Trust Your Customers

Make it easier to be honest, rather than harder to be dishonest.

We have always trusted our customers. Whether we should have trusted the mailman was a different story.

At the peak of Netflix’s DVD-by-mail business, we were mailing hundreds of millions of DVDs per year…so it was inevitable that at least some of them would get lost in the mail. But since first class mail is untrackable there was no way of knowing if a disc had truly been lost or had simply been “misplaced” and reported as lost. So, we decided from the very beginning that if someone reported a lost disc. we would take their word for it.

I’ve always believed that most people are honest. I trust them. Sure, I could put systems in place to ensure I never get taken advantage of, but that’s never made sense to me—the cost just isn’t worth the benefit. 

At Netflix we were spending millions of dollars to make it easier for customers to do business with us. At the height of Blockbuster’s attempt to move into the DVD-by-mail business, for example, we responded by doubling down on phone-based customer service, opening up a huge call center in Oregon (they really are the nicest folks). That cost a lot more than relegating everything to email, but it gave our customers a human point of contact. It showed that we valued and trusted them, and they loved it.

So after all that effort, why would we do something that made things harder for 99.9% of our customers, simply to prevent the other 0.1% from ripping us off?

Obviously, we were mailing out used DVDs, not shipping $100,000 cars, so letting a few people rip us off wasn’t going to bankrupt us. If the disc was genuinely lost…well that’s just a cost of doing business. And if someone just keeps it and reports it lost, that’s such a small price to pay for the goodwill we earned that I’d take that bargain 1000 times over.

But don’t get me wrong. I know the adage: “Fool me once, shame on you. Fool me twice, shame on me.” So I’ll certainly stay on the lookout for anyone who’s consistently taking advantage of me—or who simply lives in a place where their mailbox seems especially susceptible to pilfering. In either case, I’ll politely inform them that we no longer think we can do business together.

And that brings me to the mailman.  

One month, our reports showed a huge spike in “lost discs”. But unlike other fraud cases we’d seen in the past, it wasn’t coming from a few discrete accounts. But neither was it happening on a nationwide or even a statewide basis. It appeared to be happening in a single zip code across hundreds of different accounts. In fact, as we dug deeper, it seemed to be happening on a single carrier route. And yes…it appeared that one of the postal carriers—now an ex-postal carrier—was building themselves one of the larger DVD collections in town.

So I guess we just want to follow the advice that my lawyer is always giving me: trust…but verify.

Many ideas in this post were first discussed in the Neverland entrepreneurial community. Join us there!

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