Who is a Customer?

An Interview with Umang Gupta

Start-up lore is full of stories about companies where hyping products and resources comes perilously close to—or even becomes—lying. There’s the founder who asks friends and family to masquerade as customers the day the venture capitalists come for a visit. There’s the CEO who underestimates—drastically—the time it will take to develop the product for a different machine or operating system. Sometimes it’s hard to tell the difference between reasonable hype and falsehood. We asked Umang Gupta how he makes this distinction:

When you sell sushi, you call it "sushi"–that’s marketing. You could call it raw dead fish. Is that the truth? Or is sushi the truth? Both of them are truths; one is just describing it in such a way that when you sell it—compared to your competition—you are presenting it in the best way. It is raw dead fish, but at the end of the day, nobody will eat raw dead fish although there are lots of people who love raw dead fish that happens to be called "sushi." So that’s not stretching the truth. It's packaging or labeling that makes marketing work in a capitalist society.

Stretching the truth is when you say you have $3 million in the bank when you really have $3000 in the bank. That’s beyond stretching the truth; that’s lying.

If I can’t trust somebody to tell me the truth, I find it impossible to work effectively with them. I figure the opposite is true, too. If I can lie to somebody about one thing, I could be lying to them about some other thing. How could they trust me? I don’t want you to think I’m so moralistic I ought to be in the priesthood. But I am pointing out that when you do business with people, it needs to be based on building a long-term relationship rather than on a transaction basis (the latter meaning that they buy something and you never see them again.) You cannot compromise long-term relationships for short-term benefit. It always comes back to haunt you.

Relationships are the essence of a great brand. If you don’t build relationships based on trust, you don’t have a great brand. A lot of the essence of great marketing is ethics, and ethics doesn’t necessarily mean being moralistic and high-minded and holier-than-thou. It means being consistent and trustworthy in what you say.

Here’s an example of a common, everyday ethics dilemma for a business: How does a salesman answer the question, "How many customers do you have?" Well, what is a customer? Is a customer someone who paid full price or someone you gave the product to at 90 percent off to try it out? What if you sold the product to them but they're really not using it anymore, but they still bought it? Are they customers? What if they actually haven’t paid for it yet but they’re using it every day? Is choosing the right definition of customer an ethical issue? Yes. But is there only one ethically correct definition? No.

My strategy for solving this type of dilemma is: I pick a rule, not just for that moment but one I intend to use consistently into the future. The rule may be subject to interpretation in different ways, but I choose one based on my best judment of what is reasonable. Then I say, "Let’s agree this is the rule from now on, so the next time we won’t have to have the discussion of what’s the ethically right answer, regardless of whether the answer is helpful to us or not. We’re being ethical by being consistent."

Ethics isn't just doing things that are legally required or morally right; ethics is also being consistent to a set of principles. To the extent that you’re consistently following a certain business rule that is accepted by the other party—and not just to suit your purposes at a certain time—that’s being ethical.

Umang Gupta is chair and CEO of Keynote Systems, which tracks and analyzes the performance of Web sites. Gupta was the founder of Centura Software Corp. (formerly Gupta Corp.), a leading wireless software tools and database company. He has also been an active investor and adviser to a number of Silicon Valley start-ups. From 1981 to 1984, he was vice president and general manager of the Microcomputer Products Division of Oracle Corp.