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This article originally appeared in Harvard Business Review on February 9, 2011
As Verizon puts its iPhone on sale this week, many observers are predicting doom and gloom for AT&T, which previously had exclusive rights to offer Apple’s blockbuster device. Verizon has already sold out of its pre-order iPhones, and the ad wars have already begun.
However, many business leaders neglect to realize how competitive threats create great opportunities to strategically winnow their portfolio of consumers. It may seem counterintuitive, but smart companies need to routinely rid themselves of less profitable customers, the same way an asset manager or rebalances an investment portfolio or a Major League Baseball general manager trades a declining player.
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