Saturday, April 04, 2009

When Companies Fire Customers

As the financial crisis is still going on, a lot of companies are making radical decisions in order to stop the bleeding. Hence, a fundamental issue is raising among marketing and CRM departments.

Even though it is important to keep your customers loyal right now, there is still a part of your clientele that you might not want to keep. Indeed, these clients are costing more money to manage than they are spending. Therefore, it is very important to part with these people to focus on profitable customers.

Airlines Company
Airlines companies are champions in loyalty programs including free miles. I don't know any companies that don't have this system.
Actually, it is now becoming problematic, as customers pile up miles without taking it, which creates treasury issues: if tomorrow all customers of a company decide to take all their miles at the same date, it will probably go bankruptcy.

UK airlines companies have decided to close the account of customers that failed to collect any of their Airmiles over the past two years. "The loyalty program, which has eight million customers in the UK, has distributed 1.7 million letters to customers threatening to end their affiliation if they do not use their existing miles or fail to assemble any new ones."

American Express Offers $300 For Customers To Close Accounts
American Express offers $300 to its non profitable customers to close their accounts. That shows well that this profile of customers is really making the company losing money.
Ethic and Customer Relationship Management
Now, are those strategies ethical? The company is deciding to change its CRM approach, there is no doubt about that, but still, these people earned their miles/money.
I believe these facts are just evidences that this crisis is forcing companies to cut their budgets and expenses to remain viable, and it shows out well that customer relationship programs might become costly if not taken care properly.

Now you all know this pyramid. It shows that customer relationship management (CRM) programs are aiming to retain customers and help up selling. But when they fail, then you need to take actions...