In my recent interview with Robert Kaplan, he addressed how he feels about firing customers. He says it should be the last option. He recommended examining your own processes first, ensuring you are efficient in dealing with these customers. Then try pricing special services, which may prompt a change in customer behavior. And then talk to the customer about ways his behavior can change -such as increasing the average order size. If all else fails, suggest the customer find another supplier or raise your price.
 
“But there are a whole series of things you can do to transform unprofitable customers to profitable ones,” Kaplan says.
 
Read the interview with Kaplan, Take Strategy to the Front Lines, here.
 
In the recent MDM article, Pricing for Profitability, F.W. Webb’s retired SVP of information technology, Lawrence Mohr told MDM that setting customers up in categories helps salespeople determine which targets to spend their time on. For the categories that are unprofitable, find a better way to approach them. “We don’t want to fire customers,”Mohr says. “What you want to do is adjust how you work with the customers.”Find a way to save both the distributor and customer time and money -to do this, Mohr tells MDM it’s important to train employees on customer type.
 
Here is another article I found online that talks extensively about firing customers:
 
This article, from Knowledge @ Wharton, from December 2007, the authors say that firing your worst customers “isn’t such as great idea.” A researcher in the article says: “Our research finds that a better approach is to improve the quality of your high-end customers at the same time that you keep your low-end customers, but you should find other, cheaper, ways to manage the low-value customers, such as encouraging them to use automated phone-response systems or the Internet or offering minimal discounts or other benefits. You have to keep your competition confused about who your good and bad customers are.”
 
What do you think? Comment below.