This is the tenth installment of my Service Management learning series. Last time, I wrote about Service-Dominant Logic (SDL) and value co-creation. This time, I explore a paradoxical approach to service design: deliberately showing customers information that may work against you.
- 1 Displaying Your Product’s Drawbacks on Your Own Website
- 2 A Crisis of Trust in the Background
- 3 Analyzing Four Scenarios
- 4 Behavioral Biases Distort Decision-Making
- 5 “Proposals That Defy Customer Expectations” Are Also Service
- 6 What This Means for Employees — Thinking Through the SPC Lens
- 7 The Power of a Vision: “Improving Financial Well-Being”
- 8 “Honest Proposals” in IT Consulting
- 9 Recommended Reading for This Session
- 10 Next Up
Displaying Your Product’s Drawbacks on Your Own Website
The case discussed in our lecture involved the largest bank in a certain country.
This bank was considering an experiment: listing the drawbacks of its products right alongside the benefits on credit card application pages. Information like “high interest rates” and “late payment penalties” — the kind typically buried deep in terms and conditions — would be displayed prominently next to the benefits.
Common sense says showing drawbacks would reduce conversion rates and hurt short-term revenue. So why was this experiment even being considered?
A Crisis of Trust in the Background
Behind it all was a deep-rooted public distrust of the entire financial industry. Repeated scandals and business models that prioritized corporate profits over customer interests had eroded trust in banks to rock bottom.
At the same time, fintech companies were winning customer loyalty with highly transparent financial services. The era when business models could rely on information asymmetry was coming to an end.
The bank’s stated vision was “improving customers’ financial well-being.” However, its credit card revenue structure depended on “customers choosing high-interest cards due to optimism bias and paying unnecessary interest.” There was a structural contradiction between the vision and the business model.
This contradiction isn’t unique to the financial industry. Businesses that proclaim “customer first” while their revenue structures depend on customer ignorance or irrationality exist across every sector. And in the digital age, these contradictions become visible to consumers.
Analyzing Four Scenarios
In the lecture, we analyzed the potential impact of disclosing drawbacks across four scenarios.
Scenario 1: Conversion Rate Down x Churn Rate Up
The worst-case scenario. More people hesitate to apply after seeing the drawbacks, and existing customers lose trust thinking “they were hiding this all along” and leave. Negative in both the short and long term. This scenario was the management’s biggest concern and the primary reason they hesitated to run the experiment.
Scenario 2: Conversion Rate Down x Churn Rate Down
Fewer applications, but customers who made informed decisions stay longer. Customers who signed up fully understanding the drawbacks don’t later feel “I wasn’t told about this.” As a result, LTV (Lifetime Value) improves and customer support complaints decrease. Short-term pain in exchange for a stronger long-term revenue foundation.
Scenario 3: Conversion Rate Up x Churn Rate Unchanged
Trust in transparency enhances brand value and actually increases applications. The paradoxical effect: “If they’re honest enough to disclose the drawbacks, I can trust them.” This is precisely the positioning that fintech companies have used to win customers away from traditional banks.
Scenario 4: Conversion Rate Up x Churn Rate Down
The best-case scenario. Trust and revenue coexist. Transparency becomes a brand differentiator, positively impacting both new customer acquisition and existing customer retention. Ideal, but achieving it may require improving the product design itself, not just transparency.
What emerged through our class discussion was that which scenario materializes depends heavily on “how” the disclosure is done. Simply listing drawbacks would only confuse customers, but contextual information like “this card is suited for people who…, and not suited for people who…” can genuinely support better decision-making.
Behavioral Biases Distort Decision-Making
At the root of this case lies a behavioral economics insight: customers don’t always make rational decisions. The lecture discussed three representative biases that distort customer decision-making.
Optimism bias — people tend to believe “bad things won’t happen to me.” Even when they see a credit card’s high interest rate, they think “I’ll never be late on a payment.” In reality, many people encounter unexpected expenses that delay repayment, leading to hefty interest charges. Low insurance enrollment and the tendency to deprioritize security in IT investments are expressions of the same optimism bias.
Present bias — the tendency to prioritize small immediate gains over larger future benefits. When comparing “a card that gives you points right now” versus “a card with lower fees over the long term,” most people choose the former. This same pattern plays out in retirement fund management, health investments, and learning investments. Humans tend to perceive their “future self” as almost a stranger.
