Dumping Customers for Profit

Dec 19, 2002

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–

  1. Do companies have the information to determine
    which customers are profitable and those that are not?

  2. What is your take on what retailers and other
    companies need to do with unprofitable customers?

    Anderson – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

Be the First to Comment!