Companies have become savvy at analyzing customer information—and distinguishing customers who contribute a high percentage of profits from those who spend little yet tie up phone lines with questions and complaints. So why not just "fire" the dead-weight customers and shower the spenders with privileges? This practice doesn't make sense in competitive environments, according to a study by Jagmohan Raju, Z. John Zhang, and Upender Subramanian of the University of Pennsylvania. In Customer Value-Based Management: Competitive Implications, the researchers found that companies that eliminate low-value customers—or take steps to turn them into high-value ones—become vulnerable to poaching by competitors. The idea is that once a company "skims the cream," rivals will compete more intensely for the most profitable customers.
Yada Yada's Good for Business
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