Retailers collectively spend many millions of dollars in advertising/promotion to create/retain customers. An emerging logical, but counter-intuitive, strategy is emerging and gaining increased acceptance by firms. This strategy is to ‘fire certain customers.’ Consider the following:

Some retailers are deciding that the customer can be very, very wrong – as in unprofitable. And some, including Best Buy Co., Inc., are discriminating between profitable customers and shoppers they lose money on. Like a customer who ties up a sales worker but never buys anything, or who buys only during big sales. or one who files for a rebate, then returns the item. “That would be directly equivalent to somebody going to an ATM and getting money out without putting any in” Brad Anderson, Best Buy’s chief executive, said in a recent interview…

“What we’re trying to do is not eliminate these customers, but just diminish the number of offers we make to them,” Anderson said.

…Filenes banned two sisters from all 21 of its stores last year after the clothing chain’s corporate parent decided they had returned too many items and complained too often about services.¹

In an article published in the Harvard Business Review, Cooper and Kaplan reported the astonishing case of a heating wire company which analyzed its customer profitability and discovered that the famous 20-80 rule, which would suggest that 80% of profits came from 20% of customers, had to be revised.
 

A 20-225 rule was actually operating: 20% of customers were generating 225% of profits. The middle 70% of customers were hovering around the breakeven point, and 10% of customers were losing 125% of profits.

Marketing and finance must alter individual departmental goals. Market share is not a desirable goal if it is achieved by accepting more and more marginal customers. Likewise, top-line revenue is misleading if the associated customers drive up after-sale vendor expense by placing an inordinate burden on vendor personnel.

In essence, some customers have to be ‘fired.’ These customers cost more to retain as customers than to no longer accept their business under their current operant condition.

References:

1) Freed, Joshua “The Customer is Always
Right? Not Anymore” – downloaded 11/16/04
from http://www.sfgate.com/cgi—bin/article, p.1

2) Ryals, Lynette “The Customer is Always Right – But Are They Always Worth It?” downloaded 11/16/04 from Database Marketing Institute – http://www.dbmarketing.com/articles/art165/htm,p. 1