WHY FIRING YOUR WORST 온라인카지노 합법 사이트 ISN`T SUCH A GREAT IDEA
From Knowledge at Wharton
Fire your bad 온라인카지노 합법 사이트.
That advice has become widely accepted in recent years as companies have sought to manage their relationships with 온라인카지노 합법 사이트 in more sophisticated ways.
The rationale is clear-cut: Low-value 온라인카지노 합법 사이트 -- such as the ones who hardly spend any money on your services or products yet tie up your company's phone lines with questions and complaints -- end up costing more money than they provide. So why not jettison them and focus your customer-relationship efforts on more profitable individuals? Or, as an alternative, why not at least try to increase the worth of the low-value 온라인카지노 합법 사이트 to your firm?
It sounds quite rational, and many corporations have jumped on the bandwagon. But a new study by two Wharton marketing professors, Jagmohan Raju and Z. John Zhang, and Wharton doctoral student Upender Subramanian, cautions that firing low-value 온라인카지노 합법 사이트 may actually decrease firm profits and that trying to increase the value of these 온라인카지노 합법 사이트 may be counterproductive.
The notion that firing unprofitable 온라인카지노 합법 사이트 is a smart thing to do has emerged out of the broad acceptance of a practice usually referred to as Customer Relationship Management (CRM). With CRM, firms often use information technology to quantify the value of individual 온라인카지노 합법 사이트 and provide better privileges, discounts or other inducements to 온라인카지노 합법 사이트 identified as having high value.
In their study, Raju and Zhang have coined the term Customer Value-based Management (CVM) to describe this central component of CRM. These customer analyses have often shown that a small proportion of 온라인카지노 합법 사이트 contribute to a large percentage of profits, and that many 온라인카지노 합법 사이트 are unprofitable.
Financial institutions are perhaps best known for treating low-value 온라인카지노 합법 사이트 differently from good ones. For instance, bad 온라인카지노 합법 사이트 at Fidelity Investments are made to wait longer in queues to have their calls taken by call centers. But other types of firms have embraced CRM and are giving low-value 온라인카지노 합법 사이트 the cold shoulder. Continental Airlines e-mails only its high-value 온라인카지노 합법 사이트, apologizing for flight delays and compensating them with frequent-flier miles. At Harrah's, room rates range from zero to 9 per night, depending on customer value.
Some firms fire 온라인카지노 합법 사이트 outright. In July 2007, CNN reported that Sprint had dropped about 1,000 온라인카지노 합법 사이트 who were calling the customer-care center too frequently -- 40 to 50 times more than the average customer every month over an extended period.
In the study, "Customer Value-based Management: Competitive Implications," Zhang, Raju and Subramanian break ground by analyzing CVM in the context of a competitive environment. The researchers acknowledge that firing bad 온라인카지노 합법 사이트 may make some sense in industries where there is little or no competition. If a firm treats all 온라인카지노 합법 사이트 equally, the argument goes, not only does the company waste resources on attracting and retaining unprofitable 온라인카지노 합법 사이트, it also under-serves profitable 온라인카지노 합법 사이트, who may become unhappy and leave.
For the overwhelming majority of companies operating in a competitive environment, however, firing low-value 온라인카지노 합법 사이트 can be counterproductive, the researchers conclude. The key reason: Companies that rid themselves of low-value 온라인카지노 합법 사이트 -- or take steps to turn low-value 온라인카지노 합법 사이트 into high-value ones -- leave themselves open to successful poaching by competitors. If the competition knows that you have fired many or all of your low-value 온라인카지노 합법 사이트, they are likely to intensify their efforts to take your remaining 온라인카지노 합법 사이트 away from you because they now know that all, or most, of those remaining 온라인카지노 합법 사이트 are of the high-value variety.
"What our analysis tells us is companies make money, in part, by confusing their competitors about their 온라인카지노 합법 사이트," Raju says.
Instead of firing unprofitable 온라인카지노 합법 사이트, some companies have tried to turn them into high-value 온라인카지노 합법 사이트 by giving them inducements to change their behavior, such as teaching them to spend more or to use low-cost support channels. But the Wharton researchers found that this idea is also wrongheaded. "If you make low-value 온라인카지노 합법 사이트 more valuable, this can also be counterproductive because it also encourages your competitors to poach more intensely," Raju says.
So what is the proper way to manage relationships with low- and high-value 온라인카지노 합법 사이트? "Our research finds that a better approach is to improve the quality of your high-end 온라인카지노 합법 사이트 at the same time that you keep your low-end 온라인카지노 합법 사이트, but you should find other, cheaper, ways to manage the low-value 온라인카지노 합법 사이트, such as encouraging them to use automated phone-response systems or the Internet or offering minimal discounts or other benefits," says Raju. "You have to keep your competition confused about who your good and bad 온라인카지노 합법 사이트 are."
The new study should help convince firms to reconsider the notion that firing bad 온라인카지노 합법 사이트 is a smart decision.
"What we'd like readers to take away from our paper is that just 'cleaning up' your customer base is not good enough," Raju says. "You should focus on good 온라인카지노 합법 사이트 and try to improve their quality and not just try to get rid of the bad ones. Firms should find cheaper ways to keep low-value 온라인카지노 합법 사이트 because they are confusing your competition to your advantage and there's a chance someday that they will become good 온라인카지노 합법 사이트."
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