Choosing to Lose–Customers, that is.

August, 2007

One of our most commented-on blog posts last month was one that tackles the age-old question of: How important is customer retention? Did Sprint Nextel do the right thing when they ‘fired’ some of their most needy customers?

RRW holds a strong belief that business strategy must be based on customer profitability. We’re forever preaching to our clients that it makes no sense whatsoever to implement programs that acquire unprofitable customers. And, we’re always trying to push them to direct retention efforts to customer segments that are highly profitable.

Yet, we continue to be amazed at how few companies really have a handle on value or customer profitability.

On the other hand, we are huge proponents of top-notch customer service. We believe that if you treat your customers right then they’ll respond in turn with high loyalty. Heck, they may even become evangelists and spew your praises to all of their friends and family, if you treat them the right way.

That’s why it’s been so tough to develop an opinion on the recent Sprint decision to dump some of their high maintenance clients. This article in Washington Post, however, firmed up our opinion. Sprint Nextel Defends Cutting Customers.

We believe Sprint made the right decision, IF you’re only looking at the decision in terms of profitability, or even from a service perspective. Those 1,000 or so customers that Sprint Nextel chose to cut were making 40-50 calls each month to customer service. Clearly this wasn’t the right fit (and they may just be kinda wacky to begin with–who has the time to make 50 calls a month??). Handling those calls was certainly detracting from legitimate customer issues.

However, look at all the bad press that this customer-firing incident has caused Sprint Nextel. When you consider that, overall, their subscriber base is more than 50 million customers, how much impact could servicing 1,000 pesky customers really have?

Then, balance service requirements to handle 1,000 wacky customers against the bad press generated from this incident.

Did they do the right thing, overall? The jury is still out, in my opinion. And, it will always be tough to balance the need to retain customers against the requirement that customers be profitable.

We’ve spent some time thinking about ways to obtain that balance, and have put together an Idea Paper that illustrates one way to focus retention efforts only on profitable customer segments. It also includes some other retention tactics that you may find interesting. Let us know if you’d like these ideas. We’d be happy to share.

Of course, if you’d prefer to chat with us directly about your marketing strategy, just call us at (503) 206-5255, or visit our website: www.rrwconsulting.com for more info.