The Competitive Advantage of Trustability

A few months ago I was due to fly from Jacksonville to New York on JetBlue. The flight experienced some mechanical problems before takeoff and ended up almost six hours late. Everyone was terribly inconvenienced. When we exited the plane at JFK, each passenger was given a letter from JetBlue apologizing for the delay, and notifying us that because of the incident we were each entitled to compensation under JetBlue’s Customer Bill of Rights.

But here’s what stood out about JetBlue’s action: Rather than asking me to log in to their web site and fill in my flight information and confirmation number, or to mail in my boarding pass or something, the airline said passengers didn’t need to do anything at all to claim their refunds, just wait a couple of days and the appropriate credit would automatically be posted to their “Flight Bank” at JetBlue, to be immediately available for use on future bookings!

JetBlue’s approach to customer refunds is what I would call “trustable.” They are proactively trustworthy, watching out for their customers’ interests.

And not long ago, Amazon began paying refunds to customers even before they ask! As reported recently by Bloomberg, Amazon “has built automated systems that detect when a customer hasn’t paid the lowest available price for a product, or when the playback of a streaming movie is shoddy, and doles out refunds.” Amazon is the poster child for trustability.

Because most of JetBlue’s competitors make you jump through a few hoops before getting a refund, they enjoy a “breakage” on refund claims of 10% or more. That is, 10% or more of the customers who are entitled to refunds simply fail to claim them, so these airlines gets to keep that money. (And hey, if you think about it, one simple way to increase your company's profits would be to make it more difficult for your customers to get a refund than it was before!)

So why would otherwise intelligent companies like JetBlue and Amazon voluntarily give up this “free money”? Why would any company protect its customers’ financial interests proactively, even when its competitors do not, and it costs real money to do so?

Well, in his annual letter to Amazon's shareholders, Bezos explained that his company’s customer-centric focus has many advantages in terms of innovation, agility, competition, and investment priorities. And it is because of Amazon’s intense focus on the customer that they implement such proactively trustworthy policies. According to Bezos:

“One advantage – perhaps a somewhat subtle one – of a customer-driven focus is that it aids a certain type of proactivity. When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to. We invent before we have to. These investments are motivated by customer focus rather than by reaction to competition. We think this approach earns more trust with customers and drives rapid improvements in customer experience – importantly – even in those areas where we are already the leader.”

If you’re not customer focused – if understanding what’s in the customer’s interest and being proactive in protecting that interest is not your top priority as a business – then you’re probably not going to be as agile, innovative, and competitive. It’s that simple.

So go ahead, bank those profits from unclaimed customer refunds and other mistakes and oversights on your customers' part. Have a ball, in the short term. But realize that in the long term you won’t be around anymore.