Sprint made a bold move recently by canceling 1,200 accounts because they complained too much. According to their books, these accounts called in 40 to 50 times more than the average account.
Apparently, these whiners were dialing in “40 to 50 times as often” as the “average customer,” and after failing to appease them, the firm chose to “terminate the relationship with those customers to allow them to pursue other options.”
This was smart. Some people might cry about how ‘unfair’ it is, but the fact is that these are at-will relationships. If Sprint doesn’t want to do business with unprofitable customers, then they should definitely not be forced to. It wouldn’t surprise me if legislation is created regarding this issue (or at least the attempt will be made to create legislation).
Sometimes it’s hard for us to realize that we don’t have to do business with every willing customer. The fact is that if we aren’t profitable, we can’t long provide our services to any customers.
This article notes more detail on unprofitable customers:
Unprofitable customers are parasites. Harvard Business Review estimates that, on average, 15% of all customer are unprofitable. The book, Angel Customers & Demon Customers, estimates that, in most industries, the best 20% of customers account for 150% of profits. The worst 20% typically lose money equal to 75% of profits.
You could always raise the prices of these customers, but that has the potential to backfire. How do you explain to one of these parasitic clients that they are being charged an additional premium due to their overuse of services that were supposed to be unlimited. It may actually be illegal to do so. It’s far easier just to cut these clients loose, and let them find another company with which to do business. There are almost always alternatives for the customer.
If you have customers that are clearly unprofitable, just cut them loose. It is ethical, and it is the only sane decision that a business can make.
