Why investors are attracted to the number zero.
By Deborah Lynn Blumberg
Sometimes It’s Right To Do The Wrong Thing
The rules are right there on the company website: At Houston running store Fleet Feet, you’re allowed only 60 days to exchange shoes or to get a full refund.
In 2019, though, general manager Danny Braden intentionally violated that policy. He allowed a woman to return shoes a full year after purchase when she explained that she was struggling after losing her husband. It wasn’t the first time Braden had broken the rules. In fact, he encourages, even trains, his employees to do the same — as long, he emphasizes, as it’s safe for everyone and helps a customer.
In the era of coronavirus, some rules are non-negotiable. Enforcing social distancing or hand washing can be matters of sickness or health. But in retail, thankfully, few rules carry anywhere near that kind of weight.
“A lot of times our rules are arbitrary,” says Braden, who manages five Fleet Feet locations in the Houston metro area. “We bend rules a lot. We want our customers to be happy.”
A surprising number of companies acknowledge the same thing: allowing what some might call unethical customer conduct can be good for business. From clothes stores to websites to streaming services, organizations across industries knowingly permit — even encourage — customers to break nonessential rules.
Fast food restaurant Popeyes recently wove rule-breaking into an advertising campaign, announcing that the first 1,000 people who tweeted a picture of themselves eating a Popeyes meal with the hashtag #ThatPasswordFromPopeyes would get the company’s Netflix username and password.
Of course, Netflix has for years allowed users to share accounts, knowing full well that they’re losing hundreds of millions of dollars in the process. Restaurants gamely comp meals to dissatisfied customers even when their complaints are groundless. Target also partakes in harmless rule-bending, honoring the one year guarantee on its Cat & Jack kids’ clothing brand even when the returned shirt or shorts clearly has done a full tour of duty in art class or on the jungle gym.
Rice Business professor Utpal Dholakia has studied this type of benign indulgence — and supports it. While most business owners believe they shouldn’t allow unethical behavior, Dholakia says their attitude could be hurting their companies.
“If allowing people to return items or giving them freebies keeps them coming back and spending money,” he notes, “it will actually help the business in the long run.”
In a study of a Swiss online retailer, Dholakia and colleagues Zhao Yang and René Algesheimer of the University of Zurich found the company earned more and got better customer engagement when it let consumers register multiple accounts in an effort to qualify for free gifts. Though that clearly violated company policy, the rule breaking signaled a sort of devotion, the researchers discovered. The people who broke the rule were actually more engaged with the retailer’s website than were other shoppers — and they spent more money.
In Ann Arbor, Michigan, the Zingerman’s deli food chain has long folded this insight into its business model. Cofounder Ari Weinzweig actively encourages his 700-plus employees to break company rules in the name of customer service. The only caveat: never compromise the health or safety of customers or the community.
To clarify the distinction, Weinzweig teaches responsible rule breaking as part of employee training. “We’re socialized to believe breaking a rule means getting in trouble,” he says. “Rules are in place for good reason, and you need to be mindful.”
When Zingerman’s is open for business, the customer rules. Crave something off-menu? They’ll try to supply it. Need smoked salmon before opening hours? They let you in. Even clients determined to get a reservation despite a no-reservations policy can get their name on a list.
This commitment to bending the rules while complying with safety laws has helped Zingerman’s earn over $65 million dollars in annual revenue, Weinzweig says.
Rules Are For The Rogue Minority
Even libraries — generally bastions of propriety — have loosened up on rules to lure students tempted elsewhere by digital technologies.
Flouting years of tradition, Rice University’s Fondren Library, when it’s open, now encourages users to bring food and drinks into parts of the library. Librarians who might have scolded visitors hiding candy or smuggling coffee are now instructed to welcome them.
“We know people spending time in the library want to have something to drink and eat, so we’re allowing certain things in,” says Sandi Edwards, Assistant University Librarian for Research Services.
Rules, of course, exist for a reason: in business, they help set customer expectations and guide employees in performing work well. They cut down on errors and protect the health of workers and clients. They also can set the tone for how a business conducts itself, so that when conflict arises, employees look to the rules for guidance.
But when rules are vague or outdated, they can needlessly drive customers off, says Jeanne Bliss, a consultant who was the inaugural chief customer officer at Lands’ End, Coldwell Banker, Allstate and Microsoft.
In a retail setting, Bliss says, perceived fairness is a huge driver of customer satisfaction. Customers want to feel they are being treated fairly. Often that means harmless bending or breaking of rules.
So how should businesses split the difference? The first step is to ensure customer and community safety. Next, identify the top exceptions customers request, then guide employees how to respond.
The healthcare industry, for example, distinguishes between red and blue rules. Red rules, such as no smoking where oxygen is being use, protect people and must never be broken. Blue rules, on the other hand, such as filling out admitting paperwork before treatment, are frequently broken in emergency situations.
Dealing With Digital Rule Breakers
Dholakia argues that businesses should make similar priorities. While, for example, absconding with sparkling water from Trader Joe’s is illegal, some businesses purposefully let shoplifters walk out to protect employee safety.
The digital age has ushered in new examples of permitting questionable customer behavior. Newspapers such as The New York Times or the Wall Street Journal often look the other way when readers dole out subscription login details to friends and family. The reasoning? Those non-paying readers are seeing ads — and might become paying readers themselves one day.
Streaming services are the same. Netflix doesn’t bother to crack down on the 12 percent of their viewers who aren’t paying for the service, though it costs the company a reported $500 million a year in revenue. Instead, like other services, Netflix merely limits the number of screens one password can access at any time. Across the streaming industry, a 2014 poll by Consumer Reports showed, a full 46 percent of streaming users were sharing an account with someone outside their household.
At Zingerman’s in Michigan, where customers often insist on using expired coupons, staffers are trained to cheerfully give partial value. Recently, founder Weinzweig says, a customer who benefited from that indulgence then bought two extra bottles of balsamic vinegar. “I’m not saying break every rule every time,” he says. “That’s chaos. Part of leadership is knowing when it’s okay to break them.”
Utpal M. Dholakia is the George R. Brown Professor of Marketing at Jones Graduate School of Business at Rice University.
Deborah Lynn Blumberg is a Houston-based freelance writer specializing in business, finance and health and wellness whose work has appeared in publications including The Wall Street Journal, MarketWatch, The Christian Science Monitor and Newsday. Previously, she was a reporter at Dow Jones/The Wall Street Journal. (deborahlynnblumberg.com; @dlblumberg).