain-old good, and that’s good enough. I offered to send this article to my trash hauler, but the service manager politely declined. Seems he was busy planning the company’s annual golf outing coming up in May. That was fine with me. I just told him to just make sure he continues to collect my refuse around once a week.

Does this mean that some companies get a pass for providing impeccable customer service, while others are firmly on the hook?

Yes.

There are situations when underserved customers are especially prone to getting wigged out. Companies that understand what they are can avoid squandering resources fixing things that don’t need fixing, and they’re more likely to improve what’s consequential. According to a 2015 Harvard Business Review Article, When the Customer is Stressed by Leonard Berry, Scott Davis, and Jody Wilmet, there are five conditions that portend high levels of customer stress.

Customer stress is elevated when customers face

  • lack of familiarity with the service being delivered
  • lack of control over the performance of the service
  • major consequences if things go wrong
  • complexity that makes the service a black box and gives its provider the upper hand
  • long duration across a series of events

After the authors gleaned these findings, they applied them in the most difficult and demanding context: service delivery for cancer treatment centers. I’ll survive my missed trash pickup. Safety pins can replace dress shirt buttons that my dry cleaner ruins. I’m not offended if the grocery cashier fails to make eye contact, or to thank me for my business. But every cancer patient faces life-changing consequences. Every interaction matters. Adopting a strong customer service ethos and CX risk mitigation is crucial for these organizations.

“The [Bellin] cancer center, which opened in 2008, surpassed its five-year growth and revenue targets in just two years, and nearly 100% of patients (who are regularly surveyed) say they are ‘highly likely’ to recommend its medical and radiation oncology services. Bellin achieved these results in large part by following the four guidelines for succeeding in highly emotional contexts,” according to the article.

The guidelines extend to any service operation that meet the stress conditions:

  1. Identify emotional triggers. The authors suggest using surveys, interviews, focus groups, controlled experiments, and experience mapping. “Open-ended prompts about common frustrations can be particularly revealing: “Describe the worst experience that you or a family member ever had when using this type of service.” “If you were the CEO of this organization for a day and could make just one improvement for customers, what would it be?”
  2. Respond Early to Intense Emotions. That includes preparing customers for what to expect in the sequence of events, and communicating with care. “A valuable exercise is to convene top providers and ask them to identify phrases that needlessly undermine customers’ self-esteem, confidence, or hope. These ‘never phrases’ can be incorporated into training sessions for the purpose of eliminating them.”
  3. Enhance Customer Control. Many companies overlook this important tactic. Post-service call, many customers feel abandoned (except for the instantaneous How did we do? survey). The authors suggest mitigating the problem by offering a mobile application to consolidate content for ancillary service and support needs.
  4. Hire the Right People and Prepare Them for the Role. My most memorable support calls were with agents who were also users of the same product or service. “People who deliver high-emotion services must be able to effectively cope with stress, respectfully communicate with customers, and strengthen customers’ confidence. Thus excellent service organizations view the process of hiring and training employees as crucial to serving customers well.”

Pursuing excellence in service delivery is a potentially worthy goal. But delivering it matters more for some companies than for others.

Revenue Growth: Don’t Let the Funnel Fool Ya!

Sales funnels symbolize a widely-known reality among marketers: s*** happens.

Funnels instantly remind us that interactions between buyers and sellers are fraught with risks – not that we need any reminding. Funnels also represent our fear that we can assiduously attempt to convert a prospect to a customer, but lo, there’s a chance we won’t prevail.

I like funnels because they are easy to understand. Funnels mansplain uncertainty and risk. When you need to justify a pipeline multiplier, or reveal the rationale behind a multi-channel lead generation campaign, simply fire a 2-D trapezoid shape onto the projection screen. Divide the image into equally-spaced horizontal stripes. Use bright colors. Then, dive into funnel taxonomy.  “Raw prospects enter the gauntlet at the top. From there, they undergo a metamorphosis, becoming Leads, then MQL (Marketing Qualified Leads), then SQL (Sales Qualified Leads). Those that emerge will be anointed as Opportunities before moving south, eventually crossing into a hallowed zone marketers call Paying Customers.” My presentation includes a bloated money bag positioned near the funnel’s bottom to drive home the idea. The screen glows even brighter. Warmth envelops the room. This is everyone’s favorite topic.

