Don Peppers - Extreme Trust: Honesty as a Competitive Advantage

Play fair. Immediately after the first Gulf War in 1991, USAAthe insurance and banking company based in San Antonio, Texassent out refund checks to several thousand customers, called members by USAA. The idea was that since the men and women who had been serving at the front couldnt drive their cars back in the United States during the several months they were posted in the Middle East, USAA suspended the charges for the premiums during the time soldiers were overseas and sent out unsolicited refunds once the military personnel got home. USAA consistently comes out as the most trusted financial services organization in the United States, and customers believe USAA will always do whats right for them, never oversell them, and always be there for them when a member needs the company. The company was originally established to serve current and former U.S. military officers, but today USAA serves everyone, although not everyone is eligible for every product offered. Once you become a member, however, your children can also become USAA members, and USAAs loyal customer base now runs into the third generation. The employee culture at USAA is based on a simple idea: Treat the customer the way youd want to be treated if you were the customer.

And as for those refund checks? Nearly 2,500 of them were sent back to USAA by grateful customers who told USAA to keep the money and just be there when we need you.

Imagine for a moment that you run any other bank or insurance company in the United States.

How will you compete against a financial services institution that customers love so much they sometimes refuse to accept refunds and are loyal into the third generation and counting?

Whats the difference between USAA and the other financial services companies we all know about? Many of those companies, with names familiar to customers around the world, are not bad companies. On the contrary: Their officers are ethical. Their legal departments make sure they dont break any laws. They issue privacy policies and policy statements of all kinds, and then for the most part they do exactly what they say theyre going to do. And yet none of usnot even the executives of these well-run institutionscould imagine customers refusing to take refunds from those companies. The companies are lucky if a customer keeps doing business for several years, and they dont even think about multigenerational loyalty. What is the difference?

Most businesses today consider themselves to be trustworthy, and by yesterdays standards they are. They post their prices accurately, they try to maintain the quality and reliability of their products, and they generally do what they say theyre going to do. But thats as far as most businesses go, and by tomorrows standards it wont be nearly good enough. Not even close.

The fact is that far too many businesses still generate substantial profits by fooling customers, or by taking advantage of customer mistakes or lack of knowledge, or simply by not telling customers what they need to know to make informed decisions. They dont break any laws, and they dont do anything overtly dishonest. But think for a minute about the standard, generally accepted way some industries have made money for the past several decades:

To credit card companies, a marginally sophisticated borrower who can never resist spending, rolls his balance from month to month, and often incurs late fees is considered a most valuable customer. The common industry term for a credit card user who dutifully pays his bill in full every month is deadbeat.

Mobile phone carriers profit from customers signing up for more expensive calling plans than their usage requires, and from roaming and data services accessed by accident.

Retail banks make a substantial portion of their operating profit from overdraft charges and other fees assessed for what are usually just simple customer errors.

Some merchandise offered in pop-ups and on late-night TV is worth very little but hooks buyers into paying a little money to have their names and contact information loaded onto a mailing list, which is the truly profitable product sold by the direct marketing company.

Even today the overwhelming majority of companies dont allow customers to post product or service reviews on their own websites.