Keeping your Gift Card Clients

Hopefully, your gift card selling season is well underway by now.  According to forecasts by the National Retail Federation, 77% of shoppers are expected to purchase at least one gift card this holiday season, and many reasons are cited for their popularity, including convenience for the purchaser, and the option of choice for the recipient.  The average American will spend $145 on gift cards, up from $139, or a 4% increase, which is corresponds to the holiday sales forecasts of increases of 3-4% over 2009.  Traditionally, the spa gift card average has been between $100 and $125, although that range doesn’t account for some of the aggressive discounting and giveaways that were used in 2009.

However, as we often say at Wynne Business, gift card sales bring in prospects, not customers.  Now is the time to think about how, when those gift cards are redeemed, you will turn those prospects into return clients.  For the plan to be effective, stand back and give your business the 30,000 foot view.  The strategy for keeping gift card clients is not the same as when we cover a not-so-great Christmas present with a beautiful wrapping paper and bow.   Your fundamental business procedures need to be solid, clear, and communicated to everyone on your staff, or spending money and energy on marketing efforts becomes a lottery game; will the client experience your spa at its best, or will they visit on a not-so-good day?  We’re talking about the usual fun stuff; employee handbooks, position descriptions, operating standards, service protocols, the policies and procedures that are not much fun to create but are the backbone of a business with smooth operating flow.  Without these tools in place, your staff will be forced to make it up as they go along, which is not a consistent way to build your business, and doesn’t often lead to a spa visit that meets or exceeds client expectations.  If you are missing some, or all, of these pieces, don’t despair; with a little help, you can pull it together by Q2 of 2011 and be ready to move on to a marketing plan.

Once those essential building blocks are in place, then you can focus on creating some offers specific to your gift card recipients, such as value adds, service vouchers or upgrades, or loyalty plan points, that can be used on their subsequent visits.  Let’s plan to bring back those prospects for a second and third visit and turn them into clients, expanding your reach for future seasonal sales opportunities.  Valentines Day is only 8 weeks away!

Our Spa Director’s Management Intensive returns to the West Coast, January 30-February 2

Registration Closed

Co-taught by Peggy Wynne Borgman and Lisa M. Starr of Wynne Business Spa Consulting and Education

If you own, manage, or plan to invest in a spa, this program is a must.

If you’re already involved in spa operations, this seminar will help you tackle your toughest management challenges. If you’re planning to open or acquire a spa, you’ll leave this program with a clear understanding of the requirements for business success. If you’re considering a career change or advancement into spa management, the Spa Director’s Management Program will put you miles ahead of the competition.

You’ll have a chance to meet other spa industry professionals, a diverse group of people, and often an international one. Participants typically represent a variety of industries and greatly enrich the program with their input. You’ll create a support network that will prove invaluable as your business or career grows. The small size of the class ensures individual attention and maximum interaction.

Attendees return to the workplace with new tactics and new understanding the fundamentals that underly spa success. Our enormous take-home course text becomes an invaluable everyday reference for busy directors who need ideas and help fast. (How do we know? Whenever we visit our graduates at their spas, we see the textbook open on their desktop!) Attendees enjoy an Industry Discount at adjacent Preston Wynne Spa during their stay.

Unlike most management training courses, the Spa Director’s Management Intensive is rigorously updated and relevant to the current business climate. Hot button-topics like yield management and mid-recession employee morale issue are part of the curriculum. Unlike most other consulting/education firms, we actually own and operate a successful 27 year old day spa with fifty employees. We’re in the trenches with you in this difficult business climate–we have to walk our talk. We share what’s working now.

