It is usually not the customer who is unprofitable, it is faulty business management that results in lack of profit.
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I just got fired.
You did, too.
AT&T recently announced that it is pulling out of the consumer telephone market to focus on its B2B customers. Consumers wanting to reach out and touch someone will need to do it on someone else's network from now on.
I write this column with some sadness at witnessing a great American business icon fading away. I'm also a bit annoyed: According to AT&T, it's not their fault, it's yours and mine.
Is it? In most cases some percentage of an organization's customers is responsible for a large percentage of its profits--often all of its profits. And in more than a few cases the response of companies is to "fire" their unprofitable customers. In AT&T's case, those no-gain customers are consumers.
Although this argument makes sense from the standpoint of short-term profitability, one must ask what it means when the majority of our customers is unprofitable. And what happens when we take this argument to its logical endpoint, which is what AT&T is doing by firing all of those unprofitable customers? Do we still have a business?
It is usually not the customer who is unprofitable, it is faulty business management that results in lack of profit. Yes, we all have problem customers, but too often this becomes an excuse for not making the necessary internal changes to streamline cost structures, eliminate internal empires, or knock down internal operational and data silos. CRM applications and analytic reports may reveal the "problem," but may point to the wrong solutions.
This becomes especially obvious when companies look at things from the customers' perspective. Most of us unprofitable consumers will, unfortunately, remember AT&T as the company that despite tens of billions spent on cable and wireless acquisitions could never figure out how to put all of those services on a single bill. The company that became the first major violator of Do-Not-Call legislation. The company that tried to upsell us when we were calling to complain about being billed for services we never ordered.
If AT&T had focused on customers rather than blaming them for its internal inefficiencies, perhaps the outcome would have been different. It may seem that I'm singling out AT&T, but I am simply using it as one of the most obvious examples of a dynamic in many companies--particularly in larger firms where internal empire-building too often takes precedence over doing the right thing for the customer. I'm not suggesting that the current management team at AT&T is solely responsible for this sad situation, either--the company is suffering from years of customer neglect.
The moral of this story? Sometimes, firing unprofitable customers is as effective as amputating a finger to heal a hangnail. One business value of CRM is delivered when we use technology to retain customers, and to streamline and align our internal operations to make them more profitable, rather than to decide which ones to get rid of. If we use CRM to justify the argument that the customer is the problem, we're not only wasting our money, but we're ultimately killing our businesses.
Chris Selland is vice president of sell-side research at Aberdeen Group. He previously founded Reservoir Partners, a relationship management strategy consultancy, which was merged into Aberdeen Group in March 2004. Contact him at firstname.lastname@example.org
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