For quite some time, I have believed that business owners have no obligation to respect that old saw which says “the customer is always right.” In fact, as some who know me quite well – most notably, John Piquet, the co-owner of Caffe d’bolla – I believe owners have every right to fire customers, especially those who challenge if not threaten a business’s well-crafted paradigm of solid customer service.

Note, this doesn’t change the obligation of businesses which craft their models upon the paramount importance of the customer. However, customers do not have the privilege of limitless expectations or preferences. Business owners do sustain rightfully the prerogative in setting limits that not only satisfy the generally accepted principles of good customer service but also reflect the high quality standards which define their products and services.

Now, comes along an excellent business journal article (in Business Horizons) by Leonard Berry of Texas A&M University and Kathleen Seiders of Boston College, which effectively buries the classic maxim. They conclude that companies actually strengthen their commitment to customer service by dealing effectively with unfair customers who “take advantage of being ‘always right’ by demanding unwarranted privileges and compensation.”

This is not a new area for these two researchers. In fact, ten years before, they wrote about the perceptions of fairness in service. Then, they “argued that companies can pay a heavy price when customers believe they have been treated unfairly because customers’ responses to perceived injustice often are pronounced, emotional, and retaliatory.”

Then and now, the researchers carefully parsed what constitutes unfairness in the customer’s behavior. Note they do not deal with illegal behavior. Rather, they incorporate three concepts into their assessment: the severity of the harm, the frequency of a customer’s problematic behavior, and the customer’s intention to take advantage and disrespect the rights and boundaries of others.

The complexity, then, is in the gray areas where this type of behavior might be characterized and, through their research and interviews, they find that many managers and executives are flummoxed by the challenge of effectively dealing with the unfair customer. For their study, Berry and Seiders examined five types of bad customers.

One was the verbal abuser who “lash[es] out at employees in a blatantly offensive and disrespectful manner whether in face-to-face transactions, over the telephone, or via the Internet.”

Among the clearest examples:

“A father [who] was picking up a repaired bicycle for his daughter, who, without telling him, had approved the recommended replacement of both tires (a $40 service).” The father screamed that he was being “ripped off,” despite the employee’s indication that the purchase had been approved and verified. At the heat of the customer’s outburst, the store owner came to the front and told the customer to leave and to tell all his friends. The customer slapped the money on the counter and stormed out. The store owner, who indicated this was the first time he threw a customer out of his store, explained why he came to the employee’s defense: “Simply, if I am willing to fire an employee for mistreating a customer (and I have), then I must also be willing to fire a customer for mistreating an employee.” [NOTE: The customer did call back and apologize profusely for his behavior.]

A customer at a busy downtown restaurant who during the lunch rush insisted his steak be prepared rare. “Although a manager apologized and explained that each steak is prepared uniformly in order to maintain the best quality (and said there would be no charge for the lunch), the customer continued to voice his disapproval to the staff, creating a disturbance that distracted them and degraded the overall experience of the surrounding customers.”

Another type is the blamer (e.g. “the company is always wrong”). The healthcare industry seems to be most prevalent for this type of customer as patients believe a treatment is available for every condition, regardless of whether or not they take responsibility for maintaining their own health.

The best example of a blamer follows:

A customer called the headquarters of a casual dining chain to complain about the price of cocktails. Apparently, according to the researchers, the man had spent $86 the previous evening.

The scenario is worth quoting in detail:

“The man … said he could not believe the restaurant had charged him $7.50 for each of the beverages that he ordered. When asked how many he had consumed, the man said that was beside the point. The president asked the number in the man’s party, and the man said only two. The president asked the man when he learned that the drinks were $7.50, which he said was after he paid the bill. The president then asked what the company might do to make it right. The customer replied that he wanted all of his money back; the president responded that this was unfair, as the customer and his guest had consumed enough appetizers and drinks to total $86. A full refund would not be equitable.

“The customer became extremely angry, threatening to go online and destroy the company, report it to the Better Business Bureau, and picket in front of its restaurants for the next month. He raised his voice and asserted, “You will feel the effects of my negative PR efforts for a long time to come.” … [The] president asked the customer how he could resolve this negative situation without giving the customer his money back for the food and drinks he consumed. The customer calmed down, thought about it, and told the president that if the company donated double the amount of the bill to the customer’s favorite charity, he would consider the situation resolved. The president agreed to do so in order to move past the situation and end the disagreement.”

A third type is the rule breaker (e.g. “all you can eat shrimp” entrees shared when the price actually is intended per person at the table or phone catalog orders where the customer insists, after delivery, that shipping of the product should have been free).

A fourth is the opportunist (e.g. the one who “stiffs the little guy” – “These penny-ante opportunists, for example, don’t tip (or don’t adequately tip) service employees because they don’t have to; that is, they can get away with it.”)

The best example:

“A customer observed a plumbing problem in a restaurant restroom and complained to the manager, who called a plumbing service for the repair, and sent an employee to clean up. The customer contacted the company’s customer relations office, complained about the state of the restroom, and requested a refund for his party’s $80 meal. In response, the company sent $30 in gift certificates, in addition to an $80 check and an apology. The customer called the company again, stating that $30 was not enough to cause him to return to the restaurant because it would not cover the cost of his dining companions’ meals. He was persistent, calling several times to express his displeasure in the amount of the gift certificates. In turn, the company sent an additional $50 in gift certificates, bringing the total compensation to $160, a nice return for encountering a plumbing problem.”

The fifth is the “returnaholic,” which, the researchers said is a hybrid of the rule breaker and the opportunist.

Berry and Seiders said managers can do several things to deal with these unfair customers.

As in the bicycle shop incident, managers should “manage” customers as they would employees when circumstances arise. Managers should not hesitate to intervene when they are made aware of bad customer behavior.

Business policies should be articulated with the larger majority of fair, responsible customers in mind, not the vocal unfair minority. A good example was a local grocery store that offered IOUs for customers who forgot their checkbook or cash. While many made good on their IOUs, some didn’t as in one year when the store had to write off a loss of $30,000. While the store did not prosecute anyone for unsatisfied IOUs, there was an unsuccessful attempt to discontinue the IOU policy: “The reason? I treated it as a marketing expense because it created so much goodwill. Interestingly, when we started accepting credit, I thought that the loss number would plunge, assuming customers would carry their credit card and use that instead of a check. However, the loss number remained the same. I believe there will always be customers who will take advantage of you. They are very intentional about their unfairness. The loss incurred by them has to be built into your financial model because you should not penalize the great customers for the deeds of a few bad customers.”

Managers should anticipate and plan for situations that might involve unfair customers. “Contact personnel (and their managers) would benefit from focused training on the best ways to interact with verbal abusers, rule breakers, returnaholics, and other problem customers.”

Companies need to respond to bad customers with “fairness” and “firmness.” The researchers found value in the restaurant restroom’s plumbing problems. “The customer had a legitimate complaint about the state of the restroom, but then used the incident opportunistically to extract as much as possible from the restaurant. The company’s first response of a full refund for the party’s meal, a small gift certificate, and an apology was fair. The additional gift certificates went beyond fair. The second helping of gift certificates was excessive, reinforcing customer opportunism. Companies need to be willing to cut the cord with unfair customers.”

Well said. As so often observed in successful models, business owners should take charge in defining the service and quality paradigms that accurately reflect upon the desired positioning they seek to establish for their business, products, and services. Clearly articulated, the paradigm will be most evident to customers who are sincere and fair in their business patronage.