THE AGENDA

Financial management skills for directors and managers

• Overcoming your “fear of financials: financial literacy made easy

• Managing by the numbers: how to really use the information you get from your financial statements

• Budgeting basics: how to set financial goals that make sense

• Positive cash flow vs. profit: the critical difference

• Capture rate and its impact on the stay spa financial plan

• How to evaluate the effectiveness of your employee compensation plan

• Best practices in compensation design

• Performance incentives to motivate your team when you can’t give raises

• Plugging the profit “leaks” in your operation

• Understanding the impact of discounts and promotions

• Understanding the legal and accounting issues of gift card sales

Sales and Marketing

• The only three ways you can grow your sales

• Marketing modalities for spas: what works, what doesn’t

• Event marketing essentials

• Marketing trends: the good, the bad, the ugly

• Millenials vs. Boomers: understanding the next generation of spa goer

• Best practices in spa web presence

• Getting the most out of your printed marketing collateral

• The why and how of spa packages

• Social media: roles, responsibilities and ROI

• Advertising: where to spend your budget now

• Understanding yield management

• Crafting more compelling and less expensive marketing offers

• Understanding your real cost of customer acquisition

• What “retention” means in your spa (it’s different for day, stay and med spas)

• The role of the local market in hotel spas’ success

• Introduction to Selvice: seven steps to better customer service and higher sales

Successful Spa Programs

• Establishing your Therapeutic Vision

• Why the spa menu drives vendor selection–not the other way around

• The pros and cons of “branded” treatments

• Innovation vs. profit: keeping it simple

• Trends in menu and program design

• Modular menu design

• Customization vs. chaos: how to offer one without getting the other

• Understanding the real cost/benefit of a new service

• Optimizing workflow while ensuring safety and customer satisfaction

• Best practices for managing back bar costs

Retail Management

• Ending the disconnect: making retail happen in a spa

• How to use a Home Care Consultant

• Creating a more profitable retail mix

• Best practices for optimizing your inventory turns

• Ending the sales leaks in your store

• Salesflow: redesigning internal processes to support sales success

• Effective recommendation tools that spa employees love to use

• Scripting that sells

• Best practices for partnering with vendors

• Basics of visual merchandising and display

Leadership

• Understanding social styles and their impact on interpersonal communication

• What your team needs from you and how to give it to them

• Recruitment: how to hire the best employees

• Why the customer actually comes “second” in a great spa

• Why you’re doing everything yourself and how to stop it

• Why you can’t motivate your staff and what to do about it

• How to produce great staff meetings

• Best practices in employee discipline

• Performance appraisals that improve performance

Quality Management

 

• Moments of Truth: why little things are a big deal to your guest

• The Experiential vs. Transactional spa

• How to manage quality in the “closed door” spa environment

• “We don’t need another hero”: how consistency creates great service

• The three essential ingredients of world class service

• How to instill a “quality” mindset in your entire team

• Spa Speak 101: helping your team communicate with quality

• Process improvement 101: how to make things better, faster

• Teaching your team to effectively resolve complaints and perform service recovery

• Comps, refunds and redos: how to use them wisely

• Inspection: the key to success

LIVE WEBINAR Monday 12/6: Mastering Complaint Resolution and Service Recovery

Get your team trained in “extreme customer service” (just in time for the holiday rush.)

  • Are you confident in your employees’ ability to resolve guest complaints?
  • Do they know how to handle the inevitable issues that arise in a busy spa operation?
  • Are you certain that guests leave your spa satisfied?
  • When was the last time they received training in complaint resolution?

A great reputation has always been the best way to market a spa. But the internet has made superior customer service a crucial survival skill.

Web search is one of your top marketing modalities, and negative reviews can cost you thousands of dollars in lost revenue.

Our employee training webinar, “Moments of Truth: Mastering Complaint Resolution and Service Recovery” can give you a chance to economically and quickly get your team up to speed. The webinar is co-presented by Lisa Starr and Peggy Wynne Borgman. We include time for your questions at the end of the presentation.

Don’t let another month pass without inoculating your front line team against mediocre customer service, and common errors.

“The road to success is paved with mistakes well handled,” said the founder of Neiman Marcus. This webinar is designed to enable your front desk team to manage the inevitable mistakes and mishaps of a busy spa operation, while strengthening customer relationships and improving customer service. The adrenaline-charged moment when an upset customer complains is a make-or-break event for your business. Make sure your team doesn’t hide their heads in the sand–ensure that they will ride to the rescue of your reputation!

