Is it Ethical to Fire Unprofitable Customers?

[413]

Business invest time to attract customers, but some customers are simply not worth having. So some business think that they should fire the customers they lose money on.

-Is it acceptable to fire customers who cost you money on an ethics point of view?
-Is it acceptable for the company to focus efforts on profitable customers or should they all be treated equally?
-What is the downside of finding which customers are profitable and discourage those that are not profitable?

 

[mgb_phys]

-Is it acceptable to fire customers who cost you money on an ethics point of view?

The only ethical requirement for a company is to enhance shareholder value.

-Is it acceptable for the company to focus efforts on profitable customers or should they all be treated equally?

By treating unprofitable customers failry you will lose money - the poor starving pensioners who have invested in your company by buying shares will suffer.

-What is the downside of finding which customers are profitable and discourage those that are not profitable?

Finding the right customers and the competition for them with other businesses, rememebr everyone wants the plum customers but you might do better long term by making your business efficent enough that you can make money from the non-plum customers.

 

[Evo]

Of course a business has the right to refuse customers that cause more trouble than they are worth.

Companies routinely do special things for their better customers.

There are companies that actually gather this data for companies to determine which clients to cater to and which are losers. The only downside is that if you are one of the undesireable customers, you may not be able to buy from certain companies.

 

[Ronnin]

Business is in business to make a profit, period. If a company cannot make a profit they will not be in existence very long. Good business is done when the parties come away with what they want at a price they are willing to pay, this price varies from person to person just as the quality of the product varies from one manufactuer to manufacturer. The only downside to culling your customer base for the most profitable customers is that all things change. If the market changes or the customer base changes you may find yourself trying to once again obtain the business of those customers you deemed previously not profitable enough to service.

 

[Jimmy Snyder]

What is the downside of finding which customers are profitable and discourage those that are not profitable?

It might cost more to find out than you save by culling. I think it is perfectly atrocious that your company behaves this way, and perfectly acceptable that mine does.

 

[rewebster]

Business is in business to make a profit, period. If a company cannot make a profit they will not be in existence very long. Good business is done when the parties come away with what they want at a price they are willing to pay, this price varies from person to person just as the quality of the product varies from one manufactuer to manufacturer. The only downside to culling your customer base for the most profitable customers is that all things change. If the market changes or the customer base changes you may find yourself trying to once again obtain the business of those customers you deemed previously not profitable enough to service.

I've heard of some people that are in business just to make a living

 

[Ronnin]

I've heard of some people that are in business just to make a living

This "living" is derived from the profits. Can the owner forgo a paycheck for the betterment of the company? Sure, but a company can't go on forever that way. The headaches of ownership tend to make a person want something for all of their hard work, but not everyones definition of "living" is not the same.

 

[rewebster]

This "living" is derived from the profits. Can the owner forgo a paycheck for the betterment of the company? Sure, but a company can't go on forever that way. The headaches of ownership tend to make a person want something for all of their hard work, but not everyones definition of "living" is the same.

just depends on a person's viewpoint-----from "Mayberry"/(Andy Griffith Show) to "Wall Street"

 

[mgb_phys]

I've heard of some people that are in business just to make a living

For a privately owned business this is true - I can choose to work with certain clients because the work is interesting or they are more pleasant to work with. It is upto me to decide how much money I want to make.

For a listed company, the shareholders are trusting me to make the best decisions for their money. If I choose to keep unprofitable customers because I like them - I am defrauding the shareholders in exactly the same way as if I stole the petty cash.
Most shares are held by pension funds - hence my joke about robbing pensioners if you don't try and make as much money as possible.

 

[rewebster]

For a privately owned business this is true - I can choose to work with certain clients because the work is interesting or they are more pleasant to work with. It is upto me to decide how much money I want to make.

For a listed company, the shareholders are trusting me to make the best decisions for their money. If I choose to keep unprofitable customers because I like them - I am defrauding the shareholders in exactly the same way as if I stole the petty cash.
Most shares are held by pension funds - hence my joke about robbing pensioners if you don't try and make as much money as possible.

enron?

 

[Ronnin]

enron?

Enron is a perfect example of a company whos leadership put their own self serving interests above the shareholders. Enron, believe it or not, is the exception not the rule.

 

[rewebster]

Enron is a perfect example of a company whos leadership put their own self serving interests above the shareholders. Enron, believe it or not, is the exception not the rule.

The mortgage companies (lately)?

 

[Ronnin]

The mortgage companies (lately)?

There are lots of mortgage companies, I assume you are referring to the few sub-prime lenders that engaged in over zealous lending practices specifically. There are thousands of companies traded on the NYSE alone. I can cherry pick anything and find a few bad apples out of any bunch.

 

[Jimmy Snyder]

I can cherry pick anything and find a few bad apples out of any bunch.

You mean bunch of grapes?

 

[Ronnin]

You mean bunch of grapes?

Must be my southern tongue, bunch can be used for grouping of anything.

 

[Jimmy Snyder]

Must be my southern tongue, bunch can be used for grouping of anything.

But can apples be cherry picked?

 

[Ronnin]

But can apples be cherry picked?

Of course anything can be cherry picked. Just like those bucket trucks you see working on powerlines are of course, cherry pickers!

 

[rewebster]

There are lots of mortgage companies, I assume you are referring to the few sub-prime lenders that engaged in over zealous lending practices specifically. There are thousands of companies traded on the NYSE alone. I can cherry pick anything and find a few bad apples out of any bunch.

hey--all I was pointing out was that it went from " the exception not the rule." to "a few bad apples" pretty quickly

 

[Jimmy Snyder]

Of course anything can be cherry picked. Just like those bucket trucks you see working on powerlines are of course, cherry pickers!

True, true, but then it wouldn't be funny.

 

[Burnsys]

Business Ethics <<--- I think this thread should be in "Scepticism and debunking"

 

[413]

In what industries would it make sense for government regulation that ensures all customers receieve some basic level of service?

 

[Gokul43201]

Business Ethics <<--- I think this thread should be in "Scepticism and debunking"

I thought the thread was going to be about oxymorons!

I think it would be ethical to reject a customer based on the bottom line, but unethical to cut loose a customer midway through a project if it turns out to be more work than you had anticipated.

 

[Jimmy Snyder]

In what industries would it make sense for government regulation that ensures all customers receieve some basic level of service?

Parachute packing. Seriously, there are industries where the government steps in and insists that certain low profit customers be served. In NJ, I think there are requirements for cable providers to service all communities regardless of profitability and I think home builders are required to build a minimum percentage of low income housing. An obvious place where you couldn't do it is the wholesale industry. They don't normally cater to retail customers.

 

[Astronuc]

Governments reserve the right to regulate trade and commerce. In the US Constitution, the powers and rights not reserved by the Federal government are granted to the states and local jurisdictions.

There are regulations for safety, and then there are regulations in order to avoid discrimination. For all practical intent, one may discriminate on the basis of economic status or capability, but not on personal characteristics such as race, ethnicity, gender, personal belief, . . . .

In theory, one engaged in a public (commercial) enterprise should treat all customers simply on the ability to pay.