From Enraged To Engaged
“One of the most influential propositions in marketing” wrote McGovern & Moon in the Harvard Business Review “is that customer satisfaction begets loyalty and loyalty begets profits.”Why, then, do so many companies infuriate their customers by binding them with fees, confounding them with fine print, and otherwise penalizing them for their business? Because, unfortunately it pays. Companies have found that confused and ill-informed customers, who end up making poor purchasing decisions, can be highly profitable indeed.
Thus far, our take on the link between emotion and transformation has focused on the positive, from the culture of caring & community at DaVita to the spirit of fun & games at Zappos. Yet much of business – most of business, I suppose – is infused by the negative. ‘Heart Power’ may be what fuels championship teams, as Vince Lombardi set forth more than 40 years ago, and love may be the “killer app”, as Tim Sanders argued more recently, but there’s a reason this HBR essay was titled, ‘Companies and the Customers Who Hate Them.’ It’s one emotion, sad to say, that’s always in plentiful supply. Think of as terms of enragement. Companies continue to behave in ways that drive their customers crazy: outlandish baggage fees from airlines, rigged overdraft charges from banks, impossible-to-understand contracts from rental-car companies, countless other indignities both large and small, substantial and trivial.
As provocative as it was, the HBR essay wasn’t meant to be an attack on big companies. “Businesses that prey on customers are perpetually vulnerable to their pent up hostility,”McGovern & Moon wrote. “Sometimes all it takes to drive mass defection is the appearance of a customer-friendly competitor.”Well, that’s not all it takes. The warning helps explain the rise of companies such as Lexus and the transformation of The Geek Squad from basket case to best of breed case study. But the success of these and other game changers isn’t about providing better terms and conditions to customers. It is also, and primarily, about crafting stronger terms of engagement with customers. That’s the real promise of start-from-scratch transformation, whether by a hungry start-up or a long time incumbent. The most enduring source of advantage, the most effective way to become the most of something, is for emotionally charged employees to capture the imagination of emotionally drained customers. The late Arnold Glasow, devoted himself to helping companies connect more deeply with the customers, put it eloquently years ago, “Nothing splendid was ever created in cold blood,”he wrote. “Every great accomplishment is the story of a flaming heart.”
The emergence of Life Time Fitness, a fast growing company in a perpetually troubled industry, is a perfect illustration of the tough-minded message of the HBR essay and of Arnold Glasow’s big-hearted invitation to transformers. In a field notorious for bait-and-switch pricing, punitive contacts, shoddy service, and occasional trips to bankruptcy court by some of its biggest players. Life Time Fitness unveiled an agenda to shake up (and shape up) the competition. Its founder Bahram Akradi who got his start as a 19 year old entry level employee doing menial tasks in an old-school health club, promised to eliminate the worst business practices – those that enraged customers – and to design facilities that would dazzle with their vast size, wide offerings, elegant style, and member-centric policies.
Under the Life Time Fitness model, customers pay modest upfront fees (with a full money-back guarantee) and don’t sign long term contracts. Instead, memberships run on a month-to-month basis ($50-$100 per month for an individual, $100-$150 for a family) and can be cancelled for any reason at any time – no penalties, forfeited deposits, or hidden charges. In return, the company builds huge (more than 100,000 square feet) all-in-one clubs that are to exercise what Disneyland is to entertainment or Bunnings is to renovation – an endless source of options, choices, and stimulation.
It’s a newfangled strategy for a workout company – and a strategy that has worked out big in the market. As of mid-2018, Life Time Fitness had 17,000 employees, roughly a million adult members, annual revenues of $770 million, and a stock market value of more than 1.5B. The typical club has 25 trainers and dieticians, 250 total employees, and gets nearly 70,000 visits per month.
CEO Akradi asked his employees: “What would this industry be like if we did things the right way? What would a club look like if members designed it? What would the membership offer look like if the customer wrote it? What would the hours of operation be if customers set them? What if we let customers dictate how we did things? That’s why we did away with contracts. A contract makes you fat and lazy. We have to win over every on our customers every month. It focuses us to keep getting better.”
Importantly, though, Akradi’s long-term goal is not just to rewrite terms and conditions in his business. It is to write new terms of engagement with his customers. “If we think of ourselves as a health club company, the opportunities are limited,”he says. “If we think of ourselves as a healthy-way-of-life company, the opportunities are endless. We don’t build ‘gyms’ – dreary places where people try to escape from their ailments or postpone old age. We build destinations that make exercise and nutrition fun, positive, and bright. There’s a rational side: Am I losing weight, am I feeling better? But there’s an emotional side too: Am I surrounded by people who are trying to help me, is this a place I want to be, not just where I should be?”
The ultimate goal for Life Time Fitness is to achieve what company executives like to call ‘operating to artistry’ – a blend of well-chosen offerings, high energy spaces, and thoroughly engaged staffers meant to transform long-standing terms of enragement into deeply felt terms of engagement.