Decision paralysis from information overload — when there are too many options or too much information, people abandon the decision-making process entirely. Faced with an overly detailed financial product comparison chart, they end up saying “I don’t really understand, so I’ll just go with the most popular one.” This isn’t rational choice — it’s cognitive load avoidance.
It’s easy for companies to exploit these biases to boost sales. But that’s a business model built on customer irrationality, which is incompatible with SDL’s premise that “customers are partners.”
“Proposals That Defy Customer Expectations” Are Also Service
The biggest takeaway from this case was that blindly following customers’ short-term desires is not the only form of service.
Sometimes, “making a proposal that goes against what the customer expects, for the customer’s own sake” is service in the truest sense. Even if it reduces short-term revenue, it builds long-term trust and improves LTV.
This is an extension of SDL. If you view customers as “partners” rather than “consumers,” then allowing a partner to make a disadvantageous choice is contradictory. True partnership sometimes means telling people what they don’t want to hear.
What This Means for Employees — Thinking Through the SPC Lens
One of the most interesting points that emerged from our class discussion was that this experiment also impacts employees.
Continuously selling products that aren’t optimal for customers erodes employees’ pride in their work. Working while harboring the doubt “Am I really helping my customers?” inevitably lowers engagement.
Conversely, working for a company that deals honestly with customers boosts employee pride and engagement. This transparency policy also feeds into employee satisfaction — the starting point of the SPC.
Recall the SPC chain: Internal service quality -> Employee satisfaction -> Employee loyalty -> Productivity -> Service value -> Customer satisfaction -> Customer loyalty -> Revenue. “Being able to be honest with customers” as a company policy directly enhances employee satisfaction — the very starting point of the SPC.
The high turnover rates and mental health issues in the financial industry also reflect this structure. The dilemma of “I have to sell, but I don’t want to sell” reliably wears employees down. A transparency policy resolves this dilemma and creates an environment where employees can work with pride.
Transparency serves not only customers but also employees — this point is often overlooked but critically important.
The Power of a Vision: “Improving Financial Well-Being”
The bank’s vision of “improving customers’ financial well-being” wasn’t just a slogan — it carried strategic significance.
If you genuinely pursue “financial well-being,” selling products that disadvantage customers contradicts your vision. Conversely, enhancing customers’ financial literacy and supporting them in choosing the right financial products is the very embodiment of that vision.
Short-term revenue might decline. But if the trust that “consulting this bank will lead me to the best answer for me” is established, customers will consolidate all their financial needs with this bank. Even if a single credit card’s revenue drops, across mortgages, investment trusts, and insurance — viewed in terms of total wallet share — the outcome could be positive.
This connects to the value line concept we studied previously. Rather than “maximizing short-term revenue on every product,” the strategy is to break through on the axis of “trust” and build long-term competitive advantage.
“Honest Proposals” in IT Consulting
The same structure exists in the IT industry.
When a customer says “I want to implement the latest AI,” is that really the optimal path? Maybe modifying their existing systems would suffice. Maybe they should first revisit their business processes rather than invest in systems at all.
If you prioritize short-term contract value, proposing exactly what the customer asks for is the rational choice. But to build long-term trust, honestly saying “now is not the time for this investment” can be the highest form of service.
As an IT delivery manager, I face this judgment call regularly. When additional development requests come in, it’s easy to immediately say “Let’s do it.” But there’s a responsibility to coolly reassess whether that addition truly creates value for the customer’s business. “Given your current situation, I’d recommend revisiting this feature in six months” — an IT vendor capable of making such proposals may lose short-term revenue opportunities, but will continue to be chosen as a “trusted partner” over the long term.
Short-term revenue or long-term trust. This is a difficult call regardless of industry. But what I became convinced of through this lecture is that in the long run, trust drives everything. Trust is the most powerful fuel for keeping the SPC virtuous cycle spinning.
Recommended Reading for This Session
“Predictably Irrational” by Dan Ariely (Harper Perennial) — a landmark book in behavioral economics for understanding patterns of irrational human decision-making. It systematically explains why customers make suboptimal choices, covering optimism bias, present bias, and more. Essential reading for anyone thinking about how to support customer decision-making.
Next Up
Over these ten installments, we’ve covered the four characteristics of services, SPC, operations design, people development, SDL, and transparency. Next time, we tackle the final session’s theme: the strategy of “winning by deciding what to discard” and the value line concept, through the case of a certain airline.
