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"
We should not foresee the fact that their Revenues increased by around 9% between 2012-13. And since the company announced that their CAPEX for year 2014 will be around $2.2 billion, things can change course if they use it wisely. Read More: http://bit.ly/1iQQg4g
Posted by: catherinekylie | March 31, 2014 at 01:06 PM