MODULE 46: “Least Profitable Customers”
Core Module Issues:
• Should a company identify its “worst” customers?
• Should a company discriminate against such customers?
Module Teaching Notes
This module is the last in the “special obligations to customers” unit.
If you like, you might use this opening lecture time to review the other five modules in the unit, and you
might ask the students to rank them or comment on which case seemed most compelling.
Companies give any number of perks to their best customers. “Whales” in Las Vegas are given
complimentary upgrades to penthouse suites with regularity. For mere mortals, loyal customers are often
given rebates, advance access to desirable merchandise, and other special deals.
In this module, though, we will look at the other end of the spectrum. For every great customer, there is a
terrible customer at the other end of the bell curve.
What should companies do with customers that not only are unprofitable, but who actually COST them
money to deal with? Should a company treat everyone the same, or can they make exceptions?
Is it OK for a company to price its least profitable customers out of the market? Drag its feet/give poor
service? Ban from a store altogether?
These and other ideas are explored in the scenario.
Discussion Points for Scenario Questions
1. Many forms of discrimination are illegal. If a company treats customers differently based on
race, for example, the company is in big trouble. But many forms of discrimination, such as
those featured in this scenario, remain completely legal. Overall, does a company have an ethical
obligation to treat all customers the same regardless of how much they spend, or does no such
obligation exist?
A. TREAT THE SAME – BUT ISN’T THERE SOME LIMIT?
B. MAKE DISTINCTIONS – BUT WHY IS THIS KIND OF DISCRIMINATION
ACCEPTABLE?
2. Rate the moves the companies made that will be detrimental to classes of “low revenue”
customers who did nothing “bad.”
Outrageous —————————–→ Completely Reasonable
Credit Card Company 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
Oil Change Business 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
Baseball Team 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
Apartments (low rent) 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
[LET THE STUDENTS GIVE THEIR RATINGS AND RESPOND TO ONE
ANOTHER.]
3. Have you felt like you’ve been treated disrespectfully by a business because you failed to
spend enough money? If so, what happened?
[LET THE STUDENTS TELL THEIR STORIES. (SOME WILL DEFINITELY
HAVE STORIES.)]
4. Rate the moves the companies made that will be detrimental to classes of “low revenue”
customers who behaved badly. Are you more comfortable with companies targeting individuals
with destructive behavior, or does that not make a difference in your mind?
Outrageous —————————–→ Completely Reasonable
Apartments (damage) 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
Super Taco 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
Department Store 1 —– 2 —– 3 —– 4 —– 5 —– 6 —– 7
[LET THE STUDENTS GIVE THEIR RATINGS AND RESPOND TO ONE
ANOTHER.]
5. If a company chooses to try to purge its least profitable customers, special care must be taken
when health and safety are involved. Affected customers are more likely to sue in such cases,
they are substantially more likely to find a valid legal basis for their lawsuits, and large jury
verdicts are also more likely to occur.
Consider the health insurance example in the background information. Assume that you are on a
jury in a case in which you believe that a health insurance policy was wrongfully terminated and
that a policyholder ultimately died as a result of being unable to afford proper treatment. Assume
further that you are instructed that you may assign any amount you wish in the form of punitive
damages.
How much money would you award the deceased person’s family?
A. TONS OF MONEY – HOW MUCH?
B. NOT THAT MUCH – DIDN’T THE COMPANY BEHAVE ABOMINABLY?