Reading Time: 12 minutes

Are you an aspiring entrepreneur who’s disillusioned by how modern businesses are often driven by greed, focused solely on maximizing profits, and sometimes willing to deceive customers to squeeze every last penny out of them? Do you feel like too many businesses aren’t doing what’s right for their customers and society?

 If you’re a new entrepreneur with these concerns, you’re definitely not alone.

Think about how often customers have to be on the defensive when dealing with their mobile provider, banks, insurance companies, airlines, etc.?

It’s not right that you have to be cautious of those who are supposed to be helping you – it’s like they’re the enemy, even though you’re paying them to be on your side.

It seems like it’s becoming popular and “correct business practice” to find all the ways you can to take money from your customers.  Whether it’s hidden fees, penalties, add-ons, or maybe even the idea to charge people to access something they already bought like the heated seats in their BMW.

Yeah, BMW actually launched this idea and then dropped it due to customer backlash.  Their brilliant idea was to charge you a subscription fee to access the heated seats in your own car.  What’s next, a subscription fee for the windows to go up and down or to use the air conditioning?  Perhaps they’ll pitch you a subscription to use your emergency brakes seconds before impact – I wouldn’t even be surprised.

A BMW board member said that customer response was the reason for dropping the subscription charge for heated seats and that “testing how the customer responds is part of the process.”  

It’s crazy to think they needed to test this to determine if it would upset customers.

The Questions That Drive Business Decisions

But let’s think about the moment someone pitched this idea.  What question did someone even ask that begged the answer, “I got it, we’ll activate their heated seats for a subscription!”

These ideas don’t come from questions that ask leaders to find ways to create or deliver more value for customers.  Instead, they come from questions that ask leaders to create and deliver more returns to investors.  Essentially, the question was, “what can we do to take more money from our existing customers?”  

These are the questions aspiring entrepreneurs are taught to ask in business today.  Firstly, the focus is on existing customers, because they are a captive audience, and quite literally in this case.  I’m trapped in my cold BMW and I want to warm my bum.  I’m stuck in a situation where you have locked the hardware in my car and are offering me the right to access the hardware I purchased.  

Of course, there’s a legal argument around this.  They can argue in the case of a lease that they haven’t leased me a car, they’ve leased me 15,000 miles of vehicle transport.  Technically, heated seats don’t translate to miles, blah, blah, blah.  But if you have to trick customers with legal technicalities, you are definitely not on the customers side.

Furthermore, we are held more captive when the product is a car, insurance, bank account, air travel, medical services, etc.  When switching to a competing provider is difficult to do, a business can take advantage of that and squeeze more out of you as far as they can up to the moment before you’d actually consider switching.  Until then though, they can come up with all sorts of innovative ideas like hidden fees, surcharges, subscription fees, convenience fees, upgrade fees, warranty fees, etc.  The worst part is when they spin these so-called innovations so proudly as if they are a favor to customers.  Any time an email comes in that starts with, “We’re excited to announce…” or “We’ve been working hard to improve our services…” I already know, I’m about to pay more for less.

They say less is more though…so maybe I’m just being overly negative.  

It’s insulting that these companies think of customers as stupid.  As if I’d ever wake up and say “thank you for allowing me to pay you to turn on the hardware that I already own.”

Come on!?!  

Why Good Intentions Go Astray for First-Time Entrepreneurs

All that said, I don’t believe new entrepreneurs wake up and actively think, “how can I steal more money from my customers today?”

So why does this happen?  Why do good people come up with ideas like this?  What drives them to do this?  What questions are they asking that beg these solutions that harm customer value?  

And by the way, this doesn’t usually happen early in a company’s journey.  At the beginning, there’s usually a passionate founder who had every (or most) intention of doing something good for customers.  Remember the early years of Uber?  The company was practically handing out free rides.  They answered your questions and comments right away.  They took care of their drivers and in turn, the drivers took excellent care of their passengers.  Does anyone remember the little bottles of water and candy mints?  

So what happens to these good intentions?  Where do things go wrong for aspiring entrepreneurs starting a business?

I believe this happens when companies shift from serving customers to serving investors.  

Whether you take on investors early or late, when that moment comes, you run the risk of shifting your attention from the customer to the investor.  Essentially the investor becomes the founders and/or executive teams’ customer.  

