Fire Your Customers

I’m not trying to shock you when I say that you need to figure out a way to get rid of some of your customers.

I saw this when I worked in wireless: Some customers were literally more trouble (in dollars) than they were worth (in dollars).

Wireless carriers today aren't that different from insurance companies (ting, notwithstanding) when it comes to their business model. As a customer, you are paying an access fee (a premium), and the carrier (insurance company) is hoping you use less than what you bought.

In the early days of cell phones, it was different: Carriers passed most of their costs to you. Even though it was more confusing, it was actually way more transparent. For example, you, as a customer of Carrier A, paid for the roaming minutes you used on Carrier B’s network because Carrier B charged Carrier A for those minutes.

It was my job to verify the correct capture of those minutes according to how business rules were written — i.e, what was the carrier cost if a customer started a 30-minute call at an “off-peak” hour and then stayed on the phone into “peak” time while roaming and returning to his home network and running out of billed minutes at the 25-minute mark? We called it “bucketing,” and it was no picnic to verify that a bill was built correctly.

But one day, a smart marketing guy figured out that nobody liked worrying about roaming or how many minutes he had left.

So he got a statistician to calculate the average calling behavior that of customers and extrapolate how much an average customer cost the carrier (roaming, non-roaming, network capacity wise). With that baseline, it was time to start experimenting with unlimited plans and bolt-on features (early nights and weekends, anyone?) to both increase and simplify revenue potential. That's when carriers stopped charging customers for roaming — even though they were getting charged for those minutes.

Carriers took on the potential for more cost to reduce complexity.

It made it easier to get people to sign up when you could tell them that he service cost $100 a month instead of telling them they'd pay a lot or a little depending on where they were standing and what time it was over the course of a month. The result of that shift was that some customers (who roamed a lot) started costing carriers more than their peers — even though they were paying the same fees as their peers. In extreme cases, when roaming time actually exceeded on-network time every month, this was a real problem.

I'm no accountant, but when someone pays me $100 and costs me $200, I don't think I can make that up in volume. So the high cost folks got letters and calls with a lovely “it's not me, it's you” message and the phone number and website of Carrier B. In many cases, we even “allowed” them to leave their remaining contracts early, graciously waiving any termination fees (bighearted, I know).

All that to say, no matter what business you're in, I guarantee you that there are customers you that cost you more than they bring you in revenue.

Maybe they call a lot and eat up your support team's time. Maybe they're frequently late to pay bills. Maybe they only use coupons and badmouth you when you don't offer their friends discounts. You should consider whether you should keep these folks around or kindly introduce them to your competitor.