Nightmare continues for America's worst company: Now Sprint Nextel laying off 4000 in desperate move

The nightmare following the world's most damaging marketing action ever, is continuing to devastate Sprint Nextel as it now issues emergency statements and desperation moves.

The worst marketing action of all time

We started to report on the worst marketing move by any company that we have ever heard of, on July 11, 2007, when Sprint Nextel made the moronic move to fire 1,000 of those of its customers who Sprint Nextel thought were calling too many times to complain (plus related other idiotic moves as well, such as firing the 200 customers who Sprint Nextel thought had used their roaming services too much, only to find they were military people using phones at an area that was according to their maps as part of Sprint Nextel's network coverage). First of all, there were actual cases where upon later reflection, Sprint Nextel noticed it had made a mistake, and a few of these 1,000 were invited back. Note from the start this was mismanaged.

As we explained in July 2007, Sprint Nextel was rated the worst network provider in the USA by its service, and worse, its customer service was dead last among all American corporations, not just telecoms. And Sprint Nextel had numerous cases where customers were legitimately complaining more than once per day (if any company has even ONE instance of customers legitimately calling to complain for the same problem once per day for over a month, then that company has no right ever to fire anyone they suspect is calling too much). But worst of all, Sprint Nextel's own customer service procedures at the calling center caused customers to call many times, where callers were not connected to the next help desk assistant, but regularly asked to call back or call another number. So Sprint Nextel itself was fuelling the problem of many calls to its calling center.

Resulted in customer-backlash of unprecedented proportions

As we also predicted, this was heading to be the biggest headache Sprint Nextel had ever faced and would require immediate pro-active customer SERVICE reaction, ie an apology, a retractment and then lots of soothing of wounds caused by Sprint Nextel's incompetent marketing and PR departments. We also said Sprint Nextel would see a long term terminal decline in its trust, its customer base, its profitability, its share price and trust in its management. As we reported, the first quarter after the disaster, the share price had dived 18%, and the first casualty was CEO Gary Forsee who was forced out in October 2007.

But Sprint Nextel has been using the Rumsfeld-Cheney school of problem solving - denying it at every stage - and refusing to apologize to its customers and fixing the problems.

We told Sprint Nextel management in the Open Letter of July 2007, that the nightmare was only going to be getting worse for the customers, the employees and the share holders unless Sprint Nextel fixed the problem. But as of today, no fix.

And now we have much worse carnage for Sprint Nextel.

Sprint Nextel has just reported over the weekend that it has lost 885,000 customers in the last quarter of 2007. It had already lost 337,000 customers in the third quarter of 2007 (the first quarter after the "Sprint 1,000" PR fiasco of the firing of Sprint Nextel customers). So far since the disaster in July, Sprint Nextel has lost 1,222,000 paying customers. That alone is extremely bad news.

First, a quick note on the 885,000 it lost in the last quarter. Three out of four of those were post-paid (contract) customers, the kind who have high monthly phone bills and are particularly desired in the market. The last quarter were prepaid (pay-as-you-go/voucher) customers, mostly younger people and poor people and accounts of second or third subscriptions etc. So not just losing a lot of customers, but losing the more valuable type of customer as well.

It gets worse. We told you so in July, this is a nightmare, the worst kind, and Sprint Nextel may go under because of this PR fiasco, unless it understands it HAS to correct its mistake and start by issuing an apology and inviting all "fired" customers to return.

How much worse. The American cellular phone market is in heavy growth. The market grows by 1.65 million new subscribers every month, according to the latest analysis by our friend Chetan Sharma at the AORTA blog. So since the ill-conceived self-inflected wound by Sprint Nextel in July, the American market has grown by 9.9 million new subscribers reaching about 255 subscribers over the six months to the end of the year. Sprint Nextel should have taken - if its normal market share had held - about 2.4 million of those 9.9 million new subscribers. But rather, it lost 1.2 million. So where Verizon, AT&T and T-Mobile all grew in 2007, Sprint Nextel's total damage was 3.6 million lost customers. They did not get the 2.4 million growth that the market had to offer them AND they still lost another 1.2 million. The same story is reported by its churn rate which is double that of its rivals. This is VERY bad news today for Sprint Nextel.

What are 3.6 million cellphone customers worth in America today? At a monthly Average Revenue Per User (ARPU) of 53 dollars, Sprint Nextel's suicidal PR nightmare has cost them 190 MILLION dollars per MONTH !!!  Or on an annual level, these wasted 3.6 million subscribers have already cost Sprint Nextel shareholders 2.3 BILLION dollars of annual revenues every year. The customers who left out of anger to Sprint Nextel, will never come back. This is money that Sprint Nextel had in the bag, but incompetent strategic management by Gary Forsee and supremely incompetent marketing execution by his Chief Marketing Officer Timothy E Kelly (also known as Tim Kelly) has thrown away. To quote the fictional character Sir Humphrey from the BBC TV series Yes Minister/Yes Prime Minister, Sprint Nextel has "snatched defeat from the jaws of victory".

Why is Chief Marketing Officer Timothy E "Tim" Kelly allowed to continue at Sprint Nextel? This man should be ashamed of himself and offer his resignation immediately. Who else in the history of marketing has destroyed 2.3 billion dollars worth of customer income in only six months, resulting out of his boneheaded "marketing" move. The Board of Sprint Nextel should be demanding his resignation to follow that of Gary Forsee. And new CEO Dan Hesse should immediately accept the resignation.

In a terminal downward spiral

But lets get back. The problem is NOT going away. Why are there customers leaving? Because they now hate the brand. Sprint Nextel had promised to make the service better (in April of 2007) but then rather than doing that, it punished any customer who pointed out problems. And remember, the Sprint Nextel network is honestly so bad, that it legitimately has multiple thousands of customers who have valid concerns to call and complain 50 times per month !  How frustrating is that? The company's PR spokeswoman effectively admitted that they have lots of customers with totally valid reasons to call and complain almost twice daily, for problems that are not fixed even over a month of complaints. This results in horrible word-of-mouth. It is not advocacy, it is "badvocacy" by Sprint Nextel as it broke rule number 1, don't fire your customers, as Tim Marklein posts in his blog over the weekend.

