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Sprint (S) made headlines this summer when it “fired” 1,000 subscribers whose calls to customer service were deemed excessive. Few telecom companies are known for outstanding customer service, and Sprint’s decision did little to improve its image.
But corporations must maximize their ability to effectively serve the majority of their customers. There are times when it makes good business sense to give up on extremely high-maintenance customers who are a drain on resources:
When it’s a matter of cost-effectiveness. It’s expensive to cater to customers who make excessive demands. Even retailers like Lands’ End, whose customer service and return policy are legendary, have been known to cut off customers who chronically return merchandise and incur shipping, reshipping, and processing costs that have to be passed on to all customers. Financial-services provider ING Direct deliberately operates in a no-frills mode that can’t accommodate hand-holding but raises returns for depositors thanks to the firm’s low overhead.
When it’s a matter of security. Some frequent callers have less than honorable intentions—to finagle credit out of their service providers, for example, or, as was sometimes the case in the Sprint situation, to try to get information about other customers’ accounts.
When it’s a matter of employee retention. Contending with irate, difficult customers goes with the territory for tech support and customer service personnel. But dealing with chronically abusive customers burns out employees and sends them looking for new careers. Recruiting and training new workers takes time and is costly.
Sprint may need to get its house in order with regard to how it serves all its customers. But even the best-intentioned efforts cannot succeed with those who simply refuse to be happy, or worse, are being dishonest. Parting ways with these customers may be a necessary step in the journey toward a better overall record of service.
U.S. corporations have become the envy of the world thanks to the discipline of the free market. Companies such as Sprint that seek to close the door on so-called nuisance customers do themselves a disservice. High-maintenance customers, annoying as they may be, provide valuable information about products that are poorly designed or services that don’t live up to their billing.
Gadfly consumers do companies and other customers a favor by calling attention to problems. Rather than banning the bearers of bad news, companies should pay attention to their complaints and track them with sophisticated software. After analyzing this data, a company may decide to redesign or reprice a product or service or to change subcontractors.
Given the problems that U.S. multinationals have experienced this year with shoddy or dangerous Chinese products, it’s even more important that they closely monitor customer criticisms. Imagine if Wal-Mart (WMT) had ignored a customer’s complaint about his dog getting sick from Chinese-manufactured pet food because that particular shopper had returned lots of items last year.
And all companies that provide retail goods must adjust to doing business in the Internet era. Although losses due to shoplifting may decline as more consumers do their browsing and buying online, the rate of returns is likely to increase because a picture on a screen is no substitute for touching an item or trying it on. Some of the money once reserved to cover losses due to “shrinkage”—retail jargon for stolen, lost, or broken goods—should be reallocated to handle increased returns from e-commerce.
Dealing with vocal or even obnoxious customers is the price of doing business in a free market. If Sprint and Lands’ End ban certain consumers, these shoppers will click on the home page of Verizon Wireless (VZ), L.L. Bean, and other rivals.Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.
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