Agenda:
• Why your team must treat complaints as an opportunity
• 96% of your guests won’t complain; how to treat the 4% who do
• Using complaint resolution to improve relationships
• How online review sites have magnified the power of unhappy guests, and what to do about it
• Managing the “fight or flight” response when confronted by an upset customer
• The five steps to masterful complaint resolution
• Cultivating awareness: the ounce of preventation
• How to ask questions that get real answers from your guests
• Making it easy to complain
• How and when to apologize
• Helping the guest realize you’re “on their side”
• Avoiding the common mistakes of complaint resolution, including explaining, blame and scapegoating
• How to effectively manage a “venting” guest
• Techniques to improve your listening skills
• How to tell the difference between an upset and an abusive customer–and what to do about it
• Restoring a guest’s faith
• Making amends without giving away the store
• What most clients really want from “amends”
• The hidden danger in giving refunds too quickly
• What to do when your offer of amends is rejected by an upset guest
• How to prevent problems from recurring

To register, simply visit our Webex Training Center and click on the “upcoming” tab.

Note: You can use any computer with internet access to attend, but make sure the computer you select has speakers for our audio portion.

Can’t attend the live sesion? We have an on-demand version of this webinar. Visit the link above, and click on “Recorded Sessions” in the menu on the left side of the page. Follow the instructions to purchase the webinar download.

ISPA Day 2 Inspires & Motivates

Second full day of conference began with early morning  Professional Development Sessions.  Well, truth be told, it actually begins even earlier in the morning in the Precor Experience Center, or at the Greet the Day session, but due to the all of the parties and dinners the previous night, 6:30am does not have a lot of takers.  Excellent morning sessions were offered, including timely, actionable advice on using social media from Kathleen Turpel of Imaginal Marketing, who works with many beauty and spa businesses, and suggestions on incorporating stress management therapies into your life and spa menu from Brent Bauer, ISPA Board member and Mayo Clinic Associate Professor.

After the morning sessions, it was time to review and bid on Silent Auction items, which were incredibly numerous, and hit the show floor.  One of my interesting finds included Kumani Essentials, a new line of skin, body and haircare started by esthetician, massage therapist, aromatherapist and Spa Director Stacy Fader that is made with Fair Trade Certified shea butter, sourced in Burkina Faso.  These high-quality products allow spas to create effective signature treatments and address social responsibility concurrently.   Another new introduction is the Sidekick sunless tanning unit from Evolv, which along with advanced chemistry and engineering, offers the first-ever heated airbrush tanning technology.  Several vendors still had missing booths, due to a shipping snafu, but leave it to Boldijarre Koronczay of Eminence to turn that into a humorous marketing opportunity!

Afternoon Professional Development Sessions were all excellent, and I found myself bouncing among three topics; an up-to-the minute Global Trends panel moderated by Susie Ellis of SpaFinder and featuring Andrew Gibson, Liz Terry & Andrew Jacka; “Seven Financial Habits of Highly Successful Spas,” always timely and relevant financial advice dispensed by John Korpi and Ryan Crabbe, and a very informative Risk Management lecture by field experts Lori Wood and Tony Hirsch of the Resort Hotel Association.  All of these sessions were valuable, and in particular Ellis’s just released 10 trends to watch for 2011 gave us a taste of the year ahead.  Keep your eye out for the list, which is usually released in early December.  There were additional breakouts on social media and loyalty which were also reportedly terrific.  As usual, too many topics for one person to cover, you really do need to bring a team.

Our afternoon General Session featured the truly inspirational Doc Hendley, a tattooed bartender who, at the age of 30 started his own non-profit, Wine to Water, and to date his group has dug, repaired and sanitized drinking wells to supply water for 25,000 people in 5 Third World countries.  Hendley is a self-described “average guy” who took what he saw around him and turned it into something to benefit thousands of people and make a difference in the world.  His story of determination and willingness to undertake personal risk to accomplish his goal was one that made me think about the power that we all have within ourselves.