First quarter after the disaster. Sprint lost 337,000 real customers and failed to get its fair share of the strong subscriber growth in America, or about 1.2 million customers. Actual true damage to Sprint Nextel 1.5 million subscribers and almost a billion dollars of annual revenues abandoned. Sprint Nextel stock price dived 18% and CEO Gary Forsee was fired.

Now second quarter after the disaster. MORE defections than in the first quarter. The bad reputation of Sprint Nextel is SPREADING. This nightmare is not ending. Now 885,000 real customers and another 1.2 million lost growth, accumulating in 3.6 million customers that Sprint Nextel will never see. Wasting 2.3 billion dollars of annual revenues.

Take a look at Sprint Nextel's share price. Before the lunatic marketing maneouver in July, Sprint Nextel's share price was well above 20 dollars per share. Today it is well under ten. The company (and its share holders) have lost more than half of the value of the company. Why is Tim Kelly allowed to hold onto the Chief Marketing Officer title?

And it is STILL GETTING WORSE.

Now Sprint Nextel's new CEO is announcing desperation moves. They are firing 4,000 employees (that will not help morale, help the customer service image of the company rated dead last among all American companies by customer service). And they are closing 125 stores. Again, that will further damage the Sprint Nextel brand's image in the eyes of its customers.

Note that Sprint Nextel's quarterly report is due on 28 February, not now in late January. The management had to take this extraordinary move a month before the quarterly results come in, to warn its share holders that things are really bad, and to make the cuts in staff to show the management is doing something about it.

There was an easy fix, AND it still can be fixed

The unfortunate thing is, that this is a marketing fiasco, and it has easy marketing solutions. The new CEO should focus on fixing the real problem - that Sprint Nextel is clearly the least respected wireless carrier in what is already a bad quality telecoms market (by customer satisfaction), the USA. Rather than cut the bad quality of what its customers are getting even further (by firing staff and closing stores), Sprint Nextel should fire the incompetent marketing staff and hire competent staff. Not former telecoms engineers, but just normal, customer-oriented marketing PROFESSIONALS from any normal marketing oriented industry, whether soft drinks, candy, fashion industry, travel, cars, retail, whatever. Any recently graduated MBA in marketing will be more competent than this Tim Kelly.

Then fix the problem from last July. Issue an apology. This is easy for new CEO Dan Hesse to do - he wasn't the one making the biggest marketing mistake of the decade. And as he accepts the resignation of "Chief Marketing Officer" Tim Kelly - it is perfect time to clean house, to show the world that Sprint Nextel is going to learn to be nice to its customers, and start the journey back to normal business practises.

I wrote my open letter to Sprint Nextel on 11 July which was emailed to Sprint Nextel headquarters and circulated broadly in the blogosphere. All of my predictions in the email proved true (It is not that I am somehow particularly visionary, I was simply writing out of clear existing examples, similar stupid moves were attempted by the Kryptonite lock company, Jet Blue airline and Dell Computers, all to disasterous effects, until they apologized and fixed the problem).

Sprint Nextel - your customer diaspora will continue for the next year, for at least 4 more quarters unless you apologize now and start to fix the problem. Why will it continue, because there are angry Sprint Nextel post-paid (contract) customers who were angered who want out, but who cannot leave until their contracts expire. You have an enormous pent-up demand of customers who want to desert you. The problem will get MUCH worse before it can get better.

You cannot hide your head in the sand forever.

Tim Kelly. RESIGN !!  You have cost the once proud company 2.3 billion dollars already. May you never again grace any company on any marketing title in your remaining lifetime. You are a disgrace to all marketing professionals.

CEO Dan Hesse, please PLEASE issue the apology now and start to fix the problem. Read my open letter again, and go re-read Kryptonite locks, Dell Hell and Jet Blue. "Sprint 1,000" has already been added to that list of blogosphere shame. But you can at least stop the bleeding. So go fix this problem. You do not want your share price to plummet ever further.

Sprint Nextel share-holders. I told you EXACTLY what would happen in July of 2007. You have lost more than half of the total value of your shares. Replacing the incompetent CEO (Gary Forsee) was not enough. You will CONTINUE to lose value of your shares until Sprint Nextel comes to grips with the real issue here, and that is that their customer relationship image is quite literally the worst in America and the buzz about them is driving it ever further into the toilet.

I'm sorry to have to say so, but I did say so in July. This was all totally preventable back then.

UPDATE Jan 24 2008 - The new CEO has fired Chief Marketing Officer Tim Kelly effective immediately. I've blogged about it at "Poetic Justice in Sprint 1,000"

Comments

[mcneil]

From the customer point of view the problems started when they merged with Nextel. I used to be a Nextel customer and had numerous problems with their service. I told them three times that I was leaving and on the third time I left and went to Sprint. I was very happy with Sptint till they merged with Nextel. After the merge it was the same old Nextel crap.

[Giff Gfroere, i2SMS]

Tomi,

Also remember it was Sprint/Nextel that first raised the per SMS charges here in the United States from ten cents to fifteen cents back in late 2006. This quickly had Cingular/ATT and then Verizon doing the increase up to fifteen cents. Now recently, as in late 2007 Sprint did it again and raised the per SMS charge to twenty cents.

Now to me, what they are trying to do is get us to take their 300 sms/month for $5 plan or 1000 sms/month plan for $10. But I am not sure how this plays into the market in the United States. We are just now learning the values of SMS. Those who start off, start off slow, as in a few SMS a month. These people do not want to spend the extra money when they will not text.

To me, what this kind of marketing move does is deter folks from learning this "addictive" practice rather then invite them to learn this wonderful communication tool. It seems totally opposite of what one would do to get people involved.