You already have recognized that my scenario is called The Happy Path. Happy paths, as we know, make people happy. Everything on the slide is linear. Everything is ordinal, with a prominent, single-headed arrow to emphasize the direction of actions, activity, and interest. The partitions between funnel stages are always crisp and distinct. “Questions? . . . No? Great! Let’s move on . . .”

I advance to the next slide to continue my speil when inevitably, someone – often a new hire – lobs a question with the antecedent, “What about . . .” I’m prepared. I press the “back” button, and ask, “Was there a question about the funnel?” Indeed. Many questions, actually. A partial list of ways to complete the interrogative:

. . . Lead qualification and disqualification, changed priorities, low buyer motivation, misaligned or insufficient sales incentives, faulty CRM data, lack of project funding, buyer fear, seller fear, redirected budgets, raised customer expectations, increased ROI hurdles, misunderstood needs, bad assumptions, new assumptions, strategic re-prioritizations, project starts-and-stops, buyer confusion, atrocious sales processes, predatory buying, industrial espionage, new decision hierarchies, flawed business intelligence, process breakdowns, competing internal agendas, technological innovation, tariffs, product recalls, spikes in monetary exchange rates, increases in the cost of capital, mergers and acquisitions, personnel changes, passive aggression, essential conversations that never materialized, relationships gone awry, cruddy demos, software bugs, regulations, external competitive maneuvering, internal competitive maneuvering, and stupid tweets from anyone with access to the company’s “official” Twitter account  . . .”

I don’t consider any of this the Unhappy Path. I call it Life. Here’s the problem: beyond their purpose for symbolizing risk, funnels don’t represent the myriad conditions companies encounter when executing revenue strategy and tactics. These examples obliterate the template funnel’s shape, and shatter that straight North-South arrow into countless, itty-bitty pieces.

For me, the funnel’s most meaningful features are its taper and length. The angle degree at the top should invite concern, interest, and discussion. “Our funnel is wide as a tank container at the top and narrow as a pipette at the bottom, and it takes one year to travel from top to bottom. Perhaps we’ve found the root cause for our cash flow problems.” In practice, few seem interested in dissecting the risks that cause the delta, and how to manage them. A funnel is a funnel. Counter-intuitively, the funnel’s ubiquity as a risk symbol has made us less risk aware.

Time for a fresh look.

Twitter abandoned its egg silhouette in 2017.  Assuming their objective was to render a human-ish image, the replacement – two detached shapes that faintly suggest a human head and shoulders – offers scant improvement. Imagine what we’d be purchasing if design engineers adopted such anonymized forms to use for prototyping. I suppose we’d have a visceral understanding of what daily life was like in the 1700’s. Similarly, how can companies create revenue strategy when using generic funnels as design templates?

Overlooked differences. At best, funnels suggest risk in marketing and sales. But they don’t mirror reality. I love Roadrunner cartoons, but for my safety and that of others, I resist letting them inform my understanding of physics.

Three real-world deviations from the funnel symbol:

  1. Pathway

Prospects enter sales funnels at many different points, not just at the top. Sales funnels are highly porous, and exit points vary, too.

  1. Re-cycling

Not every lead remains permanently outside the funnel. Prospects that have exited the sales or buying process can re-enter.

  1. Effort

Opportunities in sales funnels generally don’t drop from top to bottom on their own. As leads descend through the funnel, effort and costs increase for both sellers and buyers. In fact, if funnels reflected aggregate cost of sales, the model would be exactly flipped – small at the top, and large (or very large) at the bottom.

. . . And two overlooked similarities:

  1. Connectedness

As cash engines, revenue funnels are connected in several ways to the organizations they serve. They are not free-floating in space, as they are often depicted in presentations. Marketers implicitly understand that revenue funnels often receive inbound leads from a messy universe of opportunities, and that revenue flows from the bottom. But marketing funnels are but one component of a large system. They require additional input such as cash, information, talent, and other resources to operate.

  1. Throughput

With physical funnels, smooth material flow from top to bottom signal that the funnel is operating well.  But marketers often defer to a flawed proxy for funnel health: fullness. The problem is, full funnels can also be clogged. Rather than using funnel fullness as portents for cash-flow vitality, marketers should emphasize velocity and throughput as meaningful metrics.

