Released: June 10, 2007

Customer confusion can lead to big profits

Source: David Lazarus, San Francisco Chronicle

Do some companies try to take advantage of customers with deliberately unfriendly business practices or a fiesta of fees?

A lot of consumers would call this a no-brainer of a question. But Gail McGovern and Youngme Moon - respectively, a professor and associate professor at Harvard Business School - have studied the matter and come up with an academic answer. That answer is yes.

What’s more, the two profs, writing in the current issue of the Harvard Business Review, say such tendencies in corporate circles are both short-sighted and self-defeating. “Think of the cell phone service, banking and credit card industries, each of which now demonstrably profits from customers who fail to understand or follow the rules about minute use, minimum balances, overdrafts, credit limits or payment deadlines,” McGovern and Moon write.

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