I spent some time this week with Larry Walsh, who now runs his own IT business development and media consultancy called 2112 that specializes in reseller channels, security and managed services. Larry most recently was editor of VARBusiness magazine, working there after my own tenure He can be reached at lmwalsh2112@yahoo.com. Take it away, Larry.

Sprint-Nextel sent about 1,000 subscribers looking for a new wireless carrier because of their excessive customer service use. The company’s rivals are making hay with the action by declaring that they’d never drop their customers. But, if you think about it, Sprint made the right move. Here’s why, and what lessons others should learn.

Not all customers are alike. In fact, there are such things as good and bad customers. Good customers use your goods and services at a rate that provides you with a reasonable revenue and profit stream. Bad customers often make excessive demands, consume resources and resist satisfaction with any attempts of conflict resolution. In short, bad customers cost more money than they make.

Sprint says that its average subscriber calls customer service about once a month for issues ranging from billing issues to technical support. The dropped subscribers, on average, we’re calling customers service 40 to 50 times a month, often with requests for things that Sprint could never provide them, such as information about other subscribers’ accounts. If you read between the lines, Sprint believed there was nothing it could do to satisfy these problem customers.

When you consider that Sprint has 54 millions subscribers, the idea that a relative handful of problem customers would cause huge headaches seems absurd. The reality is these subscribers were not only chewing up Sprint resources but also denying other subscribers access for legitimate problems.

Many companies look at all customers as being equal, at least in terms of sales and revenue potential. In other words, if they’re willing to buy, you’re willing to sell to them. Two customers with the same purchase order with the same cost and margin structure won’t always have the same revenue results because no two companies are alike in their expectations or demand for services. Companies need to qualify their “prospects” before converting them to “customers” or else risk taking on problem accounts that will drain resources and result in opportunity losses.

Think about it. When one of your clients starts calling the help desk, demanding faster response times and makes excessive requests for special services, they’ll quickly consume the bandwidth that’s supposed to be servicing the larger base. The support overload spreads to the sales and back office, too, since these customers will likely demand more face time and follow up actions from their sales reps, account managers and your company’s accounting department.

What can you do to avoid hooking up with bad customers? Qualify the prospect and determine how good of a customer they’ll be. Here are a couple of things to consider:

1. Avoid excessive contract and terms changes: Bad customers will typically ask—or demand—modifications of your standard agreement or service contract or will look to create other loopholes.
2. Ask for references: No customer buys exclusively from one company. Ask for references or even just a list of other companies they’re working with. You can learn a lot about customers’ habits and working relationships by talking with your peers. Routine networking within your local market will often yield tremendous intelligence on potential leads and the reputation of potential customers.
3. Charge admission fees: Establishing new accounts cost money, so why not pass that cost on to your customer. Some companies are charging their prospects for site and infrastructure assessments before entering any long-term agreements. If the prospect doesn’t meet the criteria for becoming a customer, you should walk away. Charging the prospect for the initial engagement sets an expectation that they prove how serious they are about the relationship they’re seeking
4. Check their pockets: How much money does a prospect have and is willing to spend on your deal? This is more than qualifying their ability to pay, but figuring out how much they value your products and services. Prospects that historically race to the lowest price are more likely to become bad customers; they want the world, but don’t want to pay for it. Only engage with customers who understand and appreciate the value of your goods and services. This doesn’t mean they won’t negotiate for the best price, but they won’t complain when they receive service that truly enhances their business.

If you’re prospects exhibits any of these traits, you’re better off leaving them for someone else. While it’s sometimes difficult to say no to a paying customer, having the right customers in your stable will ensure you enjoy continued revenue streams, growth and profits. And if any of your existing customers have these habits, have the intestinal fortitude to fire them. They’ll do you and your good customers more harm than good. Why do you think Sprint cut their bad subscribers loose?