I certainly understand they see SMS as a lucrative market, one that brings in a great deal of income for them. However, by raising the prices to twenty cents per message what this does is drives customers away. We all know it costs less the 1/10 of a penny to process a SMS. How can they then justify twenty cents per message?

Giff

[Ryan Mallory]

I recall a time when Sprint bought up every major MMDS CATV provider in the US (late 1990's) purely to shut them all down in under two years with no notice to the customers. Appeared to be a move to keep microwave Internet services from being developed back then. No they lease those same licensed MMDS frequencies in most markets to the same competition they tried to squash - wireless ISP's like ClearWire, who also have abysmal customer service performance. I think Sprint is a victim of its own, public alienating strategies. Others, like Charter Communications and Qwest Communications seem to be following suit with customer service that lacks integrity, training, and general interest in customer needs.

[Sprextel Employee]

The main problem with Sprint/Nextel is that the two companies aren't, and weren't ever, compatible. I've been working there through all of this, it's not one company, it's two. It's not one sides fault, it's both.

It will never work as one company and will continue to decline until the companies are separate again.

[Steven Hoober]

I worked at Sprint PCS for years, right thru the merger and all. And I was a customer for some years before that.

I sure don't think the customer firing was that bad. Not good, surely, but not that bad. Hardly anyone outside the industry seems to know about it, and no one seems to much care.

The merger just exacerbated the woes that already existed with Sprint customer service. Its always been a problem. I do think everyone is spot on regarding the analysis that Sprint is just the first part of the industry to wear thru. Everyone in the sector has horrible customer service, horrible billing practices, and so on.

I do hope Sprint turns it around, but also that all the others don't think they are immune from these issues.

[The person who wrote this blog is an uninformed idiot]

The company doesn't need morale, it needs to get rid of the idiot employees causing customer service issues ... those who aren't playing strictly by the rules. Notice Sprint is getting rid of some 4,000 plus third party distributors. They are ending relations with third-party vendors because that's who currently handles lots of their call center customer service. The 125 retail locations are likely stores that need to be closed due to poor sales or other issues. You can pick it apart if you want, but in reality these are bold, intelligent(not last ditch or timid), efforts at quickly upping the level of service provided to current subscribers. Hesse could not be doing things any better. What a foolish blog this was.

[Tomi T Ahonen]

Hi mcneil, Giff, Ryan, Sprextel Employee, Steven, and The person who wrote this..

Thank you for writing. I will reply to each of you as is our custom here at the Communities Dominate Blog.

mcneil - Good point (problems stem from merger) and I've heard a lot of that. But this is not the first time a telecoms operator or other business has merged. Sprint Nextel has managed to bungle things up rather badly along the way.

Giff - thanks. I wasn't aware they had again jacked up the SMS prices. I have been advocating to use prices at "below the pain threshold" which in Western markets tends to be about 10 cents or so (in Asia it is of course much less). I am disappointed they would be raising the price of SMS that much. I'm sure its yet another reason for their customers to be unhappy.

Ryan - I totally agree with you. Yes, Sprint Nextel is becoming a victim of its own customer-alienating strategies. Very true.

Sprextel Employee - good point. I get that a lot in discussions with customers and employees of Sprint Nextel and also with companies that work with them, and they all echo the same theme that its still two companies and they are struggling to make the merger work.

The person who wrote this blog is an uninformed idiot - thank you for your comment and also the clear disagreement in even the way you sign your comment. As to being an uninformed idiot, I did literally write the book for how wireless carriers/mobile operators should do their marketing (3G Marketing, my third book). That was celebrated by John Wiley, the world's largest publisher of engineering books as the fastest-selling telecoms book of all time. I lecture at Oxford University on the marketing by mobile operators/wireless carriers and I advise the world's largest mobile operators on their marketing. At this blog we've had comments by very respected people from the industry and in general they seem to like my writing and thinking.

But you are of course entitled to your opinion. Perhaps I am an uniformed idiot. However, let us examine the facts and the recent past. In 2006 Sprint Nextel announced it was going to improve its calling centers. It then moved most of them to India which its customers found very much worse than what it had been. In April 2007 the then-CEO Gary Forsee announced to the shareholders' meeting that he would improve customer satisfaction of Sprint Nextel (as it had just received America's worst rating of any company by customer service) and in July the action by Sprint Nextel was to fire those of its customers who complained too much or who roamed too much. The whole telecoms industry was in outrage. The move was covered in magazines and newspapers and all major networks. Latenight talkshow hosts mocked Sprint Nextel for this move. Sprint Nextel's international press in July and August was all about the bad publicity relating to the Sprint 1000 story and the related firing of the military guys who supposedly roamed too much.

Sprint spent the next month trying to explain this move.

Was it brilliant or bad. Up to July 2007 Sprint Nextel had reported quarterly growth in subscriber numbers roughly in proportion to its market share. But since that announcement of the Sprint 1000 in July, the next two quarters while American cellular industry grew just as strong as before, and the three major national rivals, AT&T, Verizon and T-Mobile each reported quarterly growth in subscriber numbers, Sprint Nextel alone reported a dramatic decline, now two months in a row, and with increasing customer defection. Their churn rate is twice that of the rivals.

Up to the firing of the Sprint 1000 Sprint Nextel saw growth in its subscribers. After it a decline. The industry kept growing. What am I missing? Clearly this move - and the related bad press - and the related bad internal morale it brought - there were reports of Sprint Nextel calling center staff giving false assurances to customers "of course we would never fire you for complaining too much" which they then had to detract.

Its not the only thing the company has done wrong, but its certainly the biggest PR and marketing blunder I've ever heard about and I've written books on marketing.

Now about these 4,000 staff that are laid off. If the company top management makes an error that causes the loss of 2 billion dollars in revenues, then my suggestion is that the first to be fired should be the marketing idiots who caused this loss, not those on the front lines - ie the stores and their staff - who try day-to-day to convince existing customers to stay and new ones to sign up. And obviously after firing Gary Forsee (the right move, they told him in August he had to go) they need to fire Tim Kelly next.

