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07/29/2003 Archived Entry: "Do you believe in demons?"

This week, the Boston Globe ran an article titled "Facing their demons," which revealed that many companies are now purposefully providing bad service to "demon" customers--those they deem to be too demanding, or just not profitable.

According to the article, providing poor service is now seen as a "behavior modification technique" designed to get customers to (a) stop asking for help and/or (b) become more profitable for the company...

One example given is Fidelity Investments. The Globe says Fidelity purposefully delays calls from "unprofitable" customers, encouraging them to use Fidelity's less-costly online service.

Funny, I find that kind of behavior hard to reconcile with Fidelity's self-description:

If you're an individual investor who does business with us directly by phone, mail, over the Internet or in person, we're dedicated to providing you with the products, services and information you need to best manage your investment portfolio.

I guess that dedication only applies to "profitable" investors, or dedicated 'net surfers.

American businesses have become obsessed with short-term profit, and thus, with immediately quantifiable phenomena. Today, a customer provides a very small contribution to the company's profit, so the customer is handled carelessly so that a "richer" customer can get star treatment. But what happens tomorrow? The "angel and devil" theory only works if you make some assumptions about your customers' influence.

Perhaps today's "unprofitable" customer is experiencing a temporary financial setback. (Of course, that wouldn't happen in this economy!) In a year or so, that customer is back on their feet. Perhaps they got a job, maybe they won the lottery, could be a rich relative died. In any case, this is now a potentially "profitable" customer... who, if your plan to exorcise your "devils" worked, is no longer your customer. In fact, they think your service sucks, and they're not likely to do business with you. You may have a wonderful reputation amongst the "established rich," but you're not going to grow your customer base if you piss off all the people who are still chasing the dream.

What about the influence of your customer? The "angel and devil" theory presupposes that your "unprofitable" customers only have influence over their own funds. What if they don't have a heavy need for your product personally, but are in a position of influence over a much larger, highly profitable account?

I recently wrote about an experience I had with SBC. I wonder if they were applying the "angel and devil" theory to blowing off a personal account held by an elderly gentleman who probably made more than the average number of support calls. If so, they failed to consider his influence. His experience was made known to the Board of the volunteer organization he works with, and as a result, the organization is actively seeking to sever all its accounts with SBC. This organization publishes a monthly newspaper read cover-to-cover by thousands of people in SBC's service area. If they chose to write an editorial about the experience, it could cost SBC many "profitable" accounts.

The only aspect of the "angel and devil" theory mentioned in the Globe article that I can agree with at all is the idea that sometimes, you do have to drop a customer. This should be a very rare occurrence. It's rare that a customer will be totally implacable, or they will need a service you just don't provide.

My advice: The decision to willfully drop a customer should be made at a high level, after careful deliberation, and it should be made in conjunction with the customer. Explain that you are unsure you can provide the service(s) the customer needs. Explain why you can't provide them. Remain open -- the customer may suggest a compromise that works. If not, do try and help the customer at the end with a referral or any other reasonable assistance, so they walk away understandably disappointed but not upset.

(It should be an honest referral, too, not a referral to "sic" a "devil" on a competitor. If you know your competitor does what the customer needs, say so! Being honest and helpful works: the customer may come back to you if they need something you can provide, knowing you'll help them even if you can't help them yourself. Plus, they'll be more likely to refer others to you, potentially giving you more "profitable" customers.)

My boss at Global Crossing understood this. From my first day at the Internet service there, he explained: We serve big corporate accounts that bring in thousands of dollars a month. But the most important customers are the average Joes who pay their $20 every month for dialup Internet service. Individually, each one is a drop in the bucket, but without them, the ISP wouldn't be nearly so profitable. A small profit out of $20 per month, multiplied by 250,000 customers, is not to be dismissed lightly.

If you're finding that your company losing money on a large percentage of its customers, perhaps you need to consider whether the problem is your "demon" customers... or your business plan.

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