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Sprint Fires Its Unprofitable Customers

| Jul 10, 2007 18 Comments

John Gaffney has an interesting story over at Think Customers: The 1to1 Blog. It appears that Sprint has fired 1,000 of its most demanding and unprofitable customers. Some of the customers have been calling customer service over 25 times a month. But is firing them the right answer to Sprint’s problems, or is it just plain laziness on the part of its executives?

For each uprofitable customer there are a host of reasons why they are unprofitable and a corresponding host of potential solutions to make them profitable. Key amongst these is looking at the origins of why the customers are unprofitable. Twenty five calls a month is a lot. But why do they call 25 times a month?

  • Is there something in Sprint’s products & services that is fundamentally broken? If yes, then fix it.
  • Have the customers been sold inappropriate products & services? If yes, then transfer them to the right ones.
  • Is Sprint not solving their problem on the first, or even the 24th call? If yes then fix customer service.
  • Can we get the customer to use a lower-cost channel to resolve their problems? If yes, then migrate them across.
  • Can we pass on the costs of calling to the customer? If yes, then contact the billing department.
  • Can we pass the customer to a lower cost partner? If yes then migrate them across.
  • Is the customer just looking for social contact? If yes, then refer them to an appropriate organisation.

If you really cannot solve the problem at source because of a ‘customer-issue’, then ease them out of being customers with grace and aplomb. Perhaps even refer them to a competitor who can provide them with the right products & services. Don’t just fire them! You never know how many friends they have in high places. Or if they have an A-list blog. Or if they will start one in response!

In a world of ever-decreasing service, it would be perhaps ‘helpful’ if executives and their consultants looked at customer experience problems through a magnifying glass, identified a way to solve the problems at source and then took the responsibility to implement them, rather than just shrugging their shoulders and passing the problem onto someone else.

What do you think?

Is Sprint just being lazy in firing its unprofitable customers? Or is this an intractable problem that just can’t be fixed?

Post a comment and get the conversation going.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

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18 Responses to Sprint Fires Its Unprofitable Customers

  1. Graham Hill July 10, 2007 at 12:05 pm #

    I see that Seth Godin has a different take on the Sprint problem.

    I am not so sure about his suggestion that the 1,000 are “happy to be unhappy”. That is just pop-psychology speculation. It still doesn’t reduce the need for Sprint to fix its customer problems at source. And to be gracious to customers if they can’t (or won’t).

    But what do you think?

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  2. Jonathan Narducci July 10, 2007 at 6:56 pm #

    Graham,

    Customer centric behavior seems to be thought of as one way. Customers have “problems” with the vendor which must fix them to “satisfy” them. Sure, there are things that vendors need to “fix,” like the problems you suggested. And they shouldn’t go unattended. But there doesn’t seem to be a lot of concern about the problems customers can cause their vendors – aside from the fact there are good customers and poor ones, which is addressed here.

    What I think is missing is the “education” process that vendors need to add to their “solutions.” Customers need to understand their role in the customer centric strategy. They just can’t keep taking and demanding because suppliers are customer centric; they have obligations as well. Do customers understand the concept that support costs money out of their vendor’s margins and potential profits? Do customers understand that their vendors may increase prices because of unnecessary expenses they incur? Do customers understand that their actions may drive their vendors out of business? Do they understand their part in solving problems and the impact on service if they don’t participate in the overall process? Do customers understand the how much things cost? Do customers understand that “frivolous” support can keep their vendors from developing and delivering added value? Etc. Customer centricity is a two way street and businesses should make it part of their customer centric strategy.

    It’s all about understanding the positive and negative experiences customers can have and working with them to develop expectations about how solutions address these experiences. Customer centric strategies include vendors understanding the impact their benefits and activities have on their different customer segments and also include the impact their customers have on their benefits and activities.

    Good customers should want their vendors to be successful so they are around to provide the benefits that their customer centric strategies provide. “Poor” customers don’t care about their vendor’s success and act accordingly. Businesses can’t afford them. So, if businesses do the work to create a two way street then poor customers should be cut loose. If they don’t then they have decided that any customer will do.

    Jonathan Narducci

    CornerStone Cubed
    Building Customer Powered Value

  3. Graham Hill July 11, 2007 at 2:50 am #

    Chris Carfi over at the Social Customer Manifesto blog has a similar take on the Sprint issue. He decries their lack of going to the source of the problem and their lack of creativity in just firing the ‘Sprint 1,000′.

    It turns out that there is also a Sprint Forum with over 100,000 members too. The general discussion on the Sprint 1,000 has generated ober 104,000 views and over 2,200 comments! There seem to be an awful lot of unhappy Sprint users out there.