This of course doesn’t even make sense because you’d think that as an investor, you’re investing in what you believe is good potential for future returns.  Thus, you should be no more involved than someone who bets on a horse on race day.  However, what happens is that the horse and jockey start talking mostly to the people betting on them and lose sight of the actual race they’re supposed to run (i.e. creating value for customers).

As a result, business leaders focus on the demand of investors to produce more returns no matter what it takes.  If you have to raise prices for the same value, then raise them, or lay off 10% of the workforce to return higher dividends, then do it.  

What creates the conditions for this is that the investor has the lowest switching costs.  They can threaten to sell their ownership stake and buy other shares at any time.  However, customers in certain industries will have higher switching costs.  So if you are the executive leader trapped in the middle of these two opposing forces, you’ll likely punish the customer who has less choices and serve the investor who can bail on you at any time.  And as an employee of the company, you too have a high switching cost when it comes to finding another job if you were to ignore your investors and get fired for it.

So at this point, a company starts to look and feel like nothing more than a vehicle for printing more money for investors whenever they demand it.  Customers are the paper and ink and employees are the printing press.  A company could reason they only have to be good enough to their customers to keep them and wherever possible, lock them into lengthy commitments and contracts to keep raising the switching costs.  Another tactic is decoupling products and services into their smaller components and then offering them a la carte for a higher price than you’d pay if they had been bundled.  

The airlines really ran with this strategy.  Over the last couple of decades, we’ve seen airlines take the traditional airline ticket and break it down into airfare + right to select seat + beverages + snacks + meal + luggage #1 + luggage #2 + boarding priority + aisle vs middle seat + seats closer to the exit vs seats in the back, etc.  They even call this innovation.  As if we don’t want all these things when we travel.  And while I understand some people would be willing to travel on any seat with nothing more than a small grocery bag for luggage, the vast majority of customers are not interested in saving money this way.  So in the end, we pay more for the same ticket than the original service would have cost.  Let’s not even begin to talk about all the made-up fees that show up once you get to the checkout page.

These so-called airline industry innovations serve only a few people.  Most of their customers are penalized for being a customer.  Even the lowest level product we could buy from an airline after decoupling all of the value – the economy seat – has been broken down one more level.  Introducing, BASIC ECONOMY seats!  Soon they’ll offer standing room only seats on airplanes (or do they already?).

These so-called innovations are only innovative for the investors of the business and helpful to the careers of the executives who run the firm.  The customer, again, is reduced to paper and ink for the money printing press.  

This also incentivizes some aspiring entrepreneurs to get into the game simply to print money.  They might ask, “what’s the least I have to do to earn the most profit?” and then, “who can I raise money from to scale this profit opportunity?”  Think of any company that uses deceptive sales tactics, tries to lock you into long-term commitments early on, or leverages pushy sales techniques.  Other examples might include middlemen companies that simply insert themselves in between the customer and a provider to charge their fee.  The value they offer is usually worth a fraction of their price.  Think of all the third-parties sitting between: retailers and customers (i.e. all the processors who move your money from your bank to the retailers bank); patients and health care providers (too many and too triggering to list); most aggregators of services who take a massive cut, etc.  

All of these examples can leave you feeling pretty icky about getting into business or becoming an entrepreneur.

The Alternative Path for Aspiring Entrepreneurs: Put the Customer First

What’s the alternative for new or aspiring entrepreneurs?  

The alternative is to build a business that is meant to create value for and serve a specifically identified customer.  You do everything you can to serve this customer and if you do it well, they will on their own want to be loyal to you, buy more from you, and refer you without even being asked to.  

You do this because you believe that if you do right by a customer, they will pay above the cost of providing that value so that your business can earn a healthy return.

Imagine looking for a problem in the world and devising a solution for it and committing to do everything you can to help your customer go beyond it to achieve the goal they set out to when they ran into the problem in the first place.

A Powerful Framework for New Entrepreneurs

The late professor Clayton Christensen introduced an idea called the theory of Jobs to be Done.  He argued that companies who knew their customer and the job they wanted to get done (i.e. their goals) would be more successful since they not only solve the problem but they also help their customers achieve their real goal.  

To prove this hypothesis, he looked backwards in time to identify the companies that were most aligned with serving customers’ goals to determine if they were more successful than companies that only addressed the problem.  He proved that alignment with a customers’ job-to-be-done led to more successful business outcomes (i.e. profitability).

