Firing Customers
posted by: Nick Roman on 2/2/2010
In a very interesting blog post, Ginger Conlon of 1to1 Media discussed a situation in which she was fired as a customer for being potentially unprofitable. While Ginger understood the reasons that the insurer terminated her business, she questioned whether the publicity fallout and negative word-of-mouth made the decision worthwhile.
There are, of course, other well-known examples of companies firing customers. In the United Kingdom, a large bank famously fired over 150,000 unprofitable credit card customers (rather presciently, as it turned out, as this was well before the credit crunch meltdown at the end of 2008). The bank withstood a huge amount of bad press immediately after the event, with the UK media finding those customers whose financial situation seemed to be the exception to the profitability rule.
Many years ago, a bank in Chicago famously added a surcharge to those customers who used a teller to withdraw cash when an ATM was readily available. They didn’t quite fire their customers entirely, but removed a very unprofitable service. Many customers left.
The result in both these cases was a significant return to profitability for those businesses. The business decision turned out to have been correct.
My question is: rather than considering the impact of bad word-of-mouth or negative publicity, should businesses consider how to handle the experience of those customers they intend to keep? Would a program of proactive communication, coupled with solicitation of feedback from all customers (and, yes, action on that feedback) serve to pre-empt the effect of negative press and word-of-mouth in order to cement those relationships?
Every challenge represents an opportunity. It’s up to companies who take such unilateral actions to reassure those customers not affected by them, in order to maintain their loyalty. After all, these are the profitable customers they’re banking on.
Will they demonstrate that they’ve learned the lesson?
What’s your view?