    This has the making of another Dell Hell.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  4. Graham Hill July 11, 2007 at 3:16 am #

    Tomi Ahonen over at the Communities Dominate Brands blog has a similar take on the Sprint 1,000.

    Tomi is certainly one of the most knowledgeable bloggers when it comes to mobile telecoms, having held senior positions at Nokia and having written the bible on mobile marketing. He points out that there are many ways to generate legitimate calls to Sprint’s call centre, particularly when you consider the complex way in which handset and service features are enabled, bundled and disabled by Sprint.

    He also points out that the Sprint 1,000 has now become a news item on CNN.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  5. Don Hill July 11, 2007 at 11:32 am #

    In my experience in the commercial business products industry there have been occassions when a customer simply was more work than they were worth, but they were still customers. Sprint mishandled the whole issue and have given themselves a blackeye over the way they poorly handled an issue that many businesses encounter every day.

    I have trained our customer service professionals to always handle “service intensive” customers with the same caring and grace as they do the high volume/high profit customers. However, when faced with continuing problem customers who frequently order wrong products, return products or exhibit unusual service requirements we typically just raise the prices charged to those customers. I’m not saying that we would charge higher than M.S.R.P. prices but they were moved into a higher priced matrix. This accomplishes two goals, the customer is paying more because of their ‘demands’ and they can make the choice to continue to do business with us or not. I refuse to diminish the quality of our service but that doesn’t mean the customer that creates these higher touch-points can’t share the burden of this added expense. Price may be their objection to not do business with us but the quality of our service will not be the issue.

    I agree that business is a two-way street, however, if the quality of the product/service is there then let the consumer make the decision to leave. Instead of firing the customer either fix the ‘real’ problem or let them exit gracefully.

    Don Hill

  6. Bob Thompson July 11, 2007 at 6:47 pm #

    Well said, Don.

    Regardless of Sprint’s intent, their idiodic handling of high-cost customers is now a PR disaster. Great fodder for the blogosphere and traditional media alike.

    Banks have instituted fees for low-value customers who visit the branch office or perform certain resource-intensive services, to try to solve this problem. This has not been without controversy, either, because who wants to pay more? But at least you can explain the rationale.

    In the case of Sprint, couldn’t they just state in new account sign-ups, or renewals, that excessive calls will incur costs? Maybe not a quick fix, but one that in the course of a year or two, would weed out high-cost customers or change their behavior.

    Of course, as Graham and others have pointed out, maybe there was a reason customers were calling. The root cause of the customers’ problems should have been addressed first. It’s all too easy to blame customers for the company’s problems.

    Bottom line: when your customer (firing) strategy makes headlines on CNN, you screwed up.

    Bob Thompson, CustomerThink Corp.
    Blog: Unconventional Wisdom

  7. Jonathan Narducci July 12, 2007 at 6:02 pm #

    Gentlemen,

    My comment “poor customers should be cut loose” was a poor choice of words to make the point I was trying to make. Don’s response was a much better way to say it. The business he described chose a method that was – and probably the best way – allowing customers to make the decision to buy or not to buy.

    But I believe it was a mistake by Sprint by not anticipating or planning for the problems some customers created for them (by Sprint’s perception). Sprint did a poor job of developing tiered products and services and a poor job of categorizing customers. As a result, customers took the brunt of these “mistakes.” I believe one of the customer centric principles is that customers don’t take the brunt of mistakes companies make and, in this case, Sprint made a few and compounded them by taking the action they did.

    My comments were meant to point out ways to avoid the mistakes. “Educating” customers that they have responsibilities to make customer centricity work as well can be done by creating different types of products and services for them but they should be thought of as early as possible and anticipated with the participation of customers. I believe that’s a principle of customer centricity as well. Controversy occurs when customers are surprised, just like this move by Sprint.

    By the way, shouldn’t it be PRed that Sprint isn’t customer centric?

    Jonathan Narducci

    CornerStone Cubed
    Building Customer Powered Value

  8. SAWHNEY AMIT July 13, 2007 at 7:33 am #

    I agree with Mr. Graham Hill.We need to look at the circumstances under which the customer become un profitable. It might be just be the case that a some re-alignment may do the trick. There is no denying to the fact that customer aquistion is always costly than retaining the customers. And if by properly serving the ” unprofitable ” customers we can turn them around to profitable customers we can not only look for a higher customer life time value but also higher brand equity.

  9. Graham Hill July 16, 2007 at 4:33 am #

    As I suspected, the Sprint 1,000 story is rapidly gathering momentum in social and traditional media.

    http://communities-dominate.blogs.com/brands/2007/07/the-sprint-1000.html

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  10. An American Person July 27, 2007 at 12:31 pm #

    Sprint REALLY messed up.

