4 Reasons Why Non-Disparagement Clauses are a Bad Idea

August 04, 2015

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Every time a customer engages in business with you, they are entering into a contract.

Some contracts are very simple. For example, when you purchase a meal, the restaurant implicitly agrees to serve you the food items as described on the menu, within reasonable time, in exchange for the posted price.

For most transactions in B2C and B2B relationships, the conditions associated with a contract are very basic. There may be some guarantees for the customer and some protections to the seller, mainly associated with their ability to secure payment, but nothing beyond that.

In light of a marketing landscape that’s quickly evolving and becoming more dependent on peer-to-peer recommendations and online reviews, many businesses have taken extreme and often unnecessary steps to protect their brand from negative actions on the part of customers that will directly impact the image or profitability of the business organization.

In short, in a misguided effort to protect their brand reputation, many businesses are telling customers that they will impose penalties if they voiced their honest negative opinion in public forums. They tell customers they can’t write bad reviews.

Including a non-disparagement clause on a contract is a bad idea, and any business organization that wants to create a business environment conducive to growth and superior brand development should steer away from engaging in this type of behavior.

What is a review-specific non-disparagement clause?

Imagine a service provider such as a hotel or plumber. Along with your quote or reservation, there is a good chance you will have small print, with the terms and conditions outlining your business relationship with the provider.

So far, so good, but what if the provider includes a conditional clause that hinders you from writing a negative review regardless of the specific details of your experience? Believe it or not, many consumers are finding out that they have entered into contracts where speaking their minds is subject to a punitive fee.

Last year, a couple from Cumbria was fined one hundred British pounds for writing a negative review on TripAdvisor after their one-night stay at the Broadway Hotel in Blackpool, England. Verbatim, the terms and conditions of their booking contained the following non-disparagement clause (head here to read the full story):

Despite the fact that repeat customers and couples love our hotel, your friends and family may not. For every bad review left on any website, the group organiser will be charged a maximum £100 per review.

To their surprise, after leaving their negative review, this couple received the credit card charges associated with this clause. While this may seem unfair, the practice is not necessarily illegal. But it does create many barriers that will hinder the ability of a business to effectively connect with its customers and create experiences conducive to loyalty and increased conversion.

Who’s adding non-disparagement clauses?

Adding a non-disparagement clause to the small print of a contract is a symptom of pervasive operational issues and poor management.

Businesses whose focus is on creating a superior customer experience at all stages of the transactional cycle have no need for this type of measure. A non-disparagement clause is a knee-jerk reaction to a slew of negative reviews affecting the brand reputation of a business, paired with the unwillingness to tackle the problem at its root.

Most commonly, this type of clause is found in small, privately owned businesses that have been ill advised by less-than-scrupulous peers or marketing agencies. This scenario happens most often when the transactional experience allows for terms and conditions to be included, and the customer signs the contract, booking, or order, either in person or digitally.

(Check out: Florida Apartment Complex: Write a Bad Review, We Fine You $10,000)

We can’t think of a single scenario where having this type of clause makes sense in a business setting. Presently, there are efforts underway to create legislation that would protect the voice of the customer and the right to post online reviews. Preemptively muzzling customers from voicing their honest opinion if it will have a negative impact is a First Amendment issue. Threatening to come after customers via a lawsuit is not the type of environment that fosters free commerce.

Let’s look at some of the reasons why you should refrain from engaging in censoring your customers:

  • A non-disparagement clause does not fix organizational problems

As a business, there is nothing worse than wanting to wear blinders. Threatening your customers with penalties for voicing their opinion in light of negative experiences puts you at a disadvantage when it comes to securing usable data that can be leveraged to refine and improve your business strategy.

Without the voice of your customers, pleased and displeased alike, you can’t draw a full picture of how others perceive your business. Thus, you walk aimlessly on a business path that leads to nowhere. Negative feedback is priceless when it comes to process and product improvement that is aligned with the wants and needs of your customers.

  • A non-disparagement clause is a poor customer service strategy

Putting a non-disparagement clause in place tells your customers that you don’t care. For many, an online review is the means to escalate a concern that went unattended on location, with the least amount of effort.

Removing the option to have an easy path to connect with you sets the stage for high customer churn, and erodes any hope for repeat business or inclination to recommend your venue to others.  

  • A non-disparagement clause can result in viral embarrassment

In almost every instance where a business has moved forward and acted upon its non-disparagement clause, the tables have been turned, resulting in deeply embarrassing press coverage that always takes the side of the consumer, and often acts as the ombudsman as consumers attempt to recover the penalties imposed by the business.

  • A non-disparagement clause doesn’t help build your brand reputation 

As much as you may want to have perfect 5-star review profiles on every possible online review site, this may not be the best and smartest move.

Having negative reviews interspersed among your positive reviews adds trustworthiness to your profile, and provides you with an opportunity to show future customers the way less-than-perfect situations are resolved.

A potential customer is far more likely to want to engage with a business that is committed to going the extra mile when things do go wrong than with one that has a flawless profile.

Finally, and most importantly, your business can only build a strong brand reputation by changing behaviors, processes, and products based on customer feedback. Without feedback, the chance of ever developing a strong online and offline reputation is almost none.


Read On: Look on the Bright Side: 4 Ways Bad Online Reviews Can Be Good For Your Business



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