The 2010 ISPA Foundation Silent Auction took place after the general session, and raised more than $70k for the ISPA Foundation, which funds educational and research needs for the spa industry, and then everyone dispersed for more parties and dinners.


Lisa Starr’s presentation, the Four Cornerstones of Spa Success

Lisa just returned from Les Nouvelles Esthetiques in South Africa–she loved every minute of it. The vibrant spa community members she met there impressed her with their professionalism, vision and a real thirst for practical, real-world management education. Here’s the Powerpoint from her presentation at the conference, one of her top-rated and most impactful classes.

Questions and comments are always welcome!

The Four Cornerstones of Spa Success, from Les Nouvelles Esthetiques Conference

My reply to the Groupon rep who contacted me this week

Hi, Jane,

After evaluating the Groupon model we decided it was not a good fit for Preston Wynne Spa. I’ll explain exactly why, as I think it may be helpful for you to hear as you approach other companies in the spa and salon industry.

Spas need to be much more strategic about the number and type of clients we seek, and deep discounting is a crude tool at best. We have very high cost of sales because most of us pay our workforce when a service is done (either through a fee for service or by commission). This is not a model where you can add customers and and automatically increase profit, where modest incremental profit x volume = success, as in a movie theatre or bowling alley or whalewatching boat. Even a restaurant has indirect labor costs.

To us, there is no point filling our most popular and profitable times with Groupon customers, and Groupon did not, at the time, enable us to limit redemption periods to weekdays. (In fact, I got some attitude from Ms. XXXX, i.e. who said scornfully, “we’re not just here to sell your Tuesday morning at 9 a.m.”)

I will say that she produced one spa reference who *was* pleased with her Groupon promotion, but I don’t know the spa’s age or location, both factors that make a world of difference these days.

We are actually experimenting with an offer with one of your competitors, one that enabled us to control much more of the factors involved and targeted our prime demographic, not the Free World.

I am deeply, profoundly unconvinced that Groupon customers consist mainly of potentially solid, loyal potential clients. Discounting has not been shown to create loyalty in past studies done on this marketing modality. Discounting creates a relationship in which there is an expectation of further discounting. Discounting is a depressing, stunningly un-creative and ultimately zero-sum game. (There is always, as I tell my consulting clients, someone who is dumber or more desperate than you.) The participants in Spa Week, another periodic discount promotion, who have come to our spa were uniformly high maintenance and low performance. And they were self selected spa fans.

To me, Groupon and its host of imitators are simply feasting on the carcass of recession-battered, desperate small businesses. And if that is the recipe for the fastest growing company in history, God help us all.

*That’s* why we don’t want to play.

Jane, that’s probably more than you wanted to know, 😉 and I encourage you to pass my comments on to your management team.

Thanks!
Peggy Wynne Borgman

Is that spa for sale really worth its price?

It’s a sign of the times. There are lots of distressed spas on the market right now. Many of these spas look like real bargains, selling for pennies on the dollar of their replacement cost. How is a potential buyer to know what the business is really worth?

Valuing a business is both a science and an art. The science includes the valuation formulas that are typically used. One valuation formula is “multiple of earnings.” Earnings include net profit, but it’s typically adjusted upward with “add backs,” things the business owner has written off that are primarily for their personal benefit, such as their salary, a car or business-with-pleasure travel expenses.

The art? That’s the value of the business relative to the buyer’s opportunities. Strategic value is just one of these considerations. For example, if you already own a spa and you’re considering the purchase of a second spa in a nearby town to expand your brand, and you can leverage an existing back office, that business may have more value to you than to the buyer who’s starting from scratch.

Is the seller using a business broker? If so, the “book,” or sales documents for the spa, should be filled with important data that will help you assess its real worth. There’s also a lot of fluff in there, but the numbers are the most important.

