• December, 18 2008
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

Sprint: Please Hold for Silence

Recent comments from executives at telecommunications vendor Sprint Nextel indicate that calls to its customer service lines are decreasing, and the company will close some of its contact center locations in response. As first reported by TradeTheNews.com, Sprint's Chief Service Officer Bob Johnson predicted that service call volume might shrink by as much as 20 percent in 2009, which would lead to the company locking the doors of up to 20 contact centers, or half the number it operated in 2008.

The news led to a 7 percent dip in Sprint Nextel's stock price on Tuesday, and left some analysts thinking that the closings would compound the company's recent problems with customer service. Poor network quality and bad handsets have plagued Sprint since mid-2007, according to Timothy Horan, an analyst with Oppenheimer. In a news article at Forbes.com, Horan indicated those two issues have hurt Sprint's market share, with customers switching to AT&T or Verizon.

Tough economic times sometimes call for tough measures, but in this case Sprint Nextel's potential decision to close contact centers carries a strong dose of the ironic. Like SAP slashing its IT budget or American Express cutting back on travel and entertainment, the reduction goes to the heart of what Sprint does for its livelihood, and what it asks its customers to spend their money on.

"In this environment, many companies like Sprint are looking to cut costs; unfortunately, customer care organizations and contact centers are often viewed as cost-centers, making them sitting ducks for slashing costs," says Bruce Temkin, vice president and principal analyst for customer experience at Forrester Research. "It's unclear how these contact closings will impact Sprint's customer relationships, but the wireless carrier just came out 107th out of 114 U.S. firms in Forrester's customer experience rankings. So Sprint will likely lose more customers even if it maintains the status quo."

Forrester's rankings [full listings can be found at Temkin's blog] show that Sprint is trailing other wireless carriers by a significant margin. Sprint's nearest competitor on the list, AT&T, is in a seven-way tie for 64th, including TracFone, another wireless carrier.

Sprint will respond to these challenges by increasing marketing spend in early 2009, but that approach carries risks as well. "If Sprint decides to heavily invest in customer acquisition, customers might be in for a rough time as a growing number of new customers vie for a smaller number of call center reps," Temkin says. There is already some marketing motion, as Sprint has been introducing new wireless routers, BlackBerry phones, and other products that may reduce customer erosion.

All is not doom and gloom for Sprint Nextel, however. A Reuters story claims companies like Sprint and T-Mobile are hopeful that the incoming Obama administration will adjust existing FCC policies on access rights to telephone lines, raising the level of competition in the telecom industry. Some industry watchers claim that the current policies favor AT&T and Verizon, which were part of the Bell phone company until the monopoly was dissolved in 1984. For details, see Reuters coverage here.

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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