Critics occasionally castigate economists for “knowing the price of everything but the value of nothing.” What economists measure best is not what matters most. (Love is not merely an interdependent utility function.) Because they are handy and comfortable with numbers, economists discount culture, a concept impossible to quantify with precision. Yet, Nobel economist Gary Becker observes, “…culture and symbols usually have great influence over behavior.”

Cultural forces surround our daily lives. These forces come from not only other individuals, but from larger entities and institutions as well. Corporations are one such entity, and through the market we experience quite different corporate cultures. Here are two personal examples that reflect vastly different responses to customer complaints.

Last year, I broke down and replaced my 1989 Polaris 4-wheeler with a new machine. It was wonderful, twice the power of my old one and 4-wheel drive. It climbs easily and plows through snow. I treat new machines with care, but after only a few hours the engine, sounding like a cement mixer with rocks in the drum, self-destructed.

I hauled it into the local dealer and requested a new machine—or at least a new engine. They offered to rebuild the engine. I replied, “No, I didn’t spend thousands on a new machine to get a rebuilt engine. Give me a new one.” “NO! It’s a company decision,” they said. I responded with this letter to the CEO of Polaris:

Dear Mr. Tiller:

...Please help me avoid an unpleasant situation. Your solution will be easy, cost effective, and consistent with your “Code of Business Conduct and Ethics” (p. 2, p. 4).

...Although I treat machines with great care, especially during break-in, this one developed a terrible knock with only 4.8 hours (about 20 miles) on the machine. I delivered it to the local dealer... They tore it down and advised me of an extremely serious manufacturing defect…I requested a new engine. They advised me Polaris is unwilling to provide this… I find this position unreasonable, unacceptable, and inconsistent with Polaris's reputation and long-term interest.

...I will appreciate your prompt consideration and notice of resolution.

Receiving no response, I called the chairman’s office and referenced my letter. His AA told me he was preparing for the quarterly board meeting and was too busy to talk. “OK, I’ll FedEx my letter to board members.” Within hours a Polaris rep called, apologized for the “misunderstanding,” and asked what he could do in addition to a new engine and an extended warranty. My new Polaris now sports a winch and a snowplow.

Contrast this with another unpleasant corporate experience turned bright. Earlier this month, an employee at the local Costco called our office about a purchase I made. A colleague answered the phone and the Costco employee was quite rude. I called the General Manager about his employee’s behavior. Within minutes he called and apologized to my colleague, and the same day he sent the following apology letter:

I would like to apologize for the unpleasant experience you and your staff had with Costco the other day. I have investigated the matter and taken appropriate action to prevent a similar incident from occurring again.

...Our primary goal at Costco is to keep our members happy, and we would like to ensure that this incident has not created ill will between us. Enclosed is a twenty-five dollar cash card for your next shopping trip and we hope it will be a more pleasant experience.

Sincerely,

General Warehouse Manager

The card went to my injured colleague, and this time my letter to the company CEO will reference only my appreciation for Costco’s corporate culture. The local warehouse’s response just adds credence to Costco’s reputation as a company who treats their customers with dignity and respect. Rather than alienate a good customer as Polaris did, Costco gained the favor of several.

Although culture is notoriously difficult to measure, and it must be modeled using weak proxies, we all know it is important. Unless an outfit is in a government protected monopoly position, ultimately bad feelings show up on the bottom line. The market provides evolutionary pressure towards treating people fair and just—it pays to be nice in the long-run.