The financial statements should tell you much of what you need to know–that is, if they’re in good shape. A spa that’s for sale is probably losing money, so expect to see that reflected in the profit and loss statements. If things look too rosy, ask to see a P & L that has not been recast for the sales package, so you can understand what the add-backs are quickly. (The business broker should have this information at his or her fingertips anyhow.) We want to know what the spa has really been doing in the last year. Previous years were probably better–but that’s not terribly relevant these days.

Once the add backs have been calculated, you might see a small profit. Here’s the sad news for that seller, and for you as the future owner: spas generally sell for 2-3 times earnings (profits.) My brother in law, who’s in biotech, on the other hand, can sell his company for 18 times earnings. Spas and salons (and most personal services businesses) are at the low end of the scale when it comes to valuation.

That’s right; a salon with a net operating profit of $50,000 may sell for $100,000, but a biotech company with the same earnings could fetch $900,000.

It’s not just our low profit margins that dampens value, but the flighty nature of our workforce. Plenty of spas and salons that are sold lose a substantial number of their service providers. Spa and salon employees spook easily, often not waiting around to see if a new owner will actually improve things. As we know all too well, even the loss of one good employee with a strong following can mean a substantial drop in revenue, as clients follow them elsewhere.

Of course, it’s not just profit, but the balance sheet, that will determine the valuation of the business. The business is worth less if its assets are outweighed by its liabilities. One potential source of liability is unredeemed gift certificate/gift cards. You must be confident that the documentation of this liability is complete–and it often isn’t.

If you are simply purchasing the assets of the spa (an Asset Purchase), such as its lease and its equipment, and don’t plan to use the business name, you don’t have to assume its liabilities, including gift liability. Even so, it may be a good marketing idea to redeem gift liability in part or in full, on a voluntary basis and for a limited term. The value of the goodwill generated will probably exceed the hard cost of redemption.

You may be looking at a spa whose earnings with addbacks are $50,000, and using a multiple of 2x to give it a value of $100,000. But their gift certificate liability is $200,000. Here’s where “art” comes in, again–how do you determine the real liability there, since we know not all gifts will be redeemed? This is where a spa management consultant can help–looking at historic trends, aging of the gifts, etc., to produce a realistic number. Maybe that number is closer to $80,000, and you’ll only end up spending $40,000 in payroll and backbar supplies to service that $200,000 liability.  If you want to use the spa’s trade name, you’ll pay for this. But an asset purchase, where you wipe the brand slate clean, can eliminate the liability. Will changing names and rebranding the business cost you more than $40,000, in hard costs and lost business?

As well, you need to know the laws about gift certificate expiration in your state. Some spas pay tax on their gift revenues as they come in (the most prudent and IRS-favored approach); others wait and pay taxes as those gift certificates are redeemed (setting a spa up for an ever-growing tax liability.) If you want to sell your business and you’re in the latter camp, a buyer will have to consider this.

In California, the value of unredeemed gift cards can be converted from a liability to income after three years of dormancy. By law, the gift cards don’t expire and you still have to honor them, but at least you can get it off your balance sheet.

We’re even aware of spas being “sold” for the price of assuming gift liability and a lease–no money is being exchanged in some of these deals. Landlords who are desperate to avoid vacancies in their shopping center real estate (which depresses rents and makes any other space less desirable) are sometimes willing to provide free rent–we’ve seen periods up to one year.

The decision to retain the spa’s existing name and branding is one to approach carefully. Look at online review sites to get a sense of how well the spa is managing its customer relations. It’s usually not possible to interview employees, but sometimes key management employees are privy to an owner’s decision to sell.

Reputations are on vivid display online, though you do have to take ratings with a grain of salt, since most review sites skew to the negative. Yelp, most notably, will “age out” positive reviews posted by people who write no other Yelp reviews, after just 90 days. Google aggregates reviews from different sites, providing a cross section. Some spas ignore online review sites, like Yelp–to their peril. If you think the spa’s name is “radioactive,” then don’t hesitate to rebrand. If the spa is established, with a reputation that’s slightly tarnished, an aggressive “under new ownership” marketing campaign, followed up with real improvements, may work the needed magic. Keep all of this in mind when thinking about how much you’re willing to spend on a spa.