    We just stopped talking about their racial class-action lawsuit — Now, all of this happened at the same time they overhauled their branding campaign. Unfortunately, it’s no surprise. Have you ever been inside a Sprint store?

    If you want MY money, you have to convince me that ME, and MY MONEY are the prize… not YOU and all the stuff your network can do. If you treat me like crap; or I get the IMPRESSION that you treat your customers like crap (whether you do, or not) you’re going to lose my money; and the money of everybody I know. The saddest part for you is — while my calls may be a pain to you, my family relative’s company could be your largest corporate client. Do I care if I get on your nerves? Your monthly bills for service get on mine.

    This situation is parallel to the ugly woman who has the stellar voice; but noone buys her records; as opposed to the cute woman who is tone-deaf, but her records sell gold and platinum. When will companies realize that the PRODUCT is not what sells when everybody has similar products… it is the BRAND. It is the PERCEPTION of the brand. How many times can I call cust svc in a free country now, before I get cut off — even if I’m calling about a problem I did not originate? 50? 12? 4? As a customer, I can’t be so bothered. I want to go where I feel my money counts.

    In conclusion. Sprint can draw boring, slow-motion circles of light all they want to on TV and call it fast — while T-Mobile, AT&T and Verizon continue to snap up new, loyal customers.

    The simplicity of the stupidity is alarming.

  11. Graham Hill October 11, 2007 at 9:40 am #

    According to a recent post on Alan Moore’s excellent Communities Dominate Brands blog, Sprint’s CEO has had to step down in the face of poor results since the Sprint 1,000 fiasco.

    Communities do increasingly dominate brands.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  12. chandra shekhar October 23, 2007 at 2:11 am #

    I am assuming Sprint as an organization would have done background work before deciding to off load the customers – they would not want to loose revenue and customers in this age of high competition.

    With revene falling and the cost of servicing a customer increasing an operator has to make a choice of who they would want to serve and at what cost – we have situations seen with several telecom operators where customer are calling for more than 350-500 times a month – and they are size able number of customers – there are also blank callers and time wasters – would a telecom operator want to service such repeated callers and would it be wise (from operating costs) to service such customers –

    I am sure Sprint would have taken this into consideration – overall I would relate this to a marriage – one needs to work on a bad marriage – but after the efforts have failed a decision needs to be taken to enter into a divorce and close the chapter – and move on – only hope Sprint had made all efforts to understand why they have such high repeat calls

  13. Graham Hill October 23, 2007 at 1:11 pm #

    Chandra

    It would be nice to believe that Sprint did indeed do more than superficial sums when deciding to fire the Sprint 1000. Initially I trusted that Sprint had acted properly and fairly. But upon verifying the facts as they emerged it appeared that Sprint had not done its homework properly.

    The fact that many of the calls were apparently internally generated through hand-offs within Sprint as one department after another failed to resolve the customers’ problems suggests that Sprint did not do its homework. And that it failed to rectify its own internally generated costs afterwards too.

    And the fact that 300 of the fired customers were US soldiers serving their country in Irag (and therefore roaming extensively off-network) definitively suggests that Sprint did not do its homework. Note how quickly this particular problem was resolved and the soldiers’ service reinstated once Sprint’s mistake was spotted.

    I have no problems with companies declining to serve unprofitable customers, but to do so based upon internally generated costs through obviously broken processes, patently unfair selection criterion and with a crass Dear John letter, all without any real thought as to the to be expected media storm smacks of downright incompetence. The CEO has already paid his price.

    The Sprint 1000 has been a highly polarising case of corporate (mis)behaviour. On the one side sit people like myself who ask why Sprint didn’t think through this more thoroughly, particularly at the true causes of the costs, to see what could be improved before firing customers. On the other side sit people like Peppers & Rogers who applaud the fact that companies are firing unprofitable customers at all, irrespective of the background to the cost/profit equqation or of alternative unprofitable customer management strategies. You decide whether Sprint was right in this particular circumstance.

    As I wrote before, I am absolutely sure that if this was Toyota, things would have gone entirely differently.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  14. hamodah January 2, 2008 at 10:28 am #

    A Properly deployed CRM system should easily identify unprofitable customers, but this is not the only job it does! CRM should identify why customers are not profitable and managers must depend on that to fix the problems.

    Sometimes, no matter what you do with a customer, they will remain unprofitable especially if you are in the B2C business, and many companies especially if small end up loosing their shirts by servicing such customers, and the right thing to do is fire them; but for a company the size of Sprint, that was a bad move.