 

General recommendations for funnel management: 

  1. Make sure the funnel opening is as wide as it needs to be, but no wider.
  2. Match the size of the opening at the bottom with the company’s revenue needs. That includes ensuring orders won’t swamp the company’s ability to fill them.
  3. Don’t take the taper for granted! Make sure it aligns with the company’s risk capacity.
  4. For planning purposes, net the funnel’s cash output against the resources required to operate it.
  5. Remember that throughput velocity is as important to consider as overall funnel value.

I’m not declaring funnels dead. Not by a long shot. The marketing and sales profession has long suffered from lack of probabilistic thinking, and funnels offer a symbolically-accurate representation of revenue generation risk.

Put another way, a picture that tells us  s*** happens is worth a thousand words.

Acquisition and Retention: The Yin and Yang of Customer Strategy

For customer retention, which of the following do vendors commonly perform:

  1. Provide outstanding service and loyalty benefits
  2. Impose switching costs through technological impediments and contractual restrictions
  3. Engineer convoluted pathways for customers who want to terminate services
  4. All of these

The correct answer, of course, is All of these. Every enterprise must retain customers. It’s a strategic challenge, and the path can be rocky. But two things are clear: 1) vendors have multiple tools at their disposal, and 2) customers don’t always benefit.

There’s a lot of confusion about customer retention. Some people ask, “which is better: acquisition or retention?”, implying that the matter is either-or. Some argue that companies invest too much on acquisition and too little on retention. Some assert that retention is preferable to acquisition because retention costs less. And finally, some mistakenly believe that retention tactics create only benign outcomes for customers.

With zealots on both sides, it’s easy to fall into the either-or trap, but it’s a false dichotomy. Without acquisition, there’s no retention. No business can survive long-term without acquiring and keeping customers. And as a practical matter, churn is inevitable: Business needs change, customers become insolvent, or they get acquired. Because revenue contribution from each customer is uncertain, companies must build sales pipelines to keep new opportunities flowing. On the other hand, profit margins from existing customers are generally higher than for new ones, so keeping customers is also very important.

In fact, every effective customer strategy involves:

  • Account acquisition: how do we identify, cultivate, and capture new opportunities?
  • Account retention: how do we keep our customers?
  • Account revenue growth: how do we facilitate increased spending or “share-of-wallet”?
  • Account win-back: how do we resuscitate past clients that can continue to benefit from our product or service?
  • Account divestment: how do we jettison customers that we can no longer support profitably?

At startup companies, acquisition and retention are immediate concerns. But as companies mature, customer strategies become more complex. Businesses can alter their core offerings or delivery models. In addition, customers can stop buying for many reasons – some preventable, some not. Along the way, once-lucrative accounts can become financially less attractive. Customer strategy isn’t complete unless it addresses all five challenges.

A key business development challenge for every organization is matching its capabilities with external opportunities, and customer strategy must address this mission. That defies relying on “industry standards” for guidance. I searched for “customer strategy best practices,” hoping for insight like “on average, machine tools manufacturers dedicate 28% of their marketing spend on capture, and 72% on retention.” Nothing. Nada.

It’s not hard to understand why. Customer strategies are based on corporate strategies, which are influenced by present and future product portfolios, competitive market position, market share, operating costs, cost of capital, risk capacity, risk tolerance, economic and regulatory forecasts, and industry maturity and growth rate – to name a few. Does Company X spend too much on customer acquisition and too little on retention? Devoid of context, it’s impossible to judge. The most useful clue is whether Company X achieved its quarterly revenue target. If so, they possibly had the right proportion of acquisition and retention. When you have next quarter’s achievement percentage, ask me again. There might be a different answer.

Even without industry standards, I took a swing at generalizations:

Acquisition-intensive companies tend to be

  • New business ventures
  • Companies that are pivoting their business model
  • Operating in young or emerging industries
  • Selling capital goods with low potential for add-on sales
  • Expanding into new markets
  • Services companies that recognize a large portion of revenue at the time of contract signing

Retention-intensive companies tend to be

  • Software-as-a-service (SaaS) companies
  • Offering other subscription-based products or services
  • Providing a low-cost entry product or service that can be readily expanded
  • Selling a product or service with high potential for ongoing consumption
  • Dedicated to supporting a key client or small number of clients
  • Expanding into new markets or developing products targeted toward their legacy accounts

Most companies are in between, confounding our ability to compliment – or assail – their approaches. Blue Apron, for example, must be equally rabid about acquiring new customers and preserving those they’ve signed. It’s a conundrum: for troubled Blue Apron, client retention depends on gaining economies of scale. And how do you achieve economies of scale? By acquiring new clients! Acquisition and retention, therefore, exist in a mutually supportive relationship. I know – it’s complicated. But it’s hardly rare.

