Stupid Things Stupid Businesses Do
Ask around and you’ll find that a lot of businesses make silly, avoidable mistakes. It’s not because they are stupid people, either; they just don’t know any better. That said, I think it behooves us all to be aware of the best practices in our respective industries — whether we manage a business with 10 employees or the CEO of a multinational corporation like Exxon Mobil Corporation (NYSE:XOM).
Case in point: Exxon recently came under fire for lobbying against emissions regulations while simultaneously investing billions in tar sands development. This is just one example of why knowing what not to do is equally important as knowing what to do.
For this article, I will focus on a small sampling of common mistakes made by businesses that are particularly stupid and how to avoid them. While there are many more stupid mistakes that companies make, these five should give you some perspective on the stupidity going on in the world of business right now. As always, I urge you to do your own research and be open to alternative points of view. Even if you don’t agree with my opinion — which is entirely justified by the facts — it’s important to take a step back from your daily work routine and ask yourself: “Is this really what we need to be doing?”
5. Lying to Customers
There are a number of companies out there that like to say one thing and do the opposite. For example, Bank of America (NYSE:BAC) likes to proclaim itself a leader in environmentally and socially responsible business practices, while at the same time financing mountaintop removal coal mining, private prisons and big oil.
Another example: Nestle (OTCMKTS:NSRGY), which has been known for its infant formula marketing policy — a practice that has led to the death of billions of infants over the years. Even today, Nestle is accused of using “dangerous” marketing tactics (like hiring lobbyists to pressure government officials into pressuring healthcare providers into giving their products preferential treatment).
Both Bank of America and Nestle are seen as leaders in their industries. In business, this is often mistaken for credibility. As a leader, you have the responsibility to set clear expectations and follow through on them.
If you don’t live up to your commitments or do things that your customers see as unethical, you may make an exception once or twice, but eventually people will stop trusting you. The same goes for businesses.
4. Ignoring Customer Complaints
I once worked as an analyst for an Internet startup that hired a traditional public relations firm to handle media relations. This is exactly the sort of thing you want to avoid.
The PR firm conducted “interviews” with journalists and gave them “input” on the company, essentially poisoning the minds of reporters who wouldn’t have otherwise been interested in your product. It was a waste of time and money. I could write a whole book on how PR people behave, but again, I believe it’s essential to look at what good companies do and avoid doing the opposite — even if you think it’s good for your business.
The point is that customers don’t want to be ignored. When they complain, they want a response. Now, different companies handle complaints in different ways. What works for one business may not work for another, but one thing that almost never works is ignoring customers. The only exception to this rule is if you really don’t care about your customer base, in which case you might as well just go out of business now and save everyone a lot of hassle.
3. Selling Products That Can Be Replaced with Free Alternatives
I have been writing about banks a lot lately and it’s no secret that I consider them the biggest criminals on the planet when it comes to price gouging. Even if you have never done any research into the subject, it’s pretty obvious that the banking industry is all about exploiting the masses and giving them a raw deal.
So why on earth would anyone need a bank?
Well, there are two reasons. First, banks offer convenience and security. Second, there are alternatives, which aren’t nearly as convenient or secure but serve their purpose in a pinch and absolutely 100% for free. I am referring to services like PayPal (NASDAQ:PYPL), Dwolla and Google Wallet — all of which let you send money (and make payments) for free online or via phone apps. Other alternatives include bitcoin and other cryptocurrencies.
In the end, no bank has a monopoly on convenience and security. Instead, they use their power to extort money out of users who have every incentive to switch to cheaper alternatives. You’d think banks would have been smarter than this, but they clearly haven’t been. In fact, even after imposing ludicrously high fees and destroying trustworthiness as a “service,” banks around the world are still charging customers ridiculous amounts for sending payments with offshore accounts in foreign countries (and if you don’t know why that makes no sense at all, then read this article about how money laundering works).
If you’re not sure whether your company’s product can be replaced by free alternatives, then it’s best to avoid giving people any reasons to doubt your company. If you want to charge a high price for a product that can be replaced for free, then provide the service and quality that will make customers happy enough they won’t care.
2. Overcharging Customers
When my friend Doug Martin first told me about this thing called free-market capitalism, I was quite surprised at how quickly he could explain how it works. He simply said: “Price is determined by the intersection of supply and demand.”
Yes, it’s quite simple. And yes, it’s amazing how many people in business still don’t get it. It’s also amazing how many business owners think they can charge what they want, when they want and as much as they want and customers will still pay up. In fact, that kind of thinking is so common that I like to use a simple trick when explaining free-market capitalism and the relationship between price and demand to new entrepreneurs who want to start a business.
Conclusion
I don’t usually like to summarize things like this, but I think the people who are still using traditional businesses as a business model have likely used these mistakes and many others in their attempts to make money. The main thing I can say is this: if you’re still charging customers ridiculous amounts for products that they can get for free, then you don’t understand why people are complaining. If you think it would be great if people would just stop complaining, then maybe now is the time to stop doing things that might make them go away.