Today I'm going to use our blog to do something that everyone always asks us to do: give free business advice. Reputational Capital
One of the single best business books that I have ever read is called Building Reputational Capital: Strategies for Integrity and Fair Play that Improve the Bottom Line. According to the book, reputational capital is essentially built-up goodwill that a company develops in its relationship with clients, customers and members of the general public. Reputational capital is intangible, but incredibly valuable for any business -- particularly those in the service industry. Reputational capital is a fancy term, but it's something that we all have with just about every brand we interact with.
For example, reputational capital is the reason why you still go back to your favorite restaurant even after you have one experience with a bad server, or still shop at one of your preferred online boutiques that sent the wrong item. These companies have built up enough capital with you over the course of your business relationship that you still have trust in them. You may not have the same level of trust, but you have enough confidence to know that you can go back or try again. On a large scale, reputational capital is why companies like BP, Tylenol and others have been able to weather storms over the years.
Reputational Capital in Practice
When we decided to offer up our apartment to host Turkey Day with friends, we were excited to learn that a catering company in Florence was offering premade dinners. With an 8 week old at home it seemed like a fantastic option. We had never heard of one of the two companies offering the dinner, but the second one (which I refer to as Company A) is one of our favorite spots for coffee and sweets. We had enough reputational capital with this company to place an order for seven.
I don't think I'm surprising anyone when I say things did not go as planned. While the food ended up tasting delicious, the amount of food delivered was not nearly enough for seven. The items delivered were also oddly inconsistant -- an adequate amount of peas and apple sauce, but barely enough stuffing for two. The numbers "1" and "7" look similar in how they are commonly written over here, so we thought OK, maybe this is the problem. Rob took the bag of food to Company A for an explanation. They put him in touch with Company B (who produced about 95% of the meal). No mistake had apparently been made. We had to go all Oliver Twist on them to get an additional delivery of two items. And, when it showed up, things were not so smooth. Conversations about Italian vs. British vs. American proportions ensued.
Long story short, we ended up having to make more food to compensate. Lucky for me, Rob makes delish potatoes (I love my Indiana boy). I made biscuits. Our guests brought a wonderful carrot side dish. We made it work. But, the whole experience was so stressful and the extra cooking so exhausting that two days later I'm finally up for doing anything besides snuggling in bed and watching movies. Life with a 2 month old is no joke -- a little extra activity and BAM you're cooked for days.
OK, on to our business lessons...
Business Lesson #1: Over-Deliver to Your Core Audience
One of the most shocking things for me is this: expats in Florence are one of the only groups with expendable income at the moment. In many cases, the expat Americans have a lot of expendable income. Thus, offering Thanksgiving dinner was a brilliant way to impress a ton of current and potential customers at once. When you are given a reputational opportunity such as this, you always need to overdeliver. We tell this to clients all the time. Have a booth at a conference targeted directly to your audience? Do something spectacular. Invited to give a presentation to a group that includes three of your dream business prospects? Figure out a way to make it the most exceptional they've ever seen.
This is a really important lesson in this situation because, as I mentioned, the food itself was quite good. It may have been some of the best stuffing I've ever had. If this company had even met (but preferably exceded) my expectations they would have had an immense amount of reputational capital with me. I would've emailed a friend that hosted a wonderful, catered party last week and whole-heartedly recommended this company for future events. I would've jumped on board any future events Company B catered. See how one adjustment in your product/offering delivery can have a huge impact? The responsbility falls on you, not the customer to make the experience exceptional.
Case in point: Last Thanksgiving we went to Il Barone. That meal was amazing. I happen to know for a fact that they barely broke even, but guess what? We've been back at least 5 times and recommended it to friends.
Business Lesson #2: Response is Everything
How you/your company reacts to a problem can also have a big effect on what bits of reputational capital may remain and the potential for a rebuilt relationship. Company A -- ironically, the one responsible for the one part of the meal perfectly in portion -- sent us a two paragraph message, apologized and offered a free cup of joe next time we're in the restaurant. Simple. To the point. Guess what? Apology accepted. When I eventually go back, I won't even mention the freebies. For me, it's the thought that counts. Studies show that most consumers feel this way across the board when it comes to customer service.
Company B's response was a little more iffy. In response to a message that my friend sent they wrote six paragraphs explaining "their side" of the story. My friend was upset because she had recommended the meal to others. Lesson: never make the person that is dissatisfied make an effort. Reading six paragaphs is a lot of work. Instead, keep it simple. Offer a clear apology. Nothing maintains or builds a relationship quite like an apology. Their response to us was a bit shorter and in their defense they did try to call us, but honestly...because I have no relationship with this company I really don't care to respond at all. I never interacted with them before and won't now. Quite frankly, I'm too dang tired to care about them.
Could we have been the one delivery that was just a total wreck? Sure. But it doesn't matter. All we care about is our experience, not the experience others had.
Business Lesson #3: Be Careful Who You Share Your Capital With
If you're still reading you've probably already come to this conclusion yourself. Our reputational capital with Company A was seriously depleted through no fault of their own. But, because their label was on the bag they ended up guilty by association. When I sent an initial message to a friend attending the dinner I said "Company A's Thanksgiving bag is a joke!" It never even crossed my mind to write Company B's name -- even though it was almost solely their offering. Crazy, right? That's the problem with partnership and collaborations and why we encourage our clients to tread lightly with them. With a partnership it's very difficult to untangle your role from another partner. Partnerships can be extremely fruitful, but when something goes wrong it doesn't matter whose fault it is -- both parties are at fault.
Yes, this is a long post. But, people are always asking us for free marketing/PR advice. I think there are a lot of lessons to be learned from this situation and from the idea of reputational capital as a whole. If you own a business and haven't read the book you need to. Sure, some of it will bore you, but reading about capital and how companies big and small have solved their PR problems is eye-opening. It may change how you serve your clients in the future.
P.S. A younger version of Kate would probably have taken and posted pictures of the dinner and publicly lambasted the company. I probably would've called the post something sarcastic like "How to Destroy Your Reputation by Almost Ruining Thanksgiving." That really doesn't do much, in my opinion. Sure, I get out some frustration, but it doesn't really make a difference. Instead, I'm using this as a learning opportunity.
P.P.S. OK, a little snark: the UK apparently has problems with portions, too.