This is merely an introduction to some important fundamentals of valuing a spa for sale, but it’s far from comprehensive. It’s essential to get help from a reputable business broker experienced in the sale of small businesses, and doubly so if the sellers are not using a broker themselves.

Owners are often emotional about selling, and probably under a lot of stress. It’s helpful to have a cool, collected third party between you and them. The first notion a seller needs to discard if they’re serious is the idea that they should be able to “get their money out of” a failing spa. It’s not going to happen–but you don’t want to be the one who gives them the reality check.

Next time: financing the purchase of a spa

Outside is In

I was doing a hardhat tour of a new spa in the wine country yesterday, one we did the space plan for at the soon-to-reopen Hotel Yountville. (Yes, the teeny Napa Valley town whose restaurants are famed for possessing more Michelin Stars than most major cities.) I remember being a bit challenged by the dimensions of the floor plate as I was working on the design a year ago. But as I walked through it yesterday, I was delighted by what I saw.

Interior architect Lisa Holt of DLS Hotels, our client, did an impressive job of creating a light-filled, airy and charming interior as she took my design from two to three dimensions. Lisa has been an enthusiastic spa visitor and has actually owned and operated a small luxury hotel and spa with her husband and DLS partner David Shapiro.

Fortunately, one direction we could go was up. Lofty ceilings and spectacular, tall treatment room doors create a slightly Alice-in-Wonderland feeling.

In the wine country, the last place I want to be is a cave (unless it’s filled with champagne.) Lisa brought the outside in with extensive use of tall windows, repeating the elegant rhythms of the doors, and we designed small private garden sitting areas off each treatment room. Bringing the outside in takes a small footprint and helps it to live large. The wet areas of the spa give onto a lounging pool, extending the spa experience effortlessly outside.

Being able to get outside while at the spa is a real luxury, and even a little bit of outdoor space can enhance the guest experience dramatically. I know that I’m willing to spend more time at a spa when I can be outside sometime during my visit. Resorts usually get this right and plan for it from the outset, though I’m often surprised at how catacomb-y spa designs can be, and cut off from the outside.

Outdoor space is not always an option, especially for day spas in retail settings. But sometimes an opportunity is right under our nose, in the form of ugly-duckling outdoor space that has become invisible to us through its very familiarity. It’s hard to look objectively at your own space, especially if you’ve been in it a long time, so sometimes it’s worth consulting with a designer to see what they “see.” One of my favorite publications for inspiration for small outdoor spaces is Sunset. They have a long tradition of outdoor makeovers that are simple, clever and inexpensive.

A few years ago we turned some found space on a second floor balcony at Preston Wynne Spa and turned it into a cabana-curtained loggia replete with cushy furnishings, outdoor rugs, and a private pedicure area for al fresco treatments. Five feet wide and thirty feet long, it was not useful for much of anything and surfaced with a very unattractive waterproofing seal. We added decking panels that sat atop the surface to create a more attractive foundation, and a fountain to muffle outside noise, as well as lush planter boxes (these also helped create more privacy.) With some soft goods (which are easy to refresh each year) it has become one of the most popular features of our spa.

Bonnie Waters at Changes Spa and Salon in Walnut Creek, California, found an unloved easement between a parking lot and the side of her building, a plain little patch of tanbark and forlorn shrubs. She convinced the building owner to allow her to use the space, which had no other purpose, and developed it as a charming outdoor terrace for her spa’s newly expanded retail and party room, screening it from the parking lot with landscaping. Because she couldn’t make permanent changes to the easement, she used decomposed granite with pavers set into the soil, rather than mortar.

Probably the best example of enhancing the guest experience with “found” outdoor space is at Osmosis Spa Sanctuary in Freestone, California. After years of operation as a landmark day spa specializing in Japanese enzyme baths, Michael Stusser, the visionary owner of Osmosis, carved a spectacular and authentic Japanese garden from a patch of creekside brush. This work of art is now the highlight of any visit to the spa and has created a remarkable identity for Osmosis.

