Brands Must Be Aware Of Their Social Contracts

Chris WrenFebruary 15, 20184044 min

The venerable L.L. Bean brand, renowned for exceptional, high-quality outdoor apparel, finds itself under fire today, the target of rising customer backlash over abandoning a long-held return policy that is no longer viable.

Embodying a core belief that “the more time you spend outside together, the better,” much of the brand’s iconic history centered around their famous catalog, dating back to the 1920s. In 2000 L.L. Bean opened their first US store outside of Maine, and like many outdoor brands including Patagonia and REI, they actively promote conscientious programs that encourage natural conservation and education.

But what set the brand apart from other outdoor industry merchants was an incredible ‘100% satisfaction guaranteed’ return policy. For decades, L.L. Bean believed so strongly in its products that it vowed to replace any item purchased, even if a customer bought it years ago and it became worn out, and even if they had lost the receipt. A Fast Company reporter recounts, “My mother-in-law has been wearing the same L.L. Bean watch for at least as long as I’ve been alive, having sent it in to be replaced a couple of times.”

As strongly as it believed in its products, L.L. Bean also believed in its customers, and this is where this story is as much about sociology as it is economics.

A February 9th announcement from Shawn O. Gorman, L.L. Bean’s executive chairman (and the great-grandson of the original Leon Leonwood Bean), addressed what has become a problem, “Increasingly, a small, but growing number of customers has been interpreting our guarantee well beyond its original intent. Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products that have been purchased through third parties, such as at yard sales.”

It seems L.L. Bean’s original policy was based on a mutually acceptable social contract between the brand and its customers wherein the brand’s policy and (for the large part) customers’ interpretations of that policy were in alignment over what was reasonable and fair. So, it’s no surprise that the brand is joining many other retailers in getting more prescriptive about their return policy.

Brands Must Be Alert To Cultural Shifts

So what happened? The old implied social contract is simply no longer viable for the business because the culture has changed. A TED talk called ‘A Cognitive Surplus Will Change The World,” by Clay Shirkey recounts an interesting experiment into human behavior by Uri Gneezy and Aldo Rustichini. They were testing something called deterrence theory which basically says if you want someone to do less of something, apply a punishment. So, they looked at day care centers which had a problem of parents picking up their children late. The social contract implied that parents would be there on time to pick their kids up, because the teacher can’t leave until the children are picked up causing a great inconvenience to the teacher.

In the experiment, they tested the addition of a fine (financial punishment) for parents who were late to pick up their children. They assumed the fine would deter parents from being late. But to their surprise, the fine actually increased the number of late pickups. In the control group, social constraints created an outcome that was more generous (sensitive to the teacher’s time) than the test group which operated under a contractual constraint (the teacher is being compensated for the time). The difference pitted two motivations against each other which showed them to be incompatible: intrinsic and economic. (I’ve summarized the study greatly for brevity here, but it’s worth viewing the TED talk to get the full details).

Over time, it seems L.L. Bean’s customers (either new or second-hand purchasers) became more economically motivated than the brand assumed them to be. And because this assumption centered on a foundational pillar for the brand, making a change to the 100% guarantee invariably has shaken some of their customers.

This should provide a real-time case study demonstrating just how important it is for brands to pay attention to cultural shifts. And while it may seem a downer to move from social constraints to contractual constrains (and have to describe policies in detail), there could be opportunity for added revenue. L.L. Bean might be able to charge a premium for extended guarantees, perhaps even subsidizing them for their most loyal customers. For those purchasing products second-hand, the brand might be able to create new customers by having them add some sort of product assurance that might still be cheaper than a new pair of boots or a watch, encouraging re-use and sustainability.

Remember that brands are never finished and to be successful yours must be managed to move with the rhythm of culture.

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One comment

  • Tim Mohler

    February 16, 2018 at 10:58 am

    Many brands are attempting to address this challenge as their customers become more savvy, budgets tighten, and the internet continues to allow the rapid spread of the latest techniques for gaming the system. Coming from hospitality, I’d suggest that the spread of reams of small print terms, limitations on the authority customer service agents have to address problems creatively (if there are humans involved at all), and subsequent depersonalization of brands significantly exacerbates the problem by eroding consumer trust. And, when brands allow a few bad actors to drive them into a defensive posture, all the other customers for whom the brand’s implied social contract is a core part of their brand relationship are left with a decision – either leave, or accept a new world where it’s them vs. another impersonal, bureaucratic machine.
    My choice of internet retailer, bank, and mobile phone service are predicated on their always refunding any fees or charges that are out of line. I don’t abuse it, and I’m willing to pay more for the privilege. But if that agreement is broken, I’m leaving – immediately. I don’t have time for hassles.
    There are times when a brand must change it’s positioning, but when it does, it should be clearly explained (these bad actors are making the product disproportionately expensive for all of you – our good customers so we’re creating some limits), human customer service agents must be empowered to make exceptions when appropriate, and PR must be ready for bad actors to take to the internet. Finally, the core brand promise of high quality, and a quick addressing of any issues through a still generous return policy must be retained. If your customers understand, they will defend you and their defense is the strongest marketing a brand can have.

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