Flawed accounting? For most companies, acquiring customers consumes a sizable chunk of the marketing budget. In B2B, buying lead times can drag on for months or years, and conversion rates (ratio of prospects who become customers) can be frustratingly low.  “Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one,” wrote Amy Gallo in Harvard Business Review (The Value of Keeping the Right Customers, May 2014). In fact, every executive I spoke with for this article shared that their company’s customer acquisition costs consistently exceed retention costs.

But “cost analysis regarding retention requires sophistication, and results vary widely between companies,” CFO-turned-novelist Pat Kelly told me. “There are many [retention] cost drivers,” and not all of them are aggregated into overall retention costs. For example, much of what companies spend on software development and logistics operations are crucial for customer retention, but most companies don’t categorize them as retention costs. On the other hand, marketing, sales, and lead generation are easier to parse. Many companies know their cost/lead down to the penny. Little wonder that spending on acquisition appears so lopsided. “It’s worth the effort to get better at tracking retention costs, but companies will never get to the right answer,” Kelly said, adding “it’s more important to be directionally accurate.” That’s solid advice. We can endlessly debate the accuracy of acquisition-retention multipliers, but acquisition almost always costs more than retention. Still, for most companies, whatever benefit precision provides doesn’t change the fundamental fact that you still can’t retain a customer that you haven’t first acquired.

Recommendations:

  1. Balance is key. Companies that get heavily invested in a single component of customer strategy risk harming stakeholders. Comcast abused a customer that they clearly couldn’t afford to relinquish. Solar energy companies inflated acquisition numbers to appear more attractive to investors. And American Express Foreign Exchange offered impossibly low rates to prospects, only to raise them without proper disclosure.
  2. Never use cost considerations as the dominant rationale for favoring retention. Acquisition, retention, growth, win-back, and divestment strategies must first align with the strategies of the organization.
  3. When defining your customer strategy, consider the right measurements. These should include minimum churn rate, expected churn rate, industry growth rate, enterprise revenue growth target, actual revenue-per-account, forecast revenue-per-account, economic forecasts, and foreign exchange rates (for international companies).
  4. Know the right customer for your company, and if that’s too difficult, at least know the wrong one. “Think about the customers you want to serve up front and focus on acquiring the right customers. The goal is to bring in and keep customers who you can provide value to and who are valuable to you,” said Jill Avery of Harvard Business School.

“If you do a good job, your customers will refer new customers, and that’s vital for every organization,” another CFO, Stan Krejci, shared with me today. But he cautioned executives not to see retention as isolated policies, processes and procedures. “Retention is a performance issue,” he said. A company’s obligation to its customers is to consistently fulfill its promises and to provide ongoing reciprocal value. A company that can do those things won’t likely resort to staffing customer call centers with Retention Specialists, and contriving technological and contractual handcuffs to reduce churn.

Acquisition, retention, growth, win-back, divestment. The elements of customer strategy are inter-dependent. “Retention feeds acquisition, and acquisition feeds retention.” Krejci said. “It’s circular.”

Ethical Selling: American Express Offers a Teachable Moment

“Every ethics question a business person could face comes down to a question you face on your very first sale: what are you willing to do for a buck?”, Philip Broughton wrote in his book, Mastering the Art of the Sale.

The question needs to be asked at every company. From the mom-and-pop Custom Cupcakes by Diane, to this week’s ethical letdown, financial behemoth American Express. The Wall Street Journal reported ongoing sales chicanery at the company, and traced its roots back to 2004 (American Express Gave Small Business Customers One Rate, Then Secretly Raised It), July 31, 2018).

Perhaps it began even earlier. AmEx reaped the benefits through 2018 – around the time Wells Fargo was accused of the same distortion. When it was publicly called out, an AmEx manager got nervous, and “told salespeople they would need his approval before offering prospective clients a margin of less than 0.70 of a percentage point, according to an email reviewed by the Journal. Current and former employees said the price changes were common knowledge within the forex business . . . Amex’s foreign-exchange international payments department routinely increased conversion rates without notifying customers in a bid to boost revenue and employee commissions,”  Journal reporter AnnaMaria Andriotis wrote in the article.

