Are you a bad customer?

Many companies look for ways to get rid of shoppers and clients who complain too much, return a lot of items or otherwise hurt their profitability. Included below: five tips for consumers

July 20, 2007

Source: Sympatico/MSN/Finance

Sprint Nextel is taking considerable heat in the U.S. for its decision to dump 1,000 of its 53 million customers for calling its customer-service lines too often. When it comes to firing customers, though, Sprint is a piker.

ING Direct, an online bank with 6.1 million customers, shuts down the accounts of 3,000 to 4,000 people a month. And like Sprint, ING Direct isn't apologizing; the bank's CEO says some customers are simply more trouble than they're worth.

"We're an Internet bank," said CEO Arkadi Kuhlman, adding that the six-year-old institution must contain costs to keep its interest rates high. "If people need a lot of hand-holding, we're not the right bank for them."

Fulfilling a paranoiac's nightmare, many retailers, service providers and other companies today are deciding some of their customers simply aren't worth keeping.


These patrons spend too little, complain too much or tie up too many company resources. The worst of these customers, says Larry Selden, a corporate-profitability expert and a co-author of "Killer Customers: Tell the Good from the Bad -- and Crush Your Competitors," can eat up the earnings generated by the best.

Profitability experts say wireless and banking companies routinely discover that 100% or more of their profits are attributable to just 30% of their customers. An additional 50% or so are break-even customers, while 20% actually create losses that offset some or all of the gains created by the most profitable clients.


Customers analyzed via computer

That's why many corporations, aided by massive computer databases and sophisticated software, try to separate their profitable customers from their unprofitable ones.


The software for a bank, for example, can analyze a customer's deposits, loans and transaction history to generate a profitability score that pops up on a screen when the customer visits a teller or calls in with the question. The most profitable customers get red-carpet treatment, including help from the manager or assignment to a personal banker. The least profitable customers may face long hold times, less help and suggestions that they use cheaper resources, such as ATMs or the Web.

Those in between might be pitched loans or other products, suggested by the software, that could make them more profitable for the bank.



Some other examples of how companies treat customers differently include:

• Parceling out the perks. Airlines know exactly who their most-profitable customers are: They're elite frequent fliers, particularly the ones who buy lots of expensive first- and business-class tickets. These folks get to use separate, shorter lines through security at many airports, as well as numerous other benefits. But airlines also keep computerized notes on their frequent fliers, says travel expert Joel Widzer, and those known to be too demanding or obnoxious may get fewer free upgrades and less-accommodating agents.
• Booting out bargain hunters. Filene's Basement, an off-price clothing retailer, made headlines when it banned two sisters for returning too much stuff and complaining too often -- behaviours the company said tied up too much staff time. Electronics retailing giant Best Buy has attracted attention with corporate policies designed by profitability guru Selden to lure big-spending customers while discouraging those who cost the company money. Among the tactics: taking money-losing patrons off mailing lists for sales and other promotions.
• Restricting returns. Some retailers, including Staples and The Sports Authority, use technology supplied by The Return Exchange, an Irvine, Calif., company, to identify and refuse shoppers who abuse store return policies. A customer who wants to return an item is first asked to hand his or her driver's license to the clerk, who swipes it through The Return Exchange's Verify-1 device. The device records the consumer's name, address and age, as well as details of the transaction, and sends it to The Return Exchange's database, where the information is aggregated. If the transaction is deemed suspicious, the clerk can refuse to complete the transaction. The company says its technology is meant to halt shoplifters and price-tag switchers, among other fraudsters. But some consumer advocates worry about privacy invasions and the potential embarrassment for legitimate customers who could be turned away.

'Bad' behaviours

Some of the behaviours retailers don't like are clearly unethical, even if they're not illegal. These include:

• Returning a purchase after you've sent away for a rebate.
• Returning an item so you can buy the item again at a discount when it shows up on the opened-box shelf.
• The time-honoured Beverly Hills borrow of wearing an evening gown with the tag hidden so you can bring the dress back the next day.
• Taking up an employee's time with questions about a product while knowing you're going to buy it elsewhere.

But retailers also complain about customers who buy only loss leaders or items priced below merchants' costs, and about those who force stores to honour lowest-price guarantees. It remains to be seen how far they'll go to discourage consumers who like a good deal and the ultimate effect that could have on their businesses.


Personally, I think businesses have a right to rid themselves of truly troublesome customers. As a business owner, I've fired a couple of clients myself and wished I'd done so sooner. But I also believe businesses have an ethical obligation to be fair to consumers and to give warning if customers' behaviour could get them canned.


The idea that people could get the boot for "abusing" customer-service lines is particularly dicey. After all, sometimes it's the company's fault that customers have to call help lines repeatedly; poorly performing products or inept customer service can make it tough to get an issue resolved.

Indeed, some ING Direct customers say their accounts were closed after they complained about errors in their accounts, although CEO Kuhlman insisted that the bank doesn't fire customers simply for having a problem. (Kuhlman previously admitted the bank had goofed by firing 5,300 of its depositors because of bad credit. The bank says those depositors' accounts have been restored.)


Finally, some profitability experts warn that databases and software have their limitations. Consumer behaviour is often unpredictable, and once-unprofitable customers can start earning their keep -- if the company hasn't already kicked them out the door.


Five ways to cope

Here are some thoughts about how to deal with businesses looking for angel customers:

• Concentrate your business. Loyalty has its rewards. Moving more accounts to a bank or brokerage can win you more-prompt attention and a break on fees. Frequent-traveler programs for airlines, hotels and rental cars can win you free upgrades and better service. Loyalty-card holders at groceries and other retailers typically win discounts.
• Consider how much your privacy is worth. The more a company knows about you, the more it can market to you and the more revenue it may generate selling your information to others. Financial institutions are required to send you annual privacy notices that tell you how to opt out of information sharing. You may be able to thwart retailers' marketing machines, according to Beth Givens of the Privacy Rights Clearinghouse, by giving a generic name -- "Shopper," for instance -- or a phony telephone number or address. Then again, you may want to be notified of sales or special deals; it's up to you.
• Use low-cost alternatives first. I hate voice-mail hell as much as anyone else and love Web sites such as GetHuman.com that help you get straight through to an actual person. But one-on-one attention is expensive to provide. If you care about staying on a company's good side, try to resolve your problem first using its Web site, including any "frequently asked questions" and owner's manuals that may be posted there.
• Don't be a jerk. Yes, I know how hard it can be not to shriek abuse when you've been transferred 15 times to 15 increasingly unhelpful employees. But abusing the help isn't just bad karma; it's bad policy. Being civil but tenacious usually gets you further than being a jerk, especially when note-taking clerks can put you on the company's naughty list.
• If you don't like the return policy, shop somewhere else. The time to find out how a store treats its customers is before you buy, not after. Stores usually post the basics of their return policies, but you'll probably need to ask if they use Verify-1 or other technology to track customers' return patterns. If you don't like what you hear, go elsewhere.
• Do an end run around the store. Web sites such as FatWallet.com and Slickdeals.net can keep you apprised of great deals, even if you've been trimmed from a retailer's mailing list.