Every Company Needs a Good Map

A company must see that it is benefiting from its relationships with suppliers and customers. If it is not, it should fix or discontinue those relationships. I have seen companies lose a lot of money because they were afraid to tell a customer that they were losing money on the deal. It hurts the business and it hurts the other customers of the company.

In a story that seems to be taking on a life of its own, Sprint announced it was going to drop 1000 customers for excessively contacting customer service. I have made comments on several of these posts and now I think I'll chime in here.

I agree with Seth - they should use the savings to do a better job for the rest of their customers. I also agree with him that different customers may require different methods.

I agree with Dan - You should figure out one customer you probably need to fire.

As I told Cord - This is an interesting story but you have to wonder, why Sprint did not come forward with the “full story” as told on the Consumerist initially.

I think that Suzanne Obermier's jury may have come back with a verdict after a short but very informative discussion - you need to fire customers that are not just unprofitable but a pain to try to service.

Suzanne also had this link to this article in the Washington Post:  Sprint Nextel Defends Cutting Customers.

Very few blogs had links back to that article but Seth and a few others had links to what appears to be the first blog post at gadgetell. 

You do have to wonder why a person would stay with a carrier, aside from disconnection fees, after 2 years as some of these people have, if they were not profiting from their actions. 

So, what is the lesson to be learned here...

In my book I tell a story about a company that was losing money on 75% of its transactions because it was not looking at the cost of the transaction. With a 40% margin and a transaction cost of $75 (to process the order), any orders under $200 were losing money (40% of $200 = $80). After looking at the average order size of $150, and seeing that 75% of all orders were under $200, it was obvious why they were having trouble being profitable. A few orders for high priced items, and large orders by distributors were propping up the average. 

I can't find it now but a few years ago, in Inc. or Entrepreneur magazine, I recall reading about a furniture maker that stopped selling to Wal-Mart because of their excessive demands. No one had a cow about that story. In fact, he was more profitable after he left the Arkansas giant than he was before.

The point is this - if a customer is overly demanding that you make concessions to the point where you cannot profitably provide your product or service, then you need to change the relationship. Charge more, reduce the quality of the product, or discontinue the deal. 

You should not just drop customers because they complain. Those people may be doing you the best favor anyone can (short of just giving you money) by helping you to find your weaknesses. You should think about rewarding them. Turn them into secret shoppers and customer service monitors. Just make sure they are working for you and not against you.

I have had my share of trouble with phone systems. I look forward to the day when it is all VOIP and I can stop the madness of the monthly bill review and follow-up phone calls. I am certain phone bills have more errors that hospital bills - but it is close. It is amazing that no one seems to be able to give a level of service people can live with. That alone would make headlines. 

Any other horror stories???