AmEx spokeswoman Marina Norville, responded, saying, “We constantly reinforce the importance of acting in the best interest of our customers.”

Current and former AmEx employees voiced a different take. They “describe an environment focused on bringing in as many new clients as possible and squeezing revenue out of them before they depart. Employees were told that the average forex [foreign exchange] customer did business with AmEx for around three years. ‘Who cares if they come or go? Let’s make money while we have them,’ one current employee said, referring to the attitude within the division,” according to the Journal.

Well, Amex, which is it? – because it’s not both.

The article describes AmEx’s tactics: “The salespeople didn’t inform customers that the margin, a markup that AmEx tacks on to the base currency exchange rate, was subject to increase without notice,” current and former employees were quoted as saying in the article. “Some time later, salespeople would increase the margin without informing the customers . . . Managers directed salespeople to keep the details of the payment arrangements hazy when speaking with potential customers and to avoid putting pricing terms in emails,” according to current and former employees.

This reveal got me wondering: how does this American Express division recruit salespeople? How do their online solicitations represent their selling culture and expectations?

This June, 2018 post for FXIP Manager popped up first in my search:

“FX International Payments (FXIP) is a cross-border payments solution developed to meet the foreign currency payment needs of small to mid-size corporate and financial institution clients. www.americanexpress.com/fxip.

The FXIP Manager reports to the Director FXIP Americas and is responsible for managing a portfolio of existing corporate clients. He/she will develop and maintain relationships, drive expansion sales of new product solutions, and make outbound calls to encourage transaction activity. The incumbent is responsible for achieving client revenue targets and overseeing the effective management across the end-to-end client life cycle, including, early engagement, loyalty and retention. He or She will work closely with colleagues in sales, marketing and operations to deliver superior service to our clients. This role includes a broad range of responsibilities, including: business development, relationship management, portfolio analysis, and requires interaction with both internal and external partners. This position will own and drive work streams and strategic initiatives to increase overall portfolio performance.

The candidate will have demonstrated success in proactively driving organic growth, client retention, revenue obtainment and related metrics in a foreign exchange environment focused on profitable expansion in a time-sensitive, well defined compliance and risk conscious environment.

Following this description, AmEx lists desired qualifications – eleven of them. Usual stuff: demonstrated experience in . . . strong knowledge . . . high proficiency . . .

Then, this one, halfway down the list:

“Must understand the individual and group responsibilities impact to department profit and revenue targets,”

And this,

“Demonstrated strong negotiation and influencing skills in order to handle objections [to] convert and activate prospects.”

Except for “deliver superior service to our clients” in the job description, this is a Revenue Focused job with a capital R, and a capital F, not unlike most sales positions. But this posting hints at the AmEx sales culture:

Drive organic growth . . . profitable expansion . . . revenue obtainment [sic] . . . Impact to department profit and revenue targets . . . Strong negotiation . . . influencing . . . handle objections . . . convert and activate . . .

Make no mistake: this is a high-pressure selling environment. If you like serving customers and relish a pat on the back for doing so, AmEx might not be the place for you. Unless, of course, you’re making goal.

What are you willing to do for a buck? And, what aren’t you willing to do? Two straightforward questions with complex answers that might vary, depending on a company’s momentary situation. Or, the sale rep’s.

This case offers a teachable moment for sales managers and salespeople to engage in conversations, and to answer further questions:

  1. Which conflicts of interest exist between AmEx and its customers? Do the same conflicts occur in our sales engagements?
  2. How might the conflicts be mitigated?
  3. Is intentional omission of facts during the sales process equivalent to lying?
  4. In the AmEx scenario, who is responsible for misleading customers? Management? Salespeople?
  5. Is it justifiable for salespeople to execute management requests, even if they perceive those requests are morally or ethically wrong?
  6. How would you resolve a conflict of interest if it happened with one of your customers?
  7. How should companies balance achieving revenue targets, and preserving the best interests of customers?

“This ought to be a moment when people stop and remember how dangerous the system is when you don’t have the proper protections in place . . . This is a wake-up call. It should remind all of us and firms that culture and compensation make a difference . . . How you reward people, how you motivate people and what values you hold people to matter,” former US Treasury Secretary Jack Lew said. He was talking about Wells Fargo.

No company is immune to the corrosive impact of dishonest and unethical sales practices. If you’re not already discussing the issues, the time to start is now.