I’m looking forward to experiencing the new spa at Hotel Yountville, inside and out, after our opening during Harvest season. Spas at their best reconnect us to nature and a more natural way of being. Outdoor space is often more than a sum of the parts; it’s always a great value-add.

Spa Employees From Hell!

We posted this short, funny, customer service video on YouTube, showing common sales and service “horrors” that happen in spas and salons everywhere, ruining chances of retaining guests, rescheduling, and retailing. Each vignette illustrates a fatal flaw–some obvious, some more subtle–and all of them re-enactments of real spa employee behavior I’ve personally experienced. It’s a great clip to show at a spa staff meeting, and certain to get people talking.

When you’re ready for the horror to end, you’ll find each of these scenes, along with vignettes showing the proper way to “replay” each, on our 80 minute employee training DVD, Selvice: Seven Steps to Abundant Sales and Stellar Customer ServiceOn our site, there’s an introduction sequence and a short example of the DVD’s “before and after” curriculum.

Thanks to BoomCycle Online Marketing for their stellar video editing on “Tales from the Spa.”

You can’t win an argument with a customer

Holly Stiel, the great hospitality customer service guru, says it perfectly: “Being Right is the booby prize.”

Last week, an article in the Wall Street Journal described Proctor & Gamble’s burgeoning PR disaster involving a new disposable diaper that may be causing rashes. They’re printing the liquid-absorbing gel onto the surface of the diaper instead of putting it inside several layers. It makes the diapers thinner. P & G insists it was the most-tested new disposable diaper ever. Great! They avidly courted 50 influential Mommy Bloggers before the launch.  But after all that, 7,000 Facebook-wielding Mommy Bloggers (and counting) have stormed the barricades, demanding the return of the previous version.

But P & G is mad as hell and they’re not going to take it any more!  (I can just hear them hollering in the board room, “I thought you said we got ALL the Mommy Bloggers!”) The company that wrote the book on branding and brand management is not in the driver’s seat any more. It is a profound illustration of just how much business has changed in the last few years. You almost feel sorry for the poor saps, as they draw their line in the sand and stare down the jostling mob just across the moat.

So. How do you think this is going to play out? Do you think those Bommy Moggers are going to listen to the voice of P & G reason?

British Petroleum has been even more ham-fisted in its handling of the catastrophe in the Gulf of Mexico. A company that makes billions in profit should be able to afford better PR coaching and crisis management.

But I have to admit, I feel exactly the way any embattled business leader does when I read a snarky Yelp review. (Thank goodness I don’t have to do that live, on a web cam.) The urge to prove that you’re right (or at least, not wrong) is overpowering. This is when we count to three hundred and try to remember Habit #5 of the Seven Habits of Highly Effective People: Seek first to understand, then to be understood.

I remember Steven Covey describing this behavior as “being willing to have your mind changed.” Instead of promoting your point of view, or waiting your turn to speak, you actually listen. And those of us who have customers know, you apologize. In this litigious world, it’s hard for businesspeople to forget about liability and the potential legal consequences of saying, “You know what? You’re absolutely right. We screwed up. And we’re sorry.” But you have to.

The simple fact is, if the customer thinks you screwed up, you did. Perception is reality. The question becomes not how you’re going to convince them otherwise, but how you’re going to rescue the relationship. Doing the Right Thing when you’re pretty sure you didn’t do anything Wrong is hard. Customers are wrong all the time; however, the social contract we entered into when we opened the doors to our spa clearly states that they’re Always Right.

(Admit it, when you’re the customer, you’re always right. Aren’t you?)

The customer who complains is the canary in your coal mine–only 10% of customers actually do. So the next time a mishap tempts you to even explain (explaining is an insidious form of not-agreeing, i.e. arguing) listen to what the customer is saying. Chances are very good you’ll learn something valuable.