Sprint cut thousands of unprofitable customers loose in 2006, and recently American Express paid $300 to its lowest value customers if they paid and closed their accounts by April 1. Both firms received widespread criticism for their decisions, but the balance sheet shows firing low-value customers can be a good move. "It's in the math. You must look at how much money it took to acquire a particular customer or customer group before you fire them," says Tina Whitfield, CEO of digital marketing consultancy Equis Global. "If I paid $1,000 and only costs $50 a year to maintain, then I'm an idiot. Also: remember that it's very hard to rehire a fired customer."
If a company has to thin its heard, here are four important points to consider in the process:
- Have justifiable data. If a company better qualifies its prospects at the beginning of the relationship it will decrease its chances of burdening itself with customers it might have to fire later. And if it comes to breaking a relationship, data will be a key to helping the customer understand the decision.
- Find a middle ground. Maybe completely firing a customer is not necessary. For example,Orbitz may tell a B2B customer that it can no longer justify a dedicated website and staff for a client, but it can ease that customer into a relationship in which the client has contact center support without website support.
- Make the reinstatement conditions clear. At the current rate of economic change, the prospects that lost value quickly could also gain it back quickly. Make it easy for them to understand the revenue thresholds they need to approach to become a valued customer again.
- Don't kill the relationship. A customer or prospect may not be a fit for your company, but understand that social media puts your rep on the wire very quickly. End the relationship, but make sure the process is not acrimonious.