Bad profits, bad companies
Filed in archive strategy by leon on August 23, 2007
Keeping the customer happy has been a management mantra for years. So why is it that companies keep gouging them? Why do phone companies lock customers into complex contracts with charges hidden in the fine print? Why do the banks keep charging such ridiculous fees?
One good reason is that it's profitable. But these profits are bad because they are the result of extracting value out of a customer rather than creating it. It's a concept examined at great length by Bain director Fred Reichheld in his book The Ultimate Question.
Bad profits are a huge problem for business and customers alike. So what should businesses do about it? I look at the issue, as explained by Reichheld, and possible approaches in my article here.
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