You would think it would be crazy to build a business around the idea of creating detractors. However, one industry is going a step further, building a business model around the idea that you hand over your money, don't consume their services, give up and go away.
I'm talking about the fitness industry. In an interview with an industry executive (who you can bet will remain nameless) one major health-club firm is actually running out of customers to churn because they are exhausting the potential pool in their locations. How does this happen?
Start with a business model that works best when people don't consume your product. Get customers to sign up for your services, make escape from the contract difficult and then keep your fingers crossed that poor experience and apathy keeps them away from your services. These are your most profitable customers - once again, short term financial accounting trumps common sense. If these people showed up and consumed services, you would be in big trouble - actually having to build capacity for them would be a killer cost issue.
So how does this play out in the long term? Well, we know from our experience that the net promoter profile of these individuals is likely to be high initial scores with the introductory offers, followed inevitably by low scores once the full cycle plays out. You create an army of detractors. In the long term, one of two things can happen:
1. You run out of anybody to recruit who will join the deal. Don't laugh, it's a genuine concern that these firms are running out of potential new recruits.
2. A new entrant rewrites the rules of the game. It's already happening, expect to see a new generation of health club management who actually succeed in retaining customers and getting positive word of mouth.
I'd expect the latter group to disrupt the industry in the same way Southwest Airlines turned air travel on it's head - and capture the lion's share of the profit pool in the process.
Anyone know a firm like that I can invest in?