I came across an article from 2012, “Is Your Company Hooked on bad profits?” by Fred Reichheld, a Bain Fellow, that is very relevant to today’s tech companies. Bad profits are revenues earned at the expense of customer relationships. These bad profits are generated usually with short-term revenue goals that over a longer period make your customers more likely to churn.
Examples of bad profits
As a consumer, you probably have many examples you can list of bad profits. Some of these are banks charging late payment or bounced check fees not in line with their costs. It could also be rental car agencies charging you more per gallon if you do not return your vehicle with a full tank of gasoline than you would pay for a fine French Bordeaux. It could be a wireless phone company charging you crazy international roaming fees. Maybe a fitness center locks you into a one year contract because they know you won’t be happy in a month. And it could be a free to play game company tricking players into spending premium currency by creating misleading buttons. Remember how AOL made you jump through about twenty agents to cancel its service? Unfortunately, these examples are too numerous to list. Continue reading “How bad profits can kill your company”