Learning from Startups: Ensogo Part 2 – trust once lost is hard to recover

Continuing from Part 1 where we discussed the sustainability issue of running the deal with Ensogo, which leads to feasibility issues for merchants and eventually affects the customer experience. Whereas the customers expect that the quality of services or products should remain the same, despite the group deal, the weak financials led to shortcuts being taken.

Ensogo’s products and services were perceived as poor value for money

While the deep discount + commission did not make sense for the merchants when they could not get customers to improve their marginal profit during the off-peak hours for services or improve their economy of scale for products, the customers expect that having a higher volume should drive down the price. It does not make sense for the customers that the quality or the quantity of services and products will be cut short by the merchants. Examples of such reduction include

  • Reducing the quantity of food
  • Receiving poor service from the beauty service while the products used in the treatment are not as good or the quantity is less than if the customers were to purchase directly from the merchants
  • Poor quality products

As a result, the perceived value for money is poor. While the customers expect excellent value for money due to the reduced price, in reality, the quality was reduced to match the lower price for many merchants.

Reputation matters. Once lost, it’s hard to gain back.

Although not all services nor products had a poorer quality, and maybe not even the majority, but it is the perception, not the truth, that mattered. When a customer expects poor quality from services/products purchased with Ensogo, the likelihood of them repeating the purchase lowers. At the same time, there’s also a much higher likelihood for those customers to spread the bad impression far and wide. In Thailand, the factor that started its decline may have been the internet forums and the poor word of mouth that propagated.

Reputation and trust are hard to build but easily destroyed. This rings true whether for a person or a company. Ensogo likely did not foresee this outcome and the repercussion of the poor financials they merchants saw, nevertheless there were stuck with the bad PR. The stake is too high to bet that reputation and trust can be gained back after losing them. The stake can be the immediate losses of revenue from existing customers and the potential losses of revenue from future potential customers that never converted. In the age of social media, one wrong move can end up like United Breaks Guitar or the PR debacle by United last year regarding dragging a doctor off the plane.

Many factors led to Ensogo’s downfall. Although it is unknown how much the loss of reputation and trust affected the company as a whole in Thailand, it likely was the start of the decline that Ensogo never recovered from.

2018-01-10T19:12:18+00:00 January 10th, 2018|Categories: Analysis|Tags: , , , , , |0 Comments

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