You're Fired! Is "Firing" Unprofitable Customers Ever a Good Idea?

By Selland, Chris | CRM Magazine, October 2004 | Go to article overview

You're Fired! Is "Firing" Unprofitable Customers Ever a Good Idea?


Selland, Chris, CRM Magazine


I JUST GOT FIRED.

You did, too.

AT & T recently announced that it is pulling out of the consumer telephone market to focus on its B2B customers. Consumers wanting to reach out and touch someone will need to do it on someone else's network from now on.

[ILLUSTRATION OMITTED]

I write this column with some sadness at witnessing a great American business icon fading away. I'm also a bit annoyed: According to AT & T, it's not their fault, it's yours and mine.

Is it? In most cases some percentage of an organization's customers is responsible for a large percentage of its profits--often all of its profits. And in more than a few cases the response of companies is to "fire" their unprofitable customers. In AT & T's case, those no-gain customers are consumers.

Although this argument makes sense from the standpoint of short-term profitability, one must ask what it means when the majority of our customers is unprofitable. And what happens when we take this argument to its logical endpoint, which is what AT & T is doing by firing all of those unprofitable customers? Do we still have a business?

It is usually not the customer who is unprofitable, it is faulty business management that results in lack of profit. Yes, we all have problem customers, but too often this becomes an excuse for not making the necessary internal changes to streamline cost structures, eliminate internal empires, or knock down internal operational and data silos. CRM applications and analytic reports may reveal the "problem," but may point to the wrong solutions.

This becomes especially obvious when companies look at things from the customers' perspective. Most of us unprofitable consumers will, unfortunately, remember AT & T as the company that despite tens of billions spent on cable and wireless acquisitions could never figure out how to put all of those services on a single bill. …

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