Lodha and the trust test: 5 lessons for businesses when they have all the power

Based on a real customer experience which revealed lessons about contractual power, goodwill, brand promises and the responsibility businesses have towards customers. 

The real test of what a brand stands for, and its character, is how it behaves when a customer comes it to with a problem and the business has all the power. 

We liked Lodha Reservo, a project in Powai, and agreed to purchase an apartment as walk-in customers.  We negotiated a deal and even agreed to pay almost the entire consideration two years ahead of possession.  

When we asked for the agreement draft and title documents, we were told that, as per company policy, these could be shared only after we paid 5%. We paid. The people who initially claimed to understand the emotions behind buying a home were nowhere to be seen once the transaction progressed. 

We kept going from person to person, with responses seemingly at their mercy.  Documents arrived in bits and pieces, sometimes incorrectly. The title document raised serious questions about land ownership and ongoing litigation.  The agreement was also one sided, giving them power to decide what an owner could do with his apartment even after possession, Lodha could deliver the common amenities including the elevators after 2 years of possession, a third party managed temple in the complex and so on. We were told these were approved by RERA.  

We could have walked away. But we had invested time, energy and money and therefore wanted to find solutions. We documented 38 concerns and sought a meeting with their legal team.  Once again company policy came in the way; their legal team did not meet customers.  The person who finally met us had to keep shuttling between us and their legal team.   We were told the litigations would be “handled, without clarity on what that meant.   

We asked for protection of our money if the project wasn’t delivered as promised. RERA, they said, permitted them 18-month extension.  We even offered to consider other clear Lodha projects in the vicinity, such was our commitment.  When nothing really worked, cancellation became our last option.   

They then said, as per RERA, they could penalize us with 2% since cancellation hadn’t taken place within 15 days of booking.  Then lowered it to 1% as goodwill to be immediately revered to 2%.  But nobody bothered to ask the two obvious questions, did the customer have all requisite documents within those 15 days to make that informed decision? Did the customer want to cancel it in the first place? 

I wrote on social media, tagged the Govt of India questioning whether RERA’s mandate was to protect home buyers or serve builders.   I wrote to Lodha’s leadership, their independent directors and to their MD, Abhishek Lodha and their founder Mangal Prabhat Lodha.  Both blocked me on WhatsApp. 

I concluded that, as an individual customer, I had very little power. Here are 5 lessons businesses should take from this experience.  

1. Contractual power and moral authority are two different things. 

I’m not saying businesses shouldn’t have contracts or commercial terms. I’m saying that a contract should never be a substitute for judgment. Lodha insisted on 5% payment to share the documents. After complying with that policy, my question was whether I had been given the required documents to make an informed cancellation decision within 15 days.  This is where businesses go wrong by mistaking the ability to enforce a contract clause for the wisdom of doing so under every conditions.   Rules do bring consistency, but applying a judgement layer brings fairness.  A good business needs both. It should never be one vs the other. 

2. Understand the difference between a discerning customer and a difficult customer. 

I studied the documents carefully, brought forward 38 concerns, continued engaging through their organizational silos and even offered to move to another project.   This was an expression of my commitment. The cancellation was never even on my radar initially.  But when concerns remain unresolved, originations can see the customer as demanding. 

If businesses want customers to ask questions during project presentation or research groups, should they treat a committed home buyer asking real questions differently?  Should businesses decide when a customer is allowed to question them?   

Discerning customers can make organizations see their weaknesses. Businesses should never make customers pay for their organizational silos. I’m not suggesting that every customer is right and that businesses should abandon commercial clauses always.  There are also unreasonable customers. But facts must be examined.  Fairness too is an essential part of a commercial discipline. 

3. Goodwill cannot be a number that changes with the organization’s mood. 

2% “penalty” became 1% “goodwill” and then reverted to 2%.  What was the message here? The organization could change its position, and the customer had to adjust.  Is goodwill a concession offered to quieten a complaint?  If they had just cancelled and returned the money, it would have simply exemplified their willingness as a business to recognize situations which can demand a response beyond the interpretation of contracts. The withdrawal of a written offer without any reason because they just felt so, also creates a much larger question than the cancellation amount involved. I concluded that company’s word has simply no meaning. 

If an organization treats its commitments so casually with customers, one cannot help wondering whether the same attitude could spill into its relationship with employees, resulting perhaps in a toxic work culture. 

4. Your brand promise can become the very contradiction customers experience

They recently spent heavily on newspaper ads proclaiming trust. When I saw the huge ads, my obvious question was, what does trust mean when you are on the other side? 

I’ve spent 3 decades in the business of building brands, and I understand the efforts.  One can write a neat ad copy that articulates a promise and expect people to believe the same.  But the truth is what a customer experiences with the brand. The real tests comes when a customer raises a problem, and the business needs to choose between insisting on its contractual rights and finding a fair solution. 

5. A real brand-customer relationship begins when a brand gives the powerless customer a hearing. 

Maya Angelou had famously said “people will never forget how you made them feel” A large business has battery of lawyers, system, processes and the ability to make decisions that can badly impact a customer’s financial situation and even his future.  An individual customer has very limited leverage.  

The leadership and even the company’s independent directors and advisors must ask whether a policy is fair in each circumstance, if facts have been examined clearly and what precedent their decision sets and its impact.  If escalation through social media posts and reaching out to their independent directors were my routes to even be heard, the company’s systems have failed. I received templated responses promising to investigate the matter, then radio silence.  A templated response is hardly a solution.  Organizations must understand such responses are the beginning of an obligation.  

The cost of winning 

Lodha used its powers to get a possible advantage and a win of Rs.8 lacs of my hard-earned money in an unfair, individual transaction. But what has that decision cost in trust?  I cannot quantify the impact on future customers who may read my experience, or from others who have shared similar experiences in response to my posts.  But I know when I see their ads making grand claims, my own experience makes a cringe. 

Businesses cannot always make every customer happy, nor should they be expected to concede every dispute. But they must recognize how they exercise their power is as important as the power itself. 

The real character of an organization is not revealed when it has everything to gain. It gets revealed based on what it chooses to do when it has all the powers, and the customer has very little.  This is when trust moves beyond a marketing claim to an organizational choice.  

Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com.