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Is Being Too Honest Bad For Business?

by J. Money on Thursday, May 9, 2013

psst listen up

(Guest Post by Skint in The City)

I got to wondering this a couple of weeks back, when I tried to change $200 into sterling pounds. There I was, a trusting soul, taking it to my local bank to exchange. I know, I could have got a slightly better deal by checking out comparison sites for currency conversion, but I wanted it done fast and didn’t think the difference would be so great as to be worth the while.

So, I got to the teller at my local bank, brandished my $200 and announced that I’d like to change it to Sterling. Now, maybe it was her last day on the job. Maybe she’d just had a nasty fight with her boss, or perhaps she was simply a savvy soul out to save her customers a few pennies. Whatever it was, this lady was all about the honesty. She winked – actually winked – at me, checked around to see no-one was listening, then leant forward towards the glass and said:

“You’d be better changing that at the post office. Our rate’s rubbish.”

“Really?” I was pretty taken aback and immediately curious. “Why are you telling me this?”

She shrugged. “It’s the truth.”

Was that it? Was she simply into telling the truth, even if it meant turning customers away?

It isn’t the first time I’ve come across such honesty when trying to give someone my business. A while back the woman at the dry cleaners told me to go home and put my jacket in the washing machine rather than get it dry cleaned again. After I picked my jaw up off the floor I went home, tried it and discovered she was spot on.

Was she right to be so honest though? It benefited me, but what would her boss say? I’d imagine if you owned the dry cleaning firm you’d be more than a little mad at her sending customers home to do their own washing.

Is that kind of honesty a good business tactic? A couple of years back, on a Scottish island, I tried to check into a hotel with Mr Skint. There was a jazz festival on and hardly a room to be had. Finally, we came across a guest house that still had vacancies, but as the owner led us to see the rooms he was more candid than one might expect from someone wanting our custom.

“The only rooms we’ve got left are what we call our crappy little rooms,” he announced with a smile. He was right. Half-charmed by his honesty, we took one anyway and spent a gloomy weekend on a lumpy bed hiking to the bathroom downstairs in the middle of the night. We can’t say we weren’t warned.

So, does brutal honesty always benefit the customer? In the case of the bank lady and the dry cleaning assistant, I’m glad they were so straight with me. On both occasions they saved me money. Especially the dry cleaner – thanks to her I learned to gaily throw dry clean only clothes in the wash on a regular basis. As soon as I see a dry clean label now my fingers start twitching for the detergent. It’s saved me a fortune over the years!

And I suppose the hotel guy did let us know what we were in for. In fact, we were a little blindsided by his honesty and sort of ended up taking the room for that reason, so maybe it worked in his favour?

Have you ever been just that bit too honest in your business dealings? Or do you believe that when it comes to dealing with customers it’s better to be a little bit Pinnochio? Ever come across sales people who were just too candid for comfort? Go on, let it all out!

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Guest Post by skintinthecity.com – showing you how to live the high life on a shoestring budget.

{Photo by mpclemens}


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{ 37 comments… read them below or add one }

1 Edward Antrobus May 9, 2013 at 8:07 am

I think it’s a case of losing the battle but winning the war. Think of Santa in Maricle on 34th Street, directing parents to Macy’s competitors. Customers found it so refreshing that it garnered Macy’s more customers. Of course, that was just a movie, but it has the nugget of truth in it. I know that if a store told me that somewhere else had a better price, I would be more likely to shop there in the future

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2 J. Money May 9, 2013 at 11:44 am

YEAH! I like that… winning the war is ultimate – good one :)

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3 Anne @ Unique Gifter May 9, 2013 at 8:22 am

I think it’s exactly what Edward said about winning the war. I’m sire you would trust that teller a lot more in the future regarding her own bank’s products. Likewise with any drycleaning you did have. I’m a big fan of the honesty, it makes people more trustworthy. It would backfire if it was a one time only type purchase or if a tangible product is what is panned. In all of your examples, the businesses still offered an alternative that you may need or want in the future.

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4 John S @ Frugal Rules May 9, 2013 at 9:25 am

As a customer I think it’s great because it might make me aware of a better deal, but as a business owner I can relate to how the manager would feel. We have done this numerous times for our business mainly because it benefitted both us and the client. We don’t want to charge someone our rate for something they could get done for 1/3 the price and not need our expertise. The nice thing is nearly every time we got business that was much more suited for us and the client stuck with us because they appreciated our honesty.

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5 Samantha May 9, 2013 at 9:29 am

I agree. If a business always was super honest with me I would be much more likely to patronize them in the future. And I would trust them, and go to them for advice. That creates a meaningful relationship with respect. And even if they were a bit more expensive, I would value them more.

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6 @debtblag May 9, 2013 at 9:37 am

Being dishonest about little problems could be good for a bit of short term gain, but being honest — and then fixing those little problems — is always better for business in the long run.

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7 Shafi May 9, 2013 at 9:53 am

If you had asked her whose rate was better, the banks, post office or another financial institution, then she could have given an honest answer. Tellers are not in the business of advising people in their finances. It’s not their job. In my opinion, that’s not honesty. That’s dragging her feet in someone’s business without asking.