Then come out with a clear statement about their customer rights and Sprint Nextel's strategic mission to achieve a customer satisfaction rating that is better than their national rivals. Look at what Kryptonite did to fix their PR disaster, or how Jet Blue admitted their errors and took pro-active steps to get back to the normal perception of marketing.

Now, are there stores that should be closed? Maybe. But this sends the wrong message to all Sprint Nextel marketing and sales staff. That while the management can blunder billions of dollars by pissing off millions of customers, the scapegoats will be the front line. That is bad news. This is a problem getting worse, not getting better.

But you, the person who signs "The person who wrote this blog is an uninformed idiot" - thank you for writing. The beauty of a blog is that we can come back. Our blog is widely read and circulated and there are plenty of permalinks. I won't be removing this blog nor any of these comments, so you can come back after the next quarterly data for Sprint Nextel are reported in April 2008. Lets have a look, do I know what I am talking about.

You should go read my Open Letter to Sprint Nextel (which I have since heard had been read widely inside the company and by its Board Members) - and consider. That was written in July 2007. Then look what happened. Perhaps you can give me a bit of the benefit of the doubt, that perhaps after all, this guy might know a bit about what he is talking about.

Or then, maybe I am just an uninformed idiot. Even if so, maybe even an idiot can come up with the truth by accident. Lets see how this plays. But I promise you, it is not getting better if this is the pattern Sprint Nextel intends to follow.

Thank you all for writing

Tomi Ahonen :-)

[Daniel Sullivan]

Oh, where to begin. My name is Daniel Sullivan and I wrote the post calling Tomi Ahonen an idiot. I wish, after reading the response, I could retract my claim but the assertions (and conceitedness) in this blog are just plain wrong. I strongly stand by my claim, based on these Sprint blogs, that Tomi Ahonen is merely a loudmouthed rabble rouser more akin to Rush Limbaugh than a real business advisor.

Sprint is doing horrible for a number of reasons, but of course the main reason is customer service. JD Power ranks Sprint last among wireless carriers as does the American Consumer Satisfaction Index. Then there is that nifty MSN survey ranking Sprint last among all companies. The customer service is no good. I won’t argue that.

Now, the problem I have with this blog is that makes a big deal about Sprints reputation for bad customer service on such thing as getting rid of 1000 frequent (and likely fraudulent) callers. It’s not that big of a deal. That MSN survey came out before Sprint released those customers and probably only a tiny fraction of customers ever even heard Sprint dropped those subscribers, so it’s not really an issue. Those dropped are individuals who call Sprint and want money taken off their bills on valid charges or invalid codes added to their accounts. These are people who are trying to commit fraud. If someone has a legitimate claim, it would certainly be handled before 40 calls were made. A certain percentage of individuals are just unreasonable and want everything for free. Dropping the 1000 is simply not a big deal. Sprints customer service reputation comes from truly bad customer service. If you are looking for a real person to blame in this mess, it is Gary Forsee.

For those of you who don’t know why Sprint made it big in the first place; it’s because they were the first ones to have cool flip phones and they have always been at the forefront of providing CDMA bandwidth. Sprint then lingered along while the market caught up and eventually passed Sprint phones in coolness factor. And then the competitors upped their level of customer service. Meanwhile, Gary Forsee became Sprint’s CEO and decided to merge Sprint with Nextel—mainly because he wanted to have a larger business subscriber base. The two networks were never compatible. They use completely different technologies. The merger was a bad decision from the get go and anyone worth their salt would have seen it then. I did. This is really the root of Sprints customer service woes.

Gary Forsee then had Sprint in one hand and Nextel in the other: separate billing platforms (P2K/Premier vs. Ensemble), separate networks (CDMA vs. iDEN), and separate headquarters (Overland Park, KS vs. Reston, VA). So Forsee in essence takes his ball of Sprint play dough and his ball of Nextel play dough and slams them together. Sprint’s headquarters moved to Reston while Overland Park becomes the operations office, Sprint accounts are migrated to the Ensemble billing system (but they have a different bill than Nextel accounts) and the dual network gives birth to PowerSource phones (they work on iDEN and CDMA).

So at this point a Sprint subscriber can be located in one of two billing systems and receive one of two different bills. Since Sprint leases the P2K/Premier billing system, they (Sprint) decided to migrate all of the accounts to the Ensemble (Nextel owned and now Sprint acquired) billing system. The good part about the old P2K/Premiere Sprint billing system is that agents can click on plan codes (SOCs) and find out details on the current and historical plans (there are hundreds, if not thousands). In the Nextel system all there are the codes. In the Sprint billing system, the agents had access to great financial breakdowns so as to easily assist customers with billing issues. Not so in the new Ensemble system.

Sprint switched people over to the new billing system without effectively training agents on how to take care of them. And then the agents were expected to instantly know Nextel. And the Nextel customer who were used to talking to Nextel agents well trained in the Nextel billing system would call in and get Sprint agents who knew nothing about Nextel. It was a mess. And it is a mess which could have and should have been prevented by Gary Forsee. The recipe for customer service isn’t a hard one. Customers want easy to read bills (no surprises), consistency, and agents who speak their native language.

Yes, the corporate philosophy at Sprint has been very wrong. Gary Forsee is to blame for Sprint’s woes, not Tim Kelly. Again, the Sprint 1000 issue is really mute at this point. If you want to pick on Sprint pick on them for the right reason. I take serious issue to the following comment:

“Now Sprint Nextel's new CEO is announcing desperation moves. They are firing 4,000 employees (that will not help morale, help the customer service image of the company rated dead last among all American companies by customer service). And they are closing 125 stores. Again, that will further damage the Sprint Nextel brand's image in the eyes of its customers.”