    In a highly competitive age, those 1000 demanding customers could turn into 50k, and then sprint will not get away with firing them, they will need to serve them at all costs! We live in a social age where people enjoy socializing online together and talking about things, including being mistreated by companies like Sprint!

    If a customer calls support 25 times per month, that means your service sucks! Maybe retire the service or fix it, not the customers. Marketing should work hand-in-hand with sales and support to drive value through the customer life cycle.

  15. Graham Hill January 22, 2008 at 11:55 am #

    You remember the monumental fiasco that Sprint created earlier this year when it fired 1,000 customers for calling Sprint too often, or for costing Sprint too much. After a little sleuthing, it appears that many customers had legitimate reasons to call so often, that Sprint’s incompetent call handling artificially inflated the numbers and that it completely underestimated the public backlash. Several hundred of the customers who were fired for roaming too much on other networks were in fact US soldiers serving in Irag.

    Sprint has since reinstated many of these customers. But that has not been enough. It has not apologised for its behaviour and it has not done anything to redress the problems. It has simply ignored the lessons learnt from prior customer service failures by Kryptonite, Dell and Jet Blue, amongst others.

    The facts speak for themselves. Since the Sprint 1,000 debacle in mid-2007:

    • It received bad press in blogs, the press and on TV
    • It lost over 1.2 million customers in the last six months, (and it didn’t gain over 2.4 million new customers as the rest of the US mobile market grew by almost 10%)
    • At an average ARPU of US$53 per month, that’s US$382 million of lost revenue over the last six months (and it didn’t gain US$764 million from the missing new customers
    • It was voted the worst company for customer service in the whole of the USA
    • Its share price has fallen from US$20 to US$10
    • It lost its CEO Gary Forsee
    • It is closing 125 of its shops due to cut backs
    • And it is losing 4,000 staff

    Not exactly a stellar record. And in an industry whose breakneck growth almost gives mobile telcos the right to print money.

    Although it is not possible to pin these serial failures entirely onto the Sprint 1,000 debacle, it is highly likely that in the ultimate socially networked industry, it had a big knock-on impact on customer retention, profitability and market valuation.

    Tip of the hat to Tomi Ahonen’s insightful analysis at the Communities Dominate Brand Blog.

    What do you think? Is Sprint the worst company in America? Or am I just being unfair?

    Post a comment and get the conversation going.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  16. Graham Hill February 3, 2008 at 3:47 pm #

    I hear that the man responsible for the Sprint 1,000 fiasco and Sprint’s generally declining performance, CMO Tim Kelly, has been fired. Finally. Something that I suggested should have happened some months ago. It is little consoluation for the 4,000 other staff who will also lose their jobs, albeit for no reasons of their own making.

    In a just world, Kelly would now be unemployable as a marketer. But it is highly likely that he will now pop up in an adult marketing role somewhere. Years of Kaizen at Toyota taught me that you should never play the blame game if something goes wrong. But in Kelly’s case I will make an exception. The buck has to stop somewhere in the C-suite. They get paid enough. I hope he has learned a valuable lesson about monumental value destruction through plain dumb marketing. Time alone will tell.

    It is also worth noting that Peoppers & Rogers applauded Kelly’s decision to fire the 1,000 customers at the time, saying that it was “good for the long-term”. Despite having it pointed out to them that there were many things Kelly should have done to fix the problem at source before resorting to such drastic action. It hasn’t turned out good for anybody in the long-term. I hope that they take pause to rethink some of the hidden complexity that dogs their flawed, one-sided Return on Customer theory.

    Tip of the hat to Tomi Ahonen at teh Communities Dominate Brand blog.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  17. estewart6 June 26, 2008 at 10:18 pm #

    I’m all about Seth’s blog and I think he makes a great point regarding Sprint’s decision. There comes a time when enough is enough and a customer will not be happy no matter what you do. I’ve had many a customer with this same disorder. I’m sure it came down to a simple financial decision. We’re spending $$$ to support these 1000 customers and we’re collecting $$$ from the 1000 customers. On the other hand it’s usually from our most unhappy customers that we can learn the most and correct or improve our company or product. I saw an interview with the president of Mindshare where he talked about this very thing.

  18. Bob Thompson April 11, 2011 at 11:56 am #

    There is a happy ending to this story. Sprint eventually realized that it had to actually fix the issues causing the customer satisfaction problems. It took a couple of years, but they pulled up their customer satisfaction scores.

    Listen to my recent interview of Jerry Adriano, VP of Customer Experience at Sprint: Sprint Answers the Call to Improve Customer Experience.

    Also see ACSI Scores for Wireless Telephone Service which found that Sprint increased its score from 56 in 2008 to 70 in 2010. Still slightly below industry average, but a tremendous improvement.

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