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8 J. Money May 9, 2013 at 11:47 am

yeah, I can see that… it does feel like the teller was kinda lazy, but who knows. maybe she just loves helping people?

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9 KC @ genxfinance May 9, 2013 at 10:00 am

Honesty is so rare that sometimes, we even doubt it when its right in front of our face. It might be a strategy for their business but hey, they might be really good people too..

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10 Skint in the City May 9, 2013 at 10:00 am

@Shafi, yes I was taken aback when the bank teller came out her advice because I hadn’t asked for it at all! I swear my mouth was literally hanging open!
@Unique Gitfter, @Frugal Rules, yes I agree I would trust the honest epople more in the future though. So if the drycleaner tells me next time that a garment really does need drycleaned I will definitely trust her because I know she’d be honest if I could just throw it in the wash.

My experience with the waitress though? – that was just plain random!

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11 Mike Carlson May 9, 2013 at 10:16 am

I can see a good side in being honest to your customers. It gives more dignity to your business, even when you try to reveal the down side of it.

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12 Jacob Erickson May 9, 2013 at 10:22 am

I think there may be a time where being too honest is a problem, but I’d like to think being honest will get you the farthest in the long-run. Most of the time when events like you mentioned happen, you leave feeling good about the company because they just saved you some money. They are expecting that you’ll refer other people because of this.

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13 Financial Black Sheep May 9, 2013 at 10:27 am

I can see both sides to the situation, but I think too much honesty would make the business lose money. It’s great the teller saved you money, but that really isn’t her job. If you asked rates and then compared, I think it would have been better on both sides. Otherwise she could get in trouble for that.

Same with the dry cleaner, depending on the garment really. I use dryer bags that do a great job dry cleaning for a whole lot less, but if I were in the dry cleaning business I would do what the customer wanted. How did the dry cleaner know you didn’t want it dry cleaned no matter what?

I worked in sales and I did what the customer wanted. If we didn’t have something to sell I offer other options for my store. If the customer wanted directions to another store, then I would give them directions, but I wouldn’t sell them on the other store. That just wasn’t my job.

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14 Andrea May 9, 2013 at 10:53 am

I’m always very honest with my clients even if it means sending them to a competitor. I’d rather lose people with the truth than keep them with a lie.

I just can’t make myself recommend something the client doesn’t need, and I have a really hard time pushing people into a service/product of mine if I know they can’t afford it. Maybe that’s not the best way to run a business, but since I exist almost solely on reputation and word of mouth, I like to play it safe.

I think it really depends on your motivation. I earn enough to pay my bills and remain self-employed, so money isn’t my motivator right now. Instead, I’m more concerned about whether I can truly help someone through my company. If I can, I’ll do everything in my power to land them as a client (without being a sleazy car salesman type) but if I can’t, I have no trouble recommending someone who might be more appropriate.

Excellent guest post – this one provided a lot of food for thought!

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15 J. Money May 9, 2013 at 11:48 am

And even better comment! :) That’s why everyone loves using your services – you’re always fair and trustworthy. I love your ethics.

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16 My Financial Independence Journey May 9, 2013 at 11:07 am

I think honesty is critical if you’re interested in building long term relationships with your customers. You can be dishonest once or twice with a given person before they catch on and go somewhere else.

It really is the little things that keep people happy and coming back.

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17 Retire By 40 May 9, 2013 at 12:18 pm

Honesty is the best policy. You’ll win more loyalty in the long run, right? It can be hard when your money is at stake though.

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18 J.D. May 9, 2013 at 12:48 pm

For my side business, I’m always 100% honest with my customers. I sell home theater accessories, and bring some with me when giving a free quote. I tell them that they are more than welcome to purchase them anywhere, but mine will be cheaper and just as good of quality as any physical store in the area. I have some speakers too, but will refer them to other places if they aren’t exactly what they want. My business motto is to do what’s right for the customer. A happy customer will be more likely to recommend you to a friend than someone who thought you just did an ok job.

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19 J. Money May 10, 2013 at 11:57 am

“do what’s right for the customer.” – I like that!

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20 SavvyFinancialLatina May 9, 2013 at 1:12 pm

I love honest business owners. I often recommend them to other people happily.

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21 #Broke Millennial May 9, 2013 at 1:22 pm

Great question to pose. I’m not entirely sure of my answer. Obviously, I would love being on the receiving end of financial savvy tips, but if I were the business owner I’m not sure how often I’d tell people not to dry clean their jacket.

I’m curious if the small pile of dry clean clothes I have can indeed go in the wash. I typically will put a piece of clothing back on the rack if it’s dry clean only. The only reason I have some are through gifts from relatives and the occasional formal dress or blazer.

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22 Financial Black Sheep May 9, 2013 at 1:53 pm

Just had to add:

I have to agree that business owners can get a lot of repeat customers if they are honest, but big businesses just aren’t like that. Since the teller had to look around to give you the cheaper deal at another business, she was obviously going against company policy. I don’t think her bosses would appreciate that.

