Sometimes Customers Are Pretty Stupid

This is a guest post by Justin Fox. Justin Fox is editorial director of the Harvard Business Review Group and author of The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.

The only sustainable way to build a business these days, we are told, is to be straight with your customers. Today's sophisticated consumers, armed with the tools of the Internet and social media, just won't put up with poor service, hard-sell tactics, hidden fees, bundling stuff we don't want with stuff we do, or other business strategies meant to take advantage of our laziness, limited attention, stupidity, or lack of options.

Yeah, right. It's true that new technologies are empowering consumers in new ways. Lots of old business models that relied on bundling (think music albums, or metropolitan daily newspapers) are collapsing. Pulling one over on customers is harder than it used to be. The Cluetrain guys were on to something.

But there still is, and probably always will be, an awful lot of money to be made by banking on customer laziness, limited attention, stupidity, and lack of options. How do I know this? Because over the past year I've handed $152.55 to eFax.
I signed up for a free one-month trial at tax time last year. I was going to be on a road trip — a low-budget, family road trip that didn't involve staying in hotels with fancy business centers — and my tax guy believes strongly in faxes. I know myself, so I worried about what would happen when the trial period ended. But I was in a hurry, and didn't see any easy alternatives.

Right before my month was up, I did think to fire off an e-mail to eFax saying I wanted to cancel. I got a response saying the only way to cancel was to have an online chat with a customer representative between 6 a.m. and 6 p.m. Pacific time, Monday through Friday, or call a number with a 323 area code. There's a lot of griping on the Internets about this policy, and it clearly is designed to make it harder to cancel. But I'm not an ice road trucker. I generally spend my workdays at a desk, with a computer, with a high-speed Internet connection. It shouldn't have been that hard for me to log on to eFax customer service and get the job done. But I didn't. And the $16.95 monthly charges to my credit card began.

In August, I actually used the account again. My wife's doctor needed to send her a fax (doctors and tax guys may be all that's keeping faxing alive). Then, around Thanksgiving, I was editing an HBR column by Erskine Bowles and he was off at some vacation house where faxing was the best way for him to send comments on my edits (okay, doctors, tax guys, and semi-retired bigwigs). So my EFax account wasn't worthless. But neither was it worth $16.95 a month — I could have easily found workarounds involving actual fax machines both times. Yet still I did not go to the effort to cancel.

What finally saved me was attempted credit card fraud. Somebody tried to order a $1,700 camera from Sears.com using my Visa card number. Sears, to its great credit, found this to be suspicious (I find the very concept of a $1,700 camera, especially at Sears, suspicious). The transaction was cancelled, and my bank issued me a new credit card with a new number. A few days later I got the e-mail from eFax: "We recently tried to process a charge on your account and were unable to obtain payment from the credit card on file." If I didn't act soon, they'd have to freeze the account.
The default option, as the behavioral economists call it, had been switched. Now if I didn't do anything, the $16.95 monthly payments to eFax would stop. I thought about just leaving it at that, but worried that eFax might try to put something on my credit report. So I responded to the eFax email, saying I wanted to cancel. I got the response that I needed to call or go online for a chat. It was evening in Boston when I read this, but it was still before 6 p.m. on the West Coast. So I finally clicked the link. Here's the full interaction, after I had said I wanted to cancel and typed in my account details (it's long, but amusing):

Craig H.: Thank you for providing your information. Please give me a moment while I pull up your account.
Craig H.: In the meantime, please type the number corresponding to your reason for cancellation:
Craig H.: 1) Moving to another provider
Craig H.: 2) Bought a fax machine
Craig H.: 3) Business or role changed
Craig H.: 4) Short term project completed
Craig H.: 5) Financial reasons
Craig H.: 6) Problems with faxing or billing
Craig H.: 7) Dissatisfied with quality of service
Craig H.: 8) Too costly
Justin Fox: 4
Craig H.: Justin, as we'd like to keep your business, I can offer you a discount and also waive your subscription fee for 2 months. After the free period, pay just $12.95 per month.
Justin Fox: no thanks
Craig H.: This plan includes 130 inbound pages monthly and extra pages are just 15 cents each.
Craig H.: There is no contract and you may cancel anytime. Shall I switch you to this savings plan?
Justin Fox: no
Craig H.: OK, before I close your account, we now have an annual plan that will let you keep your eFax service for just 14 cents a day.
Craig H.: You make one annual payment of just $50 and pay nothing more unless you exceed 30 pages per month. Extra pages are just 15 cents. This deal won't be available once your account is closed. Can I switch you to this savings plan which lets you keep your fax number for just 14 cents a day?
Justin Fox: No, I just really don't need a fax service
Craig H.: OK, I will go ahead and cancel your account.
Craig H.: Please stay online.
Justin Fox: thanks
Craig H.: Justin, you qualify for a 6 Month Trial of our eVoice service. You will receive 6 months of our eVoice® service free. With eVoice® well give you a toll free number where your clients can be greeted with a professionally recorded greeting which you can script.
Craig H.: For example: "thanks for calling xyz company for sales press 1 for support press 2." When an option is chosen you can customize where you would like the calls to ring, whether it be your cell, office or home phone.
Craig H.: This service is included free for 6 months or 1000 minutes of usage. After the 6 months it is month to month without any contracts and only $12.95 per month if you decide to keep it. Would you like an 888, 877, 855 or 866 toll-free prefix for your eVoice® number?
Justin Fox: no thanks
Craig H.: Alright.
Craig H.: Is there anything else, I may assist you with?
Justin Fox: no thanks
Craig H.: Thank you for contacting eFax online support. I hope you found our session helpful. Goodbye and take care.

So that was that. As I already mentioned, there's a lot of online bad blood about eFax. For people who had more difficult cancellation experiences than I did, I get it. But really, I have no right to complain. The fax service was impeccable, eFax was perfectly transparent about account charges, and cancellation wasn't that hard. It was just hard enough to get me to pay a significant amount of money for something I didn't really need or want.

I can envision an online fax service that would meet my needs. It would charge me a modest annual fee ($10 or $15), and then a significant per-page faxing charge ($5?). I've got to think somebody — especially somebody, like eFax, that has already built the fax-delivery infrastructure — could turn a profit doing this. But for eFax, it could seriously cannibalize the current business, and presumably be much less profitable. J2 Global Communications, eFax's parent, reported net income after taxes of $114.77 million on revenue of just $330.16 million last year (it doesn't break out revenue by segment, which makes one suspect it's mostly from faxing). That's a great business. Why mess with it by giving customers what they really want?


This post initially appeared on the HBR Blog and is reprinted with permission.