I saw the following article... and it shocked the hell out of
me. It may be a good idea to maximize profits, but... i can't
imagine the karmic hell you'll go through in another
life.
When a customer is put on hold a long time, given snail-like
service, or offered less attractive prices, at most companies it's
inadvertent. But at a growing number of firms, it may be
deliberate.
That's right. Companies are using poor service as a behavior
modification tool to transform an unprofitable customer into
either a profitable customer or a former customer.
In the most extreme cases, companies dispense with the subtlety
of behavior modification and tell a customer straight to his or
her face not to come back, as Filene's Basement did recently with
two sisters from Newton who, in the Basement's opinion, made
excessive returns and were chronic complainers.
Larry Selden, the coauthor of a new book called ''Angel
Customers & Demon Customers,'' said one way or another,
companies have to deal with their demon customers.
''The bottom 20 percent of a company's customers -- the demon
customers -- can consume 75 percent of its profitability,'' he
said. ''It isn't necessarily the customer's problem. In the vast
majority of cases, it's the company's problem.''
Selden and coauthor Geoffrey Colvin of Fortune Magazine turn on
its head the old maxim that the customer is always right. They say
companies need to view themselves as investing in a portfolio of
customers and figure out which of those customers are profitable
and which ones are not, and why. Then a company can target its
products and services at the profitable customers and either help
the unprofitable ones become profitable or get rid of them. In
other words, the customer is not always right.
Determining the profitability of a customer requires the
gathering of a lot of detailed information, including the products
or services the customer buys, the ones returned, and all
interactions with staff. Supermarkets track a lot of this
information with their loyalty cards. Credit card companies
already know everything their customers buy and now subscribe to
credit reports on almost a daily basis to learn their other
financial moves.
When companies apportion all of their costs, including capital
expenses, to individual customers, Selden said, they are often
stunned to learn most of their profit comes from a very small
group. Toronto-based Royal Bank, for example, told Selden 93
percent of its profits came from just 17 percent of its customers.
Those angel customers, the ones returning the greatest profit,
need to be kept happy. Fidelity Investments, for example, told
Selden its phone system uses technology that identifies the
caller, and if the caller is a highly profitable customer he or
she is automatically routed to service representatives with
training in that customer's particular interests.
But the flip side also applies. If the caller is unprofitable,
he or she may be put on hold while more profitable customers are
served first. The delay serves as an incentive for the
unprofitable customer to go online, where service costs are far
cheaper.
Other companies use other behavior modification techniques.
Federal Express and other firms charge unprofitable customers
higher rates. Catalog companies stop sending catalogs to
unprofitable customers. Royal Bank told Selden it would trace a
check for an unprofitable customer in three to five days, a
service it would do in one day for a profitable customer.
Chris Hoofnagle, deputy counsel at the Electronic Privacy
Information Center, said most customers would never know they are
being manipulated. ''The way in which you can be treated
differently is almost undetectable,'' he said.
In rare cases, Selden said, a demon customer cannot be
converted to profitability and must be banned. Selden said
Fidelity banned a customer with a $500,000 portfolio who was
keeping three of its financial advisers busy all the time.
''Not managing your demon customers can have a huge cost,''
Selden and Colvin write. ''They may not be demons as individuals,
but they are killing your stock.''
Several retailers declined to comment on their policies, but
Rick Segel of Burlington, a former retailer and author of the
''Retail Kit for Dummies,'' said he disagrees with Selden's
philosophy. He said every business has ''bottom feeders,'' but
retailers have to learn to live with them.
''A customer is a customer. I don't care what business you're
in,'' Segel said. ''We open the doors and whatever comes in comes
in.''