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I have begun to think of this as a "large population error", and I'm noticing it in a lot of different markets. At small scales, annoying your customers is bad
by thaumaturgy 2y ago
I have begun to think of this as a "large population error", and I'm noticing it in a lot of different markets.
At small scales, annoying your customers is bad business. You only need to lose a few before it begins to hurt. Customer complaints are more likely to be a consideration in business decisions.
At larger scales, a business can begin to preferentially adopt practices intended to drive away some customers. Perhaps you don't want the "pathological" customers, to borrow one of Patrick McKenzie's terms. You can make more money with less effort by being more selective about your customers.
At extremely large scales, you largely stop thinking about groups of customers altogether. All of your decisions are driven by aggregates -- did all sales go up this quarter, or down? The effort required to do a deep dive into the behaviors and preferences of any individual market segment may not make sense anymore on a quarterly basis. At this scale, you might be able to afford to annoy tens of thousands of customers and still have a very nice graph next quarter.
So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. It's too difficult for customers to organize a protest in a way that will influence that business's decision-making.
So much business has moved online in the last 20 years, while the US has leveled off at 80% urbanization over the same time period, along with more and more businesses congealing into BigCos, combined with the recent domination of private equity: lots and lots of things are now operating at a scale where customer concerns just aren't a part of the business model anymore.
Coffee shops, fast food, big-box retail, online retail, SaaS, PaaS: all of these can thrive while running on exorbitant pricing and abusive customer policies, because their volume of customers is so large that it's nearly impossible to be so bad that you'll piss off enough customers to impact your decision-making. (Unless you're Sony.)
- staunton 2y ago> It's too difficult for customers to organize a protest in a way that will influence that business's decision-making. It's actually very easy (in theory). You (vote for someone who will) ban fraudulent and anti-competitive behavior, sue the offenders and have them pay huge fines. The fact that this very rarely works out is a failure of the political system.
- s1artibartfast 2y agoThe intuitive answer is competition, where customers move from user-hostile companies to new ones. The problem in my mind is that the largest companies have too much efficiencies of scale to compete with on price. When competition can't undercut on price, it is hard to argue that customers aren't being served by monopoly mega corps.
- thaumaturgy 2y agoYeah, this is a pretty standard answer to the same market failures that so many people have been talking about recently. It assumes though that low prices are the best possible benefit consumers might get from competition, and it also assumes that megacorps necessarily lead to the lowest possible prices for consumers. Chokepoint Capitalism is a pretty okay book that kicks the legs out from under both assumptions.
- s1artibartfast 2y agoI don't think I'm making any assumptions about what's best. I bring it up because the most common argent levied against mega corps is using monopoly power to drive up prices, which I don't think is always true. If people specifically want to break them up to drive down prices, I don't think that will always be successful.
- thfuran 2y ago>So, when someone says a business practice shouldn't be "tolerated", that's a perfectly reasonable position, except it doesn't actually work for businesses operating at extremely large scales. I'm not really sure what you mean. The EU has managed to put together much better consumer protections in a lot of areas. There are large businesses there.