Dan Hesse, the new CEO at Sprint, is not making desperation moves. Hesse is trimming fat in a bold display of leadership and strength. Sprint employees don’t need a pat on the butt and a thank you for doing a good job as they have been doing a crappy job. Policies need to change; manager’s need to be fired; poorly performing stores need to close. Sprint has around 20,000 distribution points. About 1400 of these are Sprint “corporate” stores. The rest are considered third-party retailers and, under Forsee, Sprint would seemingly issue a dealer license to a homeless man on a street corner. Many of the third-party stores operate with reckless abandon, but most operate with much more efficiency (and integrity) than Sprint corporate stores. Sprint is closing 125 corporate stores, firing 4000 employees (including management level and possibly executive level), AND cutting 4000 “third-party” distribution points, AND less reliance on vendor services. This is clearly an effort to get rid of the weakest customer service links. Forsee is making an effort to regain the structure and control needed to implement stronger customer service across the boards. He’s a good CEO and has done well at Embarq.

Hesse is not trying to merley project merely an image that he is working to improve customer service. Hesse is really taking the steps which should have been done long ago. He is taking control. From a marketing standpoint, I guess it’s not glitter and gold, but only after Sprint fixes their customer service issues will they be able to remarket themselves as extremely customer focused. As long as Sprint has name recognition, they will eventually be able to launch a marketing campaign toting their improved customer service (but they need time to fix it).

Also, if you didn’t notice, in the past year the Sprint website has gone from horrid to rather functional and Sprint has added a customer interaction blog site called Buzz About Wireless where customers can post suggestions and interact with Sprint employees on various issues.

In conclusion, the firing of 1000 customers was no big deal on any level. Can you show me a survey of what percentage of Sprint subscribers have ever even heard about the firing? And if so, how many took the firing as a negative mark on Sprints image? I would guess this to be less than 1 % and I believe that number to be very generous. The customer service issues aren’t due to this at all. Sprint’s customer service problems have gotten worse because of the merger. Daniel Hesse, the new CEO, is making changes to regain proper control of Sprint.

--Daniel Sullivan

[Tomi T Ahonen]

Hi Daniel

Thanks for coming back and also I greatly appreciate it that you posted under your own name this time.

WE AGREE ON MUCH

You make many good points and we agree on most of them. To be clear, we both agree Sprint Nextel is worst at customer service of any of the wireless carriers in America, actually at least by one survey the worst company in all of America by customer satisfaction and yes, this was prior to the firing of the "Sprint 1,000".

We also agree that ultimately the responsibilty for the bad reputation was with former CEO Gary Forsee and that it is just that he was fired. And that most of the troubles stem from the merger of the Nextel and Sprint networks that has been executed poorly (also mostly the fault of Forsee).

I also admit that companies do have to make tough choices in their staffing, and firing 4,000 is not that "big a deal" in the overall scheme of things worldwide in the telecoms and IT sector, especially when the industry might be in a downturn and there are industry-wide cut-backs.

Of course this is not the first time Sprint Nextel has fired staff, I recall it was 5,000 people laid off about a year ago. And while we don't know exactly where these 4,000 job cuts will be made, as 125 Sprint-owned stores are culled, certainly a significant portion of the total will be from the stores. And the stores, together with the calling center, are literally the front line for customer interaction with the Sprint Nextel brand. It will not help improve the Sprint Nextel image to have stores that once existed, for existing customers now to discover a sign of "For Sale".

It does not help improve the customer experience (while it hopefully does improve the bottom line).

We agree on most of it.

I do not agree with your assertion that the 1,000 who were fired deserved to go, and that they were mostly fraudulent customers. You wrote:

"getting rid of 1000 frequent (and likely fraudulent) callers. It’s not that big of a deal. Those dropped are individuals who call Sprint and want money taken off their bills on valid charges or invalid codes added to their accounts. These are people who are trying to commit fraud. If someone has a legitimate claim, it would certainly be handled before 40 calls were made. A certain percentage of individuals are just unreasonable and want everything for free. Dropping the 1000 is simply not a big deal."

Daniel. What you write makes sense. But it is totally, irrevocably, proven to be untrue. There were hundreds of articles by the USA press about the Sprint 1,000 in July and August of 2007. I haven't read all of them but I read several dozen and reference many of them in the four follow-up pieces I did in 2007.

First - you assert fraudulent users. No. There was one article that claimed this by an unnamed source, which was refuted at dozens of credible major press stories, that these were not fraudulent customers.

Secondly - you suggest that if a customer would have a legitimate claim, it would definitely be handled in 40 calls. Again, it makes perfect sense in "the real world" where modern marketing methods are deployed, but there are several actual credible major press stories chronicling how users often would call more than 40 times to resolve a problem with Sprint Nextel, partly because their processes are so bad (the staff believe the problem is fixed when it isn't) and partly because Sprint Nextel's own procedures promote MULTIPLE calls forcing both new calls rather than forwarding the complainer to another extension (as most operators do it in their calling centers) and forcing callers to call back repeatedly (as most operators will have their staff call back the upset customer with updates). And obviously the best operators in the world tend to fix problems at the first call. No, Daniel, the facts are out there. There were literally several thousand cases of LEGITIMATE cases where Sprint Nextel's customers were calling more than 40 times and their problem was not resolved.

Among the Sprint 1,000 there were several cases where Sprint Nextel, upon complaints and reflection, found that they had in fact been wrong and the caller had been right, and these customers were re-instated. Spring Nextel in its actions (while not apologizing) has admitted that this is common in their calling center.

No, Daniel, what you write makes sense in most cases, but in the case of Sprint Nextel, the actual case histories chronicled by others, not me, prove this was an epidemic driven by Sprint Nextel's own internal problems. In that case to "punish the customer" when some of the customers were LEGITIMATELY so upset they were calling 40 times per month AND STILL not having their problems, fixed - no, Daniel, that company has no right to claim it can find the "bad callers" and institute this draconian, cruel method of "customer care" by cancelling these customers.

