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Customers from hell face retail retribution

By JOSHUA FREED
The Associated Press

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Some retailers have decided the customer can be very, very wrong — as in unprofitable. And some, including Best Buy, are discriminating between profitable customers and shoppers they lose money on.

Like a customer who ties up an employee 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," Best Buy Chief Executive Brad Anderson said recently. "Those customers, they're smart, and they're costing us money."

Anderson said Best Buy was tightening its rebate policies in the case of customers who abuse the privilege, but he declined to say what else the retailer was doing to discourage its most costly customers.

"What we're trying to do is not eliminate those customers but just diminish the number of offers we make to them," Anderson said.

Larry Selden calls them "demon customers."

Selden, a consultant who works for Best Buy, co-wrote "Angel Customers & Demon Customers." In his book, he said that while retailers "probably can't hire a bouncer to stand at the door and identify the value destroyer," they're not powerless.

Selden, a retired Columbia University business professor, said an investment firm found that one customer with a portfolio of $500,000 was tying up three financial advisers almost full time with requests for help and information.

"Eventually, reluctantly, and very politely, in this one case the company asked him to go elsewhere," he said.

Selden worked as a consultant for Royal Bank of Canada, which at one time traced checks faster for its most profitable customers, while other customers waited up to five days, he wrote. The bank now has other ways of prioritizing customers.
 
Laura Gainey, vice president of client-segment strategies, said the bank's phone system sends certain customers to the front of the line, where they get the most experienced customer-service representatives, depending on criteria that include their account size.

"I don't really believe that any customer at Royal Bank is a demon customer," she said, "but there's no doubt that there are different ways of approaching different customers, which will allow us to better serve their needs and allow us to serve the bank and our shareholder's needs."

Sometimes it's the retailer's fault that a customer is unprofitable, Selden said. He cited an upscale retailer in New York that lost sales because its changing rooms were dirty and in bad repair. Women who had probably taken up the sales staff's time were declining to change in those rooms, and declining to buy, he said.

"Then there are those customers that are just evil customers ... fundamentally they're out to cheat us," Selden said. "It's not a large number of customers, but they can have a material impact on a business."

Occasionally, stores need to "fire" their worst customers, Selden said. Massachusetts-based Filene's 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 service.

The sisters claimed they had been loyal customers for years.

Best Buy Executive Vice President Philip Schoonover said the idea of "firing" some customers is one place where Best Buy disagrees with Selden. The company will try to find ways to make money-losing customers profitable, he said.

Retail consultant Karl Bjornson of Kurt Salmon Associates said the idea of discouraging bad customers can work if a company is careful. It generally works better to, say, offer fewer sales rather than discouraging individual customers who shop aggressively on price, he said.

Every store has customers it doesn't like, he said.

"The question is, how public do you go with it and how big a deal do you make out of it? There are ways of discouraging people from shopping in your store without point-blank telling them you don't want them in your store."