One of the decisions that every entrepreneur needs to make about how to run his or her business is how to deal with customers.  Obviously every smart business man or woman is going to want to make his or her customer happy.  Most companies pride themselves in selling a quality product to their customers and providing good customer service.  But the issue arises when customers abuse policies that were designed to provide them with such good service.  How do you handle an abusive customer?

“The customer is always right” says the old cliché.  But what happens when you have a small clothes store that has a decent but not exceptional high margin, and you have a return policy that states that you will accept all returns within 30 days, no questions asked.  Then a customer with bad intentions starts coming into your store, buying clothes every week, and returning them the week after.  And they do the same thing week after week after week.  You know what is going on – they are living on new clothes very week at your expense.

Or what happens when you own a music store and your return policy states that you can exchange your CDs within 15 days.  Then a customer comes in, buys a CD and exchanges within 15 days.  Then the same customer exchanges it again, and again, and again.   Most likely they are building a whole library of copied CDs, taking advantage of your generous exchange policy, and you end up with the cost of repackaging all this material.

Is the customer right in the cases above?  Or should you refuse to provide the return or exchange despite of what your policy says (and risk ending up with a law suit in your hands).

Stories of companies that have gone out of their way to meet a customer need at all costs is inspiring, and even romantic.  Who doesn’t like to read about the Fedex guy who was unable to make a delivery because of a road blockage and decided to rent a helicopter just so that the customer would get his package on time?  It sounds heroic.  It makes you feel good.  But if Fedex did that too many times they would end up bankrupt.

How would you answer the question: “is the customer always right?”  Should companies have liberal, customer centric policies that place a great degree of trust on people’s honesty and decency?   Or should they have controls in place that prevent customer abuse.

Do you trust your customers or do you protect yourself against them?

I don’t think there is one right answer that fits all businesses.  The choices you make regarding how you treat customers greatly depend on your market, your competition, the type of products you sell, the type of customers you attract, your margins, and many other factors.  In some cases dealing with a few abuses is the price you pay (no matter how bad it hurts) in order to generate a repeatable and profitable business from genuine and honest customers.  Sometimes taking the hard line is necessary in order to protect you from a barrage of abusive behavior that leads to excessive losses.

In the search for business success, entrepreneurs need to deal with this dilemma and make some tough choices.  Regardless of what route you choose the key is to have thought through these issues and set your company strategy and supporting policies accordingly.

So is the customer always right?  Yes.  Except for those times when they are not.