I was recently alerted to an article in the Detroit Free Press about a woman who is suing car maker Honda in small claims court instead of via a class action suit because certain of their hybrids allegedly do not get the gas mileage claimed because of technical problems.
Now, the idea of averting class action suits is an interesting subject of discussion, but that’s not what caught my attention in this story. My bigger takeaway is “Why would Honda let it come to this?”
As a business, large or small, your customers are your lifeblood. Plus, with so much competition abound, customers have myriad choices for virtually every product and service. So, if you have made a mistake- or if your customers perceive that you have made a mistake- here’s a novel idea: fix it and make them happy.
For Honda, a class action lawsuit wastes tremendous money in legal fees and is a time distraction (and probably a PR distraction) for the company. Most importantly, it doesn’t make the customer happy and risks losing that customer, not to mention the friends, family and network of that customer. The lifetime value of a customer for any company, particularly a car company, is very high and valuable. Think about how much money Honda spends advertising to get new customers that could instead be spent saving their relationships with existing customers upset about this problem.
99% of customers are reasonable. If Honda would have reached out to them and worked with them, they would have been able to find reasonable solutions, create happy customers and stay out of court.
If you have an issue that’s making customers unhappy, the best business decision is to bend over backwards to keep them raving fans. As a business, the goodwill you generate from doing that will more than compensate for any costs involved in doing so in the long run.
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett (Shark Tank, The Voice, Survivor, The Apprentice) produced technology competition series, America's Greatest Makers, airing on TBS and an on-air contributor for the national cable television station CNBC, the preeminent name in business news. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics.
Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011-2015) and has her own action figure.
Honda let it go there because the chances that a Class Action that ridiculous would ever be certified by the court is probably a billion to 1. You also need 3 to start the claim and then a law firm who'll buy into it.
But realistically, if Honda took the time to defend a claim (which has to be under 5k if it's small claims court) such as this; they would have lost millions of dollars defending themselves from the bad press that would have eventually followed, and to defend it, validates it. And that's where they risk losing thousands of customers. Litigation Risk Management is a strategy to keep customers they did the right thing.
I get your point; but in this particular case.....if I were Honda, I would have been happy to let it go to small claims court, and if she was ever successful getting a class certified; I would have moved for immediate summary judgement and filed a counter claim for a frivilous law suit.
You have to pick and chose your customers because the ones who do make frivilous complaints, are a breed of customer, that cost money!