Instead, if she acted as if she believed it would improved customer relations and wasn’t afraid to stand up for the cheaper price, then it might be good for the company. Since she did not it makes the company look bad both ways.

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23 Slackerjo May 9, 2013 at 2:00 pm

I work in support/customer service and sadly, most people are not allowed to be honest or they can lose their job, so sometimes the customer has read between the lines. Of course the person making the rules don’t deal face to face with customers so it’s easy to make a rule like that even though being honest actually provides better service.

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24 J. Money May 10, 2013 at 12:00 pm

I know, right?? I used to battle my bosses all the time when doing customer service and they hated me for it, but they did eventually understand it was good for overall business (and just good overall in life, too). They then promoted me to manager where I told all my customers I was on *their* side which is really how it should be. Customer service is FOR THE CUSTOMERS even though it’s on behalf of a business. At least that’s the route I went and I can promise you it didn’t hurt :)

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25 Cassie May 9, 2013 at 2:31 pm

In all honesty (lol), more companies would keep me as a customer if they were more honest with me. Sure, I may use their services less frequently, but I’ll come back again and again rather than seeking out someone new, cheaper, or even more convenient.

That cheaper comment may get me hung out to dry by the PF community, but it’s true. I value honesty in the companies I deal with, and sometimes it’s worth the extra pennies.

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26 Skint in the City May 9, 2013 at 4:16 pm

@Broke Millennial. Re washing the dry clean clothes – go for it, really. I swear, when the dry clean woman told me to wash then I was, as I wrote in today’s guest post, gobsmacked. But I decided to take her at her word – after all, she was risking losing her job, right? I felt she must have a point to feel so strongly about it. I’ve written a post about washing dry-clean only clothes if you’re interested – will send you the link. Saved me a fortune!
@Slackerjo – I was thinking that too. Was concerned by these folks’ honesty in a way, in terms of how their bosses would react. Sure, it benefited me greatly but their bosses would not be happy!
@Financial Black Sheep – I’m thinking now – is there a difference between being honest if you’re the boss (guess you can do whatever you like then) and being honest as an employee (when you need to watch you’re back a little?)

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27 Kyle @ Debt Free Diaries May 9, 2013 at 4:53 pm

In the long run, I think honesty is the best policy with a business. There was a co-worker of my girlfriend who was looking into some weight loss (aiding) supplements that my girlfriend sells. My girlfriend was up front with her and told her that although they do help, she wasn’t going to drop 40 pounds in two months if she kept a “junk food diet.” She also told the lady that there was no miracle pill on the market to do what she was looking for. In the end my girlfriend lost the sale, but the relationship she saved with her co-worker is much more valuable. In fact, she’s much more likely to purchase something else in the future because she knows my girlfriend won’t try to sell her something just for the sake of making a quick buck.

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28 J. Money May 10, 2013 at 12:01 pm

Good for her! Better to set expectations straight from the beginning, ESPECIALLY if it’s a friend or co-worker!

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29 Nick @ ayoungpro.com May 9, 2013 at 4:58 pm

When I worked as a bank teller, I was the teller turning people away with the truth. I frequently told people to go next door to the grocery store to buy their money orders ($5 vs $0.15). In all honestly, my employer only cared about sales but I couldn’t do that in good conscience. Guess what happened though? I was the top selling teller in the state of Utah every single quarter. In fact, they ended up changing the teller bonus structure because I was making $3,000 every quarter in bonuses (not a lot to some but back then it seemed like a lot). The moral of the story? I was able to sell things to people because they trusted me and knew that I was not going to sell them something that they wouldn’t benefit from.

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30 J. Money May 10, 2013 at 12:02 pm

Work it, bro! That is awesome!! What made you leave the bank business later? Or are you still in it, just not as a teller? (I forget?)

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31 Nick @ ayoungpro.com May 10, 2013 at 12:12 pm

I left the banking business about 10 months ago. I had transitioned into a role in IT, but I was lured away by an E-Commerce company that offered me 3x what I was making for essentially the same job.

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32 J. Money May 14, 2013 at 2:20 pm

Wow, NICE man. That’s one helluva upgrade!

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33 Mike@WeOnlyDoThisOnce May 9, 2013 at 8:04 pm

I think it depends on the business, honestly. Building rapport with clients in any business requires honesty, first and foremost. A little more anonymity sometimes affords less straightforwardness.

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34 Kevin H May 10, 2013 at 6:55 am

I once had a call from a customer who had the problem of low hot water pressure. After some questioning on the issue I have him my thoughts, “The hot water coil on your boiler has likely scaled over.” I then proceeded to tell him the coil can be flushed out however I do not have the equipment so I sent him else where. Was that the right choice? I believe so.

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35 Skint in the City May 10, 2013 at 9:29 am

@ayoungpro.com – Proof from the horse’s mouth, right there – being honest is good for the bank balance!

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36 NKunitsyn May 19, 2013 at 7:02 pm

I believe it highly depends on the business. But you shouldn’t get carried away with lying like the US banks did back in 2008, or it will hurt you. A good consensus is always good!

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37 J. Money May 20, 2013 at 10:41 pm

Yeah – they sucked, didn’t they?

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