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Should You 'Fire' Unprofitable Customers?

Sprint created a firestorm in the business world and the blogosphere when it was announced that they recently fired 1,000 customers. According to Sprint, these customers called multiple times a day regarding issues that Sprint claims were resolved. Other inside sources claim that these customers continued calling to demand credit. Customer Service reps were exhausted dealing with them so they continued giving small credits. Over time these customers were racking up credits worth thousands of dollars. Sprint

Our group has faced a similar dilemma with clients. What should a bank do with customers who call multiple times daily to check their balance, making sure they have enough money in their account to buy lunch? These customers refuse to use other avenues of communication. They refuse to check on-line or use the automated phone menu. The net result is that the customer becomes a revenue drain. The customer is costing the company rather than being part of a profitable relationship. Should a company put up with this situation to avoid the negative word-of-mouth that Sprint has faced? Should you allow a few customers to con the system and write it off as black-mail payment?

I have heard heated points of view on both sides. Some argue that you should never, ever fire a customer like Sprint did. These folks cite options Sprint might have taken such as creating a surcharge for each call to the customer service line. But wouldn't this create another firestorm of negative word-of-mouth and more calls to complain and demand credit? Others argue that Sprint made the right move. They argue that you can't let customers take advantage of you and applaud Sprint for having the guts to make a tough call.

Wherever you stand on this issue, it's an important conversation to have. How can you stay in business if your customers cost more than they generate? What do you do with these customers?

Post a comment and share your own thoughts.

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Comments

I read once that you should fire your the least productive 10-20% of your clients each year. I have never been able to do that. In my profession it is impossible to know where your next referral may come from or the next client that runs into legal issues. Therefore it has never really made sense to automatically fire clients in my mind.

If clients were actually causing me to lose revenue then that would likely be a different story. It sounds as though Sprint reached this conclusion and made a sound business decision as unpopular as that may be with some people.

Great post, Tom. Very thought provoking and applicable in so many businesses and professions.

Rush

Thanks for the comment, Rush. I have, of course, heard about Jack Welch and his philosophy of firing the bottom 10 percent of your workforce based on performance - but haven't heard the same thing with clients.

I agree - if you have a profitable relationship it doesn't make sense to "fire" a client just to do it.

Great piece Tom, and good to talk with you again! This is a very important topic for every salesperson and business owner to consider. I personally believe that there is a definite point at which a company must divorce from their customer.

I apologize in advance for the shameless plug which follows, but it is actually quite relevant. I wrote an article back in May, "Sales: When To Fire a Customer" that hits the nail on the head. See if you agree.

http://ideaseller.typepad.com/idea_sellers/2007/05/sales_when_to_f.html

Not a shameless plug, Daniel - just an extension of the conversation. You make some extremely valuable points. In fact, you made me think about our groups list of clients both past and present. I think it's time to give some thought to where we've invested our time and resources.

Like you, we have also chosen not to do business with a few clients. In some cases it just wasn't a good fit and we weren't the right firm to help them with their needs. In other cases, the client was wasting our time and their money because they had no real commitment to act on the information we provided. Some people would argue that you should never turn down a customer, but sometimes you have to look at the bigger picture and choose what's ultimately best for both you and the customer.

Nice post Tom. I found 10% of my clients were causing 90% of my headaches. Running my own business, it took a long time to get up the courage to fire this bottom 10%. I finally took the plunge and have not looked back. I enjoy my work a lot more and am able to devote more quality time to the 90% of my clients that my work so rewarding. It must be done tactfully, but I would suggest any business give this idea serious consideration.

Thanks for providing the personal experience, Brett. Our group had a board meeting yesterday and we discussed this whole issue. I was reminded of a client we have refused to work with because of those headaches and just thinking about the ex-client stressed me out. You're right, sometimes it's just not worth the headaches.

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