Q

Losing non-profitable customers

We understand the importance of retaining customers, especially profitable ones, during this tough economy. But what about the opposite side of the coin - losing non-profitable customers? Does it always make good sense to do this? What are some examples of how companies do this?
No intelligent plan for corporate customer loyalty should include keeping all of the customers. Through an assessment of customer lifetime value, for example, companies can determine that some customers may simply be unprofitable to serve and retain given their current and anticipated revenue contribution; and these customers can be given a lower 'tier' or level of service, or not serviced at all (i.e. shown benign neglect), until they either leave or are encouraged to locate an alternate supplier.

For more on this topic, including examples of companies dealing with unprofitable customers, read this article from Michael Lowenstein
This was first published in May 2003

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