Finally, as you no doubt know, there were several customer advocate groups who immediately rallied against this practise. If they had been fraudulent customers, Sprint Nextel would have said so, but they never claimed that.

Daniel, you have given Sprint Nextel the common wisdom benefit-of-the-doubt, which any human being would have with any knowledge of business. But in this case, the actual reported stories clearly show, Sprint Nextel was actually that bad. These were not a bunch of whining customers who complain out of no reason (although, of course, in any business, there are always some who complain forever, about anything. To deal with those, there are gentle means, not to fire them)

POWER OF COMMUNITY AND ALPHA USER

But Daniel. I wrote the book with Alan Moore about digital communities and social networking, the power of the mob, called Communities Dominate Brands. That book is a global bestseller now driving top management from Nokia and Google to Coca Cola and Red Bull. The central theme of the book is that you cannot fight a digital community (hence the frequent references to the horror cases of Kryptonite, Dell Hell and Jet Blue - Kryptonite admits they were near going bankrupt as they did not know how to react to a digital community revolt - and Dell's share price never recovered from Dell Hell.)

In our book we discuss the role of the Alpha User. Ours was the first book to explain the relevance of this concept. The true influencer, far more relevant than the "early adopter" which was the best that marketing had prior to the discovery of the Alpha User and its role in determining how digital communities behave.

You say that probably under 1% of Sprint Nextel customers know of the "Sprint 1,000". I am certain as Jay Leno featured it in his monologues several times last summer ridiculing Sprint and Time had a story about it and CNN and CBS news covered it, the percentage is far higher than 1%.

But I take your point. I'll grant you that its much less than half of all Sprint Nextel customers who know of it, or heard of it, or care about it.

That is not the point. You miss totally the relevance of my Open Letter, the true catastrophic business examples we give in the book and on the blog, and which have been verified by the Economist, Business Week, Time etc. You cannot win if you fight an angered digital community as Dan Rather found to his dismay at CBS news or indeed President Estrada found in the Philippines as Howard Rheingold chronicles in his book Smart Mobs.

Four years ago Sprint Nextel could have gotten away with it. The 1,000 would be fired, some little bru-ha-ha would have perhaps ensued, but the matter forgotten and put to rest.

Today it is totally different. Because of digital communities (social networking) and especially because of Alpha Users.

Two percent of the total customer base of Sprint Nextel are Alpha Users. ALL of them are passionate about Sprint Nextel, either loving it or hating it. They are passionate about it. They personally have in their phone books more than half of ALL Sprint Nextel customer phone numbers. Read our book for more with all the research and facts.

These Alpha Users were outraged, maddened and many forever angered by Sprint Nextel's action.

Go read the comments at the Sprint users board. One lady complaining about the firing of the Sprint 1,000 had been read over 100,000 times !!!

One lady (who was among the fired) complained bitterly, and there were 100,000 Sprint Nextel loyalists, who read her entry. Did they think she was right or wrong? That posting has an unheard-of 5 star rating. Five stars out of five, when 100,000 people have read her posting.

This is what I mean. An Alpha User.

The Alpha Users are dramatically more influential than any other element in the modern marketing mix. More relevant than handsets, discounts, loyalty schemes, free message buckets, etc. A study by Xtract about real mobile operator customer churn data and Alpha Users has found that for churn, Alpha Users influence churn 4 times more than the average user. There is NOTHING in the marketing mix that an operator/carrier can do that would accelerate the loyalty gains four times over the current (except getting the good will of Alpha Users obviously)

Daniel - I understand your thinking, that the Sprint 1,000 is an "old story" and "nobody remembers it" and therefore it must be irrelevant today.

First, consider the big picture. Sprint Nextel net customer base grew quarter-on-quarter in 2005, in 2006 and the first two quarters of 2007. But right after the Sprint 1,000, for the first time as far back as I can find, Sprint Nextel LOST customers. Yes, the first quarter but even worse, also the second quarter.

It could be explained away by an industry downturn. Except that there was none. The USA total cellphone subscriber base grew on average by 1.6 million subscribers per month also in the third quarter, and more than that in the fourth quarter. So while the industry grew quarter-on-quarter all through 2005, 2006 and 2007; and Sprint Nextel's customer base grew with that industry growth, for 10 of those 12 quarters, suddenly Sprint Nextel - and ONLY Sprint Nextel - experienced a downturn in the last two quarters.

Something happened in the summer of 2007.

Maybe it was the iPhone? That would certainly explain why AT&T has growth and Sprint Nextel does not. But as Verizon grew subscribers and T-Mobile grew subscribers inspite of the iPhone, then this cannot be the reason (it may be a part of the reason, but not the driving factor)

What else of in any way meaningful happened in the Summer of 2007? The Sprint 1,000 fiasco. The second biggest story in telecoms in America in the summer of 2007 behind the iPhone. It is rare to get the late night talk show hosts to talk about our industry; it is heartbreaking to find this kind of notoriety featured there. Sprint Nextel's already bad name in the summer of 2007 was being dragged through the mud.

I will very happily accept for consideration any other factor you can show me, from the summer of 2007, that could cause this unique downturn in subscriber retention and acquisition for Sprint Nextel, Daniel, but I have not seen it.

Now, why is this so much worse? It is because these Sprint Nextel Alpha Users are angry still, and they are eager to bolt from the network (unless Sprint Nextel issues an apology and starts to court them back). That is why the customers leave now six months after the incident, and will continue to desert this sinking ship for at least the next four quarters. It is totally predictable, totally following the pattern of Dell Hell, Kryptonite and Jet Blue. Go read those cases Daniel, and consider.

Before digital communities, this kind of "bullying" by a marketing department was possible. Today because of digital communities and especially the power of Alpha Users, Sprint Nextel will not win this fight.

TIM KELLY

Now. Lastly on Tim Kelly. The freshly promoted to Chief Marketing Officer of Sprint Nextel in the Spring of 2007, this was the first major marketing effort since he was appointed.

