Sprint to Demanding Customers: 'You're Fired'

While wireless carriers are shuddering in the face of the iPhone's launch, Sprint Nextel (NYSE: S) has sent letters to some of its more demanding customers telling them, in effect, "you're fired."

The number of customers let go is unknown, according to press reports, and Sprint did not return calls for comment by press time. However, sending these letters establishes "a very poor precedent for handling customer profitability issues," Sheryl Kingstone, director of enterprise research with Yankee Group, told CRM Buyer.

Profitablity a Legitimate Concern

The letter, which Sprint customers have posted in a variety of places on the Internet, states "we have received frequent calls from you regarding your billing or general account information." It goes on to inform customers that "the number of inquiries you have made to us [during the past year] has led us to determine that we are unable to meet your wireless needs."

Clearly, Sprint has conducted some sort of segmentation analysis that has identified customers who are expensive, from a customer service point of view, and therefore unprofitable, from a bottom-line point of view, Kingstone said. As a general rule, "it's a smart business decision to eliminate unprofitable customers," she added.

The problem is that Sprint likely did not take all the steps it could or should have before this dramatic cutting of ties with established customers, Kingstone explained.

The Last Straw

The question a company like Sprint should ask itself, explained Kingstone, is whether or not this is the last straw in the customer relationship. In Sprint's case, specifically, the data shows that it probably is not.

Only 63 percent of Sprint Nextel customers reported that they are "somewhat satisfied" or "very satisfied" with the customer service they receive from the carrier, according to data recently gathered for the Yankee Group Anywhere Consumer: 2007 Communications Customer Satisfaction Survey. That's 17 percent below the industry leader, Verizon Wireless, and 10 percent below the overall average.

Poor Precedent

In addition, Kingstone notes, this move sets the stage for a variety of future customer service issues for Sprint. The letter already sent indicates that the company is zeroing out the accounts of fired customers and releasing them from early termination fees on their contracts. What, then, is to stop other customers from running up big bills and making repeated calls to customer service in order to get released from their own contracts and have their bills waived?

The company's closed-lipped stance on the issue is another problem, Kingstone pointed out. "They should be proactively communicating what they have done before cutting off these customers," she stressed.

"Did they look to move customers to a lower-cost alternative channel, such as self-service? Did they evaluate everything they can do to make their own call center operations more efficient? Or did they put all the onus on the customer?" Kingstone said.