Increase Font Size Option 5 Reset Font Size Option 5 Decrease Font Size Option 5
Home | Personal Finance | Investing | The Worst Companies: Does it Pay to Treat Customers Badly?
Got Opinions? facebook_16 Facebook twitter_16 Twitter RSSRSS
 
The Worst Companies: Does it Pay to Treat Customers Badly? Print E-mail
(5 votes, average 5.00 out of 5)
Personal Finance - Investing
Written by Omie Ismail   
Thursday, 29 April 2010 07:41

This month, the pro-consumer website, Consumerist, ran a contest to determine the "Worst Company in America". Much like the NCAA basketball tournament, the champion is picked from a group of companies customer_servicethat compete with each other for the dubious distinction. There are a series five rounds where readers pitch in and vote for which is the worse company in each round. This year the honor went to a real champion - the infamous Comcast which has distinguished itself by escalating their cable charges and having  notoriously terrible technical and customer service. For the record, last year's title went to the money sucking fiasco known as AIG.

Consumerist's readers seem to have a knack for separating really outrageous companies from those that just have a few questionable business practices. For instance, readers singled out Cash4Gold as having "fraudulent" business practices which helped propel it into the "Final Four" trouncing wanna-bees like Best Buy, a company that assaults its customers with it's Geek Squad overrated and overpriced  'Optimization' services.

We decided to run a few numbers on the results of this Consumerist unscientific contest to answer an intriguing question - "do companies that treat their customers like garbage get punished in the stock market?" Here's what we found.

Thankfully, our study came up with a very comforting answer - Yes. There seems to be a strong correlation between treating customers poorly and stock performance. In other words, the higher up in the "Worst" contest, the more likely a company was to underperform the S&P 500 Index over a 5 year period. For the companies that are currently publicly traded, here's their performance by category.:

  • First Elimination Round: 73% (8 of 11 companies) beat the S&P 500 Index
  • Second Elimination Round: 57% (4 of 7 companies) beat the S&P 500 Index
  • Third Elimination Round: 33% (only 1 of 3 companies) beat the S&P 500 Index
  • The Final Four: 0% (0 of 2 companies) beat the S&P 500 Index

Remember this is a "worst" contest so getting knocked out in the first round is a good thing. Of the bottom 5 publicly traded companies, only Apple beat the S&P 500 with a stunning return of 637% over 5 years. Apple's very existence on the list was hotly debated with many readers incredulous that a company that does so many things right could even be eligible for the competition, let alone make it past the first round. But Apple's closed architecture, onerous application approval process, and decision to only go with AT&T for the iPhone irked enough people for it to make it all the way to round 3.

If you follow the instincts of Consumerist readers who tend to have their radars on for bad company practices, eventually those companies take a beating in their stock prices. Perhaps that might offer some solace for those consumers who feel cheated.

Check out the Worst Company in America for more on this annual contest.

Returns of Consumerist Worst Company In America 2010 Contest:

(As you go through this chart - keep in mind that it's a good thing to be eliminated early in the competition.)

Worst_Company_In_America


Some important notes for those interested in the details:

  • Returns include all dividends and stock splits using data provided by Yahoo! Finance.
  • Not all entity returns could be calculated due to bankruptcies, short stock price histories, and mergers.
  • AIG and GM were excluded due to massive government intervention on a scale much greater than other firms.
  • Paypal, Ticketmaster, NBC were not included since they make up a minority of revenues for their parent companies and therefore stock price is not necessarily indicative of their performance.
  • Delta Airlines was not included due to lack of 5 year stock price.

Related Articles:

 

Are You Cheap? Take the Quiz that will enlighten you!

Are You Beyond Cheap? Take our new Scoundrel Quiz and see how bad you are.


Want to Learn How to Live Better and Cheaper?

Get our Famous 5 Rules of Living Cheaply today! You'll get over 20 pages of great content for free with full access to our Cheap University.


Like this Article? Get LiveCheap delivered daily:

or get updates via RSS.

 

Like this article? Share it on Facebook or more!

Twitter! Facebook! Del.icio.us! Digg! Google! Yahoo! Reddit! Mixx! Live! StumbleUpon!
Comments
Add New RSS
+/-
Write comment
Name:
Email:
 
Website:
Title:
 
Please input the anti-spam code that you can read in the image.
haverwench |2010-04-30 08:09:18
I can personally attest that I've cut off business relations with one of these companies (Bank of America) because of its terrible treatment of me as a customer. If they lose enough customers this way, that's got to lower their profits, which you would figure should hurt their stock price as well. (But then the market can be irrational sometimes.)

It's odd that cable companies don't lose more customers if their service is that bad, given how many other alternatives there are these days.
Omiewon  - B of A |2010-05-01 16:32:11
Bank of America seems to defy gravity when it comes to adding customers. Nobody there can really help you with anything unless it is a very straightforward transaction. Yet, I think that all the branches and ATMs is what helps them.

They have a very good infrastructure but the people side is non-existent.
John605  - Cool analysis |2010-04-29 07:11:08
Agree Apple is a fluke. Cable companies are awful. Interesting how badly cable does vs direct tv.
 
Joomla Templates by Joomlashack