By George Anderson
A Strategy + Business article says that more companies are crunching numbers to determine which customers cost more to do business with than they are worth.
Chris Dallas-Feeney, senior vice president, Booz Allen and co-author of Capturing Value Through Customer Strategy says, " It's a scarier notion to turn clients away than it is to hope against hope that you can make profitable the 500 clients you should get rid of. I call this the 'hope springs eternal' way of thinking. The reason salespeople are successful is because they are generally optimistic and don't want to get rid of customers. And that's a good thing. But a company can't afford to let optimism stand in the way of making a tough decision about customers when it's necessary."
Wharton's Peter Fader of the University of Pennsylvania's Wharton School of Business disagrees. "I think it's insane to do. For one thing, it is hard to diagnose past behavior to understand why people did what they did. Historical behavioral data is rich and interesting, but it has its limits as a guide to the future."
Moderator's Comment: Two Questions--
- Do companies have the information to determine which customers are profitable and those that are not?
- What is your take on what retailers and other companies need to do with unprofitable customers? [George Anderson - Moderator]