Eliminating False Positives: A Counterintuitive Mistake

I recently had 2 bad experiences in a row with 2 different companies.

The first one is ReplaceDirect.nl where I ordered some PC parts which broke just days after the lawfully required minimum guarantee period of 6 months.

In my astonishment, they decided to hide behind the law giving the standard boilerplate: ‘’We gotta draw the line somewhere.’’

Okay, and it just so happens that that line is identical to the minimum period the law states? Me thinks not!

There’s no better way to communicate to your customers: ‘’If we could scam you with broken parts and zero guarantee we would, but unfortunately that’s illegal so we’ll do the bare minimum to comply with the law. Not because we want to, but because it’s illegal not to.’’

This is an example of bad faith.

A deliberate strategy by the company designed to maximize profit.

(Based on the Friedman Doctrine, you do everything you can to maximize revenue no matter how unethical as long as it’s not illegal. That last part, illegal, is a threshold that’s all too often crossed by companies adhering to the FD. It’s a slippery slope.)

You ship shitty products and rely on the hope that they stay functioning for at least that 6 month period. When they break, your customer is shit outta luck.

If they do break within that 6 month period, we know from behavioral psychology that people prefer inaction so most people will default to doing nothing.

Out of that small subset that bothers you, you deny them a refund until you’re left with an even smaller subset who threatens to sue at which point you grant them the refund.

It’s a deeply unethical, immoral way to run a business…

But a way it is (unfortunately) none the less.

For our perspective, this isn’t that interesting of a case to investigate as it only offers the banal conclusion… don’t run your business like this because if you subscribe to Youngling Feynman theory then our obligation is two-fold:

i. Make your revenue engine work. (So the business does well for the owners, employees, and shareholders.)

ii. Aim for deep user love. (So that a slice of the world will be better off because your company exists.)

I build out this thesis in the essay series: Do You Have Customers Who Deeply Love You?

This company obviously breaks our second axiom. But it also breaks the first because by screwing over people, you will have negative word of mouth and low or negative organic growth.

Eventually, you’ll exhaust the finite pool of customers who you haven’t screwed over.

The second case is actually more interesting for our purpose of learning.

This was a takeaway restaurant that gave me an incomplete order.

When I got home I noticed it and called them, however since they were closing up they couldn’t help me and told me to call back the day after.

The call itself was very confrontational and made a lousy situation worse.

Bad stuff happens… However, if you’re lucky to have a sympathizing customer like me then you should be extra empathic and apologetic for your (excuse the french) fuck up.

The irony is that the more ownership you take of the problem the more understanding your customer will be.

If you become confrontational, especially if you’re in the wrong, your customer will become defensive.

The next day I went back and I felt the onus was on me to prove that they had messed up.

By chance, an employee with whom I talked recognized me and could confirm that there was food left at the end of the shift which validated my story.

They remade the entire order and that was that.

However it did made me wonder what they would’ve done had that girl not been there.

I wanted to share this story so you don’t make the same mistake because this was handled extremely poorly.

My time is valuable and had I known about this whole song and dance I had to perform I wouldn’t have even bothered.

The contrast with ReplaceDirect.nl is that this wasn’t bad faith.

They were subject to their biological drives.

Specifically, loss aversion.

If you’re 100% sure you messed up, you’ll want to fix it (unless it’s part of your immoral business model not to.)

Let’s call that a true positive: You give a refund to someone who deserves a refund.

However, this company is so mortified of a false positive: giving someone a refund who doesn’t deserve it, that they harm the ones who do.

Creating a policy which eliminates any possibility of false positives will make your accountant very happy.

But it will come with the collateral damage of denying people refunds who actually deserved it. (Let’s call that false negatives.)

So by eliminating the possibility of a false positive, you increase the number of false negatives.

In the end, they gave me ‘’a refund’’ they gave me what they forgot plus the rest of the order, but the damage had already been done since the negative experience left a (no pun intended) bad taste in my mouth.

And also, it didn’t feel like a fair exchange. I had to put in so much time and emotional labor only to receive my complete original order.

So what should they have done?

They should’ve been biased towards assuming it’s them who messed up (and use this situation as a profit center which I’ll cover at the end.)

Instead of preventing the possibility of a false positive (which is about you, the business, selfish) they should try to minimize the possibility of a false negative (which is about the user experience).

Because a false negative is the worst kind of word of mouth a company can get because you’re punishing an innocent person.

You can’t get this perfect because you’ll make mistakes and there are people who’ll take advantage.

However, you can’t base your policy on those 0.1% bad apples and thereby harm 99.9% of normal or even cool customers.

So, while you should take steps to minimize false positives, trying to eliminate them altogether is a mistake.

In the world of retail, theft is factored in as shrinkage. And while they do take some steps to prevent the extreme cases, they’ve (over time) realized that having no shrinkage and having no customers show up anymore is missing the forest through the trees.

Have you noticed that Apple is one of the few companies who display their hardware openly in their Apple stores?

What you might not know is that theft is a much bigger problem for them because of it.

Just click this link: https://www.youtube.com/results?search_query=apple+store+theft

However, they’ve made the right call that the anomalous behavior of a few, shouldn’t dictate policy.

One final lightbulb I want to turn on in your brain is that it’s possible to view customer service when something goes wrong as a profit center and not a cost center.

The behavior of ReplaceDirect shocked me because it’s rare to come across companies that immoral.

However, the behavior of that restaurant is what I expected to a degree.

There was some doubt that it might not suck which is why I called, but I did have that voice in my head going ‘’Is this worth it.. it might be a whole ordeal’’.

I didn’t expect it to turn out like it did, with me on ‘’trial’’ but I wasn’t expecting roses either.

If you can do that (roses) for your customers you’ll damn near give them a heart attack.

They’re so used to the very worst.

So when all of a sudden you show up, and your company is super apologetic and compassionate and you go above and beyond doing way more than necessary to fix it… well, then you’ll get a much higher ROI then you could get on any advertising campaign.

Don’t stress about the people who’ll abuse your kindness, if it’s super obvious then kick them out but when in doubt, decide in their favor!

Originally published at https://www.younglingfeynman.com on July 10, 2019.