Local Story, Universal Lesson

Independents and large chains face bankruptcy risk when they don’t listen to customers

When we started OwnerListens, Oren and I felt the pain of the problem we were solving. Oren had just opened his restaurant in the incredibly competitive downtown Palo Alto area. He was looking for a better way to communicate with customers and truly listen to what they want. That’s what we built OwnerListens for, and it worked: The more we listened to customers the better the restaurant got.

Realizing the power direct conversations with customers could have for all businesses, we opened up the platform to others. As good local citizens we went around and spoke to other business owners in our area about it. We offered to let them use the platform for free in exchange for their feedback. Many took us up on the offer and some did not.

We were really interested in those that turned us down. Was it something about our platform? Was the pain we felt not shared? Did they have a better solution in place? There was a lot to learn and implement from this feedback. Enough to warrant a special blog post one day.

Today’s post is about a very specific subset of those businesses.

There were nine businesses that turned us down for a very similar reason. They all claimed that their business was going well and that they did not care about customer voice. Some said they don’t believe customers know what they want and as the expert, they will decide for them (picture snooty chef here). Others claimed that they had enough foot traffic on our busy street for reviews and online reputation not to matter. Not even on Yelp, not even here in app crazed Silicon Valley. Another said she had built a brand already and had customers locked in. I’ll never forget the sentence: “Our customers are lemmings. They will take what we put in front of them”.

Well, ok then. Those business owners were definitely not the kind of customers we were looking for. We just moved on.

However, a few months later we noticed something interesting: two of those businesses were closing down. It happens of course and there could be a number of reasons but, we thought, let’s continue to pay attention to this. We collected a little of info about each business: when it opened, what services it offered, what price ranges was it in, was it an established brand’s branch or an independent etc.

The one clear attribute for all of them was a relatively long tenure of over 4 years. Three were in business over 10 years. One had been around since the nineties and only one was less than a year old. All but one were independently owned and operated, and not part of a franchise. All had Yelp scores that were 3.5 stars or higher. Four had Yelp scores of 4.5 stars. TripAdvisor scores were similar.

A few more months went by and two more of those businesses had shut down. Within 18 months, six of the nine were gone. Two years later, 8 had closed. And, a few weeks ago we saw that the final one shut down. The average Yelp score of those businesses at shutdown was 3.2 stars.

Businesses shut down all the time and we don’t really know why.In the case of these nine businesses, there could be multiple explanations in addition to or unrelated to their disinterest in customer voice. For comparison, some of our customers on our street shut down in that time period as well. However, the top two reasons cited most often when an OwnerListens customer shut down in our area was an increase in rent followed by new concepts that simply didn’t take off and closed quickly.

This is not a scientific study by any means. However, we think it’s telling that businesses who explicitly decided to avoid listening to customers, ended up dead in the water. Businesses that had been around for a while, spent time and effort getting customers, and were lucky enough to have space on University Ave (Palo Alto’s main drag) at a time of extraordinary prosperity for the city (thanks to the tech bubble), yet could not make it.  We can’t help but think that had they been open to customer feedback and paid more attention to customer sentiment, those businesses might have survived.

We’ll never know and we don’t have statistical proof given the small sample set. What we do have is common sense that tells us listening to your customers is the right thing to do. What we do have is OwnerListens businesses that thrive on customer communications and reap the rewards of adapting to customer needs. To us, the lesson is clear: Customer voice is not a luxury. It’s a necessity.

Ignore your customers at your peril.