If he knew what he was doing, if he was competent, he should have explained to Gary Forsee that this is not the right thing to do. Or even if he lost THAT argument, he - Tim Kelly - should have been professional enough to change the campaign so, that this was not the right WAY to do it.

As I wrote in my Open Letter, Spring Nextel could have easily dealt with this, to no damage whatsoever, with modern, humane, marketing methods. Not kick the customers out, but offered them a chance to leave (and most would have). No fuss, no damage, no bad PR, and not millions of customers deserting them, costing Sprint Nextel 2.3 billion dollars of annual revenues from now to perpetuity (these customers are never coming back).

So. What if Tim Kelly is some coward weasel who was just appointed Chief Marketing Officer but then bullied by CEO Gary Forsee? If Tim had internally argued against this PR disaster (any professional in marketing would have immediately seen it is the wrong thing to do, and furthermore, that it was the wrong way to try to do it) - then the moment Gary Forsee was fired, Tim Kelly should have brought about Sprint Nextel's apology to this - to show he is really a marketing man and not some coward weasel in the corporate HQ of Sprint Nextel.

Daniel - look at the stock price of Verizon, AT&T and T-Mobile's parent Deutsche Telekom for the period since July 2007. Then look at Sprint Nextel's. This is EXACTLY like Dell Hell. It will not be fixed until Sprint Nextel changes its tune and apologizes and starts to treat the hurt customers nicely.

I have no axe to grind in this. I live in Hong Kong, I have never been a customer of Sprint or Nextel. But I am thought of as the thought leader for modern marketing for mobile telecoms; I write books and lecture at universities and run workshops on modern customer-oriented marketing for telecoms, in particular mobile telecoms (wireless, cellular). I am using Sprint Nextel as the ultimate case of doing it all wrong. I am convinced that by the time they finally fix this, Sprint Nextel's PR fiasco of the Sprint 1,000 will go down as the greatest marketing disaster, worse than New Coke. And unless they fix it soon, the customer diaspora will continue (as the USA market continues to grow), the share price will continue its downward spiral, and sooner or later, some corporate raider steps in and chops up the company.

Why? All it takes is for new CEO to issue an apology and something like Jet Blue did (or Kryptonite) and make a pledge to something like a customer bill of rights or whatever - and obviously then truly deliver, better customer service than any of the other 3 US wireless carriers. That is the way to save this company.

And Tim Kelly. His name is dirt. He totally ruined his chances in this game. His name will be featured in Harvard MBA classes for decades to come, in line with the guy who said the Beatles didn't have a chance because the time for guitar bands was over in the early 1960s.

But I appreciate it that you stopped by again, and I hope this exchange of views helps you see where I'm coming from. I do think - and there is a consensus forming around this in the professional marketing circles - that the power of digital communities/social networking - is changing the whole game for how marketing will work in this decade. Sprint Nextel happened to use old methods in the new game. They were ignorant (but for execs in telecoms, that in itself is inexusable, we in telecoms discovered this new marketing phenomena first) and they made classic marketing errors just like Kryptonite, Dell, Jet Blue and Dan Rather at CBS News.

The problem will not go away. It can be traced to that fateful day in July when Sprint Nextel announced it was firing customers.

Thank you for writing. I hope this has shed some light on why I think this was such as bad thing in July 2007, and why it is clear to me that today's actions are the direct result of that event.

Please do come back and lets discuss this more

Thank you

Tomi Ahonen :-)

[Neil Armstrong]

Hi Tomi,

I came across your blog today linked from Seth Godin. Loved the article and the subsequent comments and thought you might be interested in our example from across the Atlantic.

In 2005 PlusNet, a UK ISP, made a similar mistake of 'sacking' two customers. Our customers quite rightly punished us for it and we only just survived to tell the tale.

I'd like to think as a company we've found our way back to doing the right thing for our customers. Would be interested in your thoughts. I've written an article on our customer community site that revisits the dark days...
http://community.plus.net/blog/2008/01/24/flashback-to-the-dark-days/

Cheers.
Neil.

[Tomi T Ahonen]

Hi Neil !!

Hey, thanks, that is a great story, we have to blog about it. That is exactly the lesson that we hope most companies will learn by "not doing" (do not try this at home, ha-ha). We have the Kryptonite story as one of the case studies in the book of course, but now there are many more.

I will follow your link and I'll blog about it, thank you so much.

Tomi :-)

[Steven Hoober]

Wow. Lots of comments. Two things from an insider point of view.

The bulk of customers can get one of THREE totally different bills, online account management experiences and customer care desktops. Not two. Do not ask how. Eventually, it'll migrate to the newest of these, but the migration just adds to the problems the call center folks (and all other account management channels) have to deal with.

The fired customer thing sure was poorly handled (i.e. not handled at all, just executed), but at least some of these were certifiably insane folks. Some called over 20 times a day. Just to...talk. A retail store can refuse service for anyone, and call the cops if you won't leave the order counter. Should nothing have been done? Really not totally clear cut.

I don't want to violate any former employer confidentiality, but similarly unpleasant things, to significant portions of the customer base, were considered (and may still be under consideration) to reduce load on the care reps. There is a school of thought (and Sprint is not the first place I have seen it) that customer service would be fine if there just wasn't so /much/ of it. Driving calls down is the only goal, to such organizations. That, of course, is usually counter-productive to the end goal of satisfaction, low churn, etc.

[Neil Armstrong]

Hi Tomi,

Many thanks for the kind words and feedback on our site! If you or Alan want more info please drop me an email. Thanks again.