Over the last year, I’ve become a raving fan of a small hotel chain called Archer Hotels.  They have about a dozen locations throughout the US and one of those locations is about 40 minutes from me.  On one of our overnight date-nights, my wife and I decided to stay at the Archer Hotel.  Upon arrival someone at the check-in desk greeted us warmly.  While checking us in, he took great interest in learning about us and our reason for staying there.  After he learned it was just a one night date night stay, he casually weaved the topic of wine into our conversation and picked up on our wine preferences.  About 30 minutes after we walked into the room, there was a knock on the door.  When I opened it, there was someone holding a bottle of wine with a note attached.  The note read, “Here’s a little something to help you start your date night.”  Needless to say, we were absolutely surprised given this only happens at the bigger chains when you are staying in their most expensive rooms or staying for significantly longer than one night. 

On another occasion where we had booked a night at the Archer Hotel, our little girl got sick the night before.  We didn’t want to leave her while she wasn’t feeling well and we were already within the 48-hour rebooking/cancellation policy which meant I would have to simply pay the cancellation fee and rebook later.  Because of our first experience, I decided to reach out and ask if they could help me rebook later without penalty.  I explained that our little girl was not feeling well and that we still want to have our date night however we need to reschedule for now.  About an hour later, on the same day we were supposed to check in, their general manager got back to me and said, “No worries, we’ll help you book another night whenever you’re ready to.  In the meantime, we hope your little girl feels better!”  

When we eventually rescheduled, they actually upgraded our room to a 1-bedroom suite from a regular room.  Another great date night and more proof that there are still businesses out there whose mission is to serve the customer and their goals.

Examples of Customer-First Practices for New Entrepreneurs

If you are a new entrepreneur or an aspiring entrepreneur, be mindful of the business content you listen to.  There are a lot of people who I believe have good intentions but they are passing along the lessons grounded in prioritizing investors over customers.  And there are also people out there who are open about the fact that they are teaching you how to get around rules, laws, and policies meant to protect customers all so that you can maximize your profits.  

Decide what your values are and what matters most to you.  If making the most money you can at any cost matters, then there’s plenty of strategies, tricks, hacks, and ways to do that out there.  FYI – you won’t find them anywhere on my site.

However, if you are purpose and mission driven and want to make a positive impact on the people you serve, be mindful of what you learn and practice.  It’s not hard to “practice your way” into doing more harm than good and not even be aware of it.  It’s quite easy to drift in the direction of obsessing over more money, beyond what you even reasonably need.

I’ve been blessed to meet and learn from entrepreneurs who define success on their terms, know their values, and build businesses that serve customers first while providing a great living.  They don’t need to pursue ever-growing profits and revenue.  They know what they need from their business and they earn it by focusing on doing right by their customers.

Some examples of the types of pricing, products, and policies these entrepreneurs subscribe to include:

• No-penalty payment plans.  If you can’t pay it all up front, they’ll divide it equally at no additional cost.
• Slots for people who can’t afford the full price.  These folks are invited to reach out and discuss what they can afford and work with the business owner to find a solution.
• Pay What You Want.  An invitation to pay what you believe the service was worth.  On average, people pay more than what most businesses would have charged up front.
• Down-selling someone when you know what they need is less profitable than what they tried to buy.
• Opportunities to earn the product by referring and selling the product to others until you unlock a free one for you.
• Three Wildly Different Pricing Tiers.  I saw this recently where a business owner, acknowledging that his ideal customer may be in one of three very different sets of financial circumstances, offered $30, $3000, and $30,000 levels of offer.  The invitation was to book a short call with him to discuss your needs and your circumstances to determine which level was right for you and how he could structure the offer at that level with the goal of helping you achieve a relatively significant outcome. 

If businesses have left you feeling icky and with a bad taste in your mouth and you want to be a different kind of entrepreneur, then know that you are not alone.  We are out there and we love learning from one another!

I teach first-time entrepreneurship and my teachings are grounded in Clay Christensen’s theory of jobs to be done so that my students can build truly customer goal driven businesses.  If you need help doing the same, please reach out.

Related Articles in The Journey to Reinvention Blog

Book Review: How Will You Measure Your Life by Clay Christensen

How to Find the Problem Your Business Idea Solves

How Aspiring Entrepreneurs Can Take an Idea from Concept to Creation