Neil

[Jack]

Our billing has been a mess for at least four years. Had to call NEXTEL every month and complain about billing. Never knew what to expect. It was always wrong, never the same every month. There is five phones on our account but no one told us it should be on a family plan package instead of three different plans on one bill. AFTER FOUR YEARS NO ONE NOTICED THIS!!! Until two weeks ago in the Liberty,MO store when there customer service girl found the problem and said that there can not be three different plans under one family. She noted our account and someone was to notify us with in two to five working days and here it has been two weeks and we have heard from no one. We have been paying almost double in fees and billing and no one will return our calls. I can see why a company would have so many problems operating in this maner. All I want to do get out from under them. And after all the money they have made wrongly off of us, we should be let go free and clear oweing nothing. I would never go back to this company. I think the first thing they need to do is fire Tim Kelly, not fire the people that work for you, that need the jobs so desperatly. What problem is that going to solve? You get rid of the sourse of the problem. Do you really have to think that hard? TIM KELLY!!
Jack Woodring

[Neil Armstrong]

Hi Tomi,

You may have already heard this but a credit card company in the UK called Egg has just 'sacked' more than 150,000 customers. http://news.bbc.co.uk/1/hi/business/7222336.stm

Yet more firms breaking rule #1...

Neil

[Alan Moore]

I know I was one of them. Delivered via a recorded voice message

Go figure

Thanks for posting

Alan

[Graham Hill]

The Egg thing is over 161,000 customers with claimed high credit risk. The credit risk claim has already been shown to be not true. It looks like Egg is being economical with the truth. The story has all the makings of a Sprint 1,000 story so far; Dear John messages, misleading claims about the reasons for firing, parts of Egg's story that just don't hold up, etc.

I blogged about it over at the CustomerThink blog. The blog has been on fire since.
http://www.customerthink.com/blog/internet_bank_egg_fires_161_000_customers

Graham Hill
Independent CRM Consultant
Interim CRM Manager

[Giff Gfroerer, i2SMS]

Tomi,

Have you seen this one? I picked it up from Mobile Marketing Watch:

"Sprint is being accused of some allegedly questionable practices and it appears that they’re seeking in excess of 5m dollars. Sprint is also accused of extending consumer contracts by actively marketing existing customer’s new products and services without adequately informing the consumer that acceptance would result in a contract extension. The complaint also alleges that Sprint Nextel…

* Offered courtesy discounts without adequately notifying consumers that by receiving the discount their contract was extended or a new contract was created.
* When some consumers have requested a copy of the alleged new contract or evidence there was a contract extension, Sprint allegedly stated that they didn’t have a copy which they insist the consumer is bound and refused to provide a copy of the contract outlining the terms."

Complete details on the suit are here:
http://www.mobilemarketingwatch.com/wp-content/uploads/2008/02/appleby-vs-sprint-nextel.pdf

Giff

[Tomi T Ahonen]

Hi Steven, Neil, Jack, Alan, Graham and Giff

Thank you all for your commments

Steven - wow, three bills? Thanks for the insights. About the firings still. So yes, if you have 55 million customers, of course there are going to be a couple of hundred in that group who are really nasty, annoying, "you can never satisfy them" kind of customers. But I did the analysis that these 1,000 customers, even at the top end of the level of their calling traffic, counted for less than one percent of all calling traffic to Sprint Nextel. And as we know, Sprint Nextel has thousands (many many more than these) customers with LEGITIMATE reason to call more than once per day for more than a month to get their legitimate problems solved, for all manner of reasons.

But yes, I'll grant you that some hundreds of their total customer base certainly must be the totally annoying customer who can't be satisfied no matter what. If we say that the average call to the calling center lasts about 5 minutes, then a typical calling center rep will get less than one of these calls per day. Come on, if they are fully trained professionals and this is their job, if they can't handle a couple such nasty calls PER WEEK, then they should change jobs.

But the famous author and leading mobile blogger Russell Buckely at the MobHappy blog pointed out a very important consideration - among the 55 million Sprint Nextel customers there will be some of dimished mental ability. Those who have just marginal mental ability to barely survive life. Not certified mental patients, but of very low mental ability. Like Forrest Gump of the movie. Very simple people.

They too will get mobile phones. And they can be very confused about the new services, new tariffs, new phones, changes to the existing service, etc. That kind of person could call up the calling center easily many times per day for a while, simply being confused. And then, that person would be hitting DIFFERENT reps. Some will drop the call, some will tell the person to call another number or call back (as is Sprint Nextel's policy) and again the person will find a different person answering, who is likely to use different vocabulary in explaining the issue. For a "normal" person it would not be a problem, but for one of modest mental ability, this can be a very confusing situation. Causing frustration, and yes, many calls (about the same issue, which by Sprint Nextel's organizational systems, may technically be "resolved" but in such a confusing way, by different people at different times, using different terminology - and with the foreign accents from India further confusing matters).

Again, once they start on that slippery slope of firing customers, these kinds of people will get caught in the cross-fire.

So yes, they did execute this horribly. Like I wrote in my original piece, there are perfectly common normal ways to get rid of those customers if Sprint Nextel would have wanted to do so, over time, letting them churn with the normal churn rates, etc.

Neil (first comment) - thanks !!!

Jack - ouch. There are so many of these horror stories about the company. But at least now there was that bit of poetic justice that Tim Kelly was fired (at last) by the new CEO. Good decision.

Neil (second, Egg) No !! I was afraid this is going to spread. How horribly sad.

Alan - ha-ha, so you too? Should we blog about this? Do you want to do it as you've also personally seen it.

Graham - thanks for the details. Yes, all the makings of another PR fiasco.

Giff - I can't believe it (yes of course I believe you). How horribly wrong-side-up is this company? They need a new Chief Marketing Officer to come in with a very aggressive broom to sweep out all the dirt. And they should issue a kind of customer manifesto like the airline did in the US that stranded its passengers (I forget now which one it was, so many US airlines have such bad customer service, ha-ha).

Thank you all for writing. We'll keep on monitoring the company, and I'm hoping they learn from their mistakes. But also, if we have to have some Darwinian survival of the fittest, certainly these blog comments add to the conclusion that Sprint Nextel is among the least fittest of the bunch, and least deserving of survival...

Tomi Ahonen :-)

[cheap jewelry]

I like what you have said,it is really helpful to me,thanks!