Last Friday I ended a 9 year relationship with Sprint. It didn’t have to be that way, but failed customer service policy made it inevitable- and also, made it unlikely that I’ll ever say anything nice about Sprint ever again.

So, today when the CEO resigned- and they announced a major loss of customers, I wasn’t surprised. I’m sure my story is repeated every other minute- and it’s not the advertising that’s at fault, it’s bad customer service.

First, here’s what Ad Age said about the churn at the top- and then I’ll share my story and how Sprint could reverse it’s fortune:

Sprint CEO Resigns; Carrier Announces Major Loss of Customers – Advertising Age – News
SAN FRANCISCO (Adage.com) — Despite $1.78 billion in ad spending, and its hiring of one of the leading ad agencies in the nation, Sprint Nextel continued to bleed customers in the most recent quarter, leading to the resignation today of Gary Forsee as chairman and president-CEO.

In a statement regarding the resignation, Sprint also said it will announce that during the third quarter it lost some 340,000 postpaid wireless customers, that is, customers who pay a bill each month instead of those who pay in advance for a limited number of minutes.

Botched merger
Under Mr. Forsee, who has been CEO since 2003, Sprint merged with Nextel, a move which many analysts considered botched as it failed to boost the company’s value. His plan was to get the carrier to differentiate by building out a WiMax network by 2010, a plan which cost some $5 billion on a technology some viewed as unproven but others applauded.

“The plans he had are very sound — Sprint needs a differentiator,” said Roger Entner, senior VP-communications sector, IAG Research. However, Mr. Entner added, “losing 300,000 subscribers speaks for itself.”

As the carrier’s difficulties mounted, Mr. Forsee revamped his marketing department, ousting Chief Marketing Officer Mark Schweitzer and replacing him with Sprint veteran Tim Kelly. The company also put its $1.2 billion ad account into review. Omnicom Group’s Goodby, Silverstein & Partners won the business and launched at midyear a campaign tagged “Sprint ahead” and introduced the concept of “Sprint speed.” The anthem spot, and an outdoor billboard campaign which followed, featured neon lights.

The campaign followed work from Omnicom sibling TBWA/Chiat/Day, which used the taglines “Power up” and “Yes you can.”

While I have the utmost respect for both TBWA/Chiat/Day and Goodby, Silverstein & Partners, their campaigns mean nothing in the selection of cell phone service. If there is one category where the advertising budget could be better spent on other parts of the business, cell service is it. Take a hint from Amazon and Google- it’s the user experience that’s critical to keeping customers- not a $200 termination penalty, or extending contracts everytime you change some part of your service.

Amazon took their ad budget and instead offered free shipping. Google offers a great free service- search, as a platform for all of its other products.

So, how did Sprint lose me? A combination of the $200 termination penalty and the rigidity of their contract extension. It’s funny, the day after the termination, I saw a Virgin Mobile ad that talked about no contracts, no termination fees- as if they really cared about just being a great cell phone carrier- not my ball and chain for 2 years. Their site says their only commitment is “Us to you” – isn’t that the way it should be? Customers are the ones paying afterall.

I am one of the few people who absolutely loved Sprint- and was unabashed in my preference for the upstart cell company. I’d had amazing service, great rates, and until the iPhone came out, no reason to switch. My main reason for leaving Sprint was their lack of a decent smart phone- the Palm Treo is like a Windows PC – too many buttons, options and bad software- compared to the sleek smooth interface of the iPhone. As Peter Drucker said- a “a business has only two functions in society: marketing and innovation” and Sprint had failed on the innovation front.

But, wait, I had 2 lines- one for me, and one for my Dad, who is 80 years old- and doesn’t talk that much on the cell, but we shared my plan. So, I wasn’t looking at $200 cancellation, I was looking at $400- with less than a year to go. I wanted to transfer my home number to my Sprint phone- and be done with the home line- but they couldn’t do it. It took a week to get Sprint to realize that I just wanted a new number on my old Sprint phone- a lot of very long calls- and billing errors.

But, then it turns out- 2 cell phones wasn’t really practical, so I was going to cancel mine, no matter what- but, my Dad didn’t need 700 minutes- he just needed the base $30 a month account. I called Sprint and tried to explain to them that I just wanted to keep him on Sprint at the lower rate- and that the $360 they would receive for the year would be greater than the $200 termination fee. But, no- they insisted to extend it 2 years- and what was worse- if he died, I would be liable for his line for the full 2 years since it was in my name. Not that Pop’s is about to kick, but, I wasn’t willing to extend for 2 years. So I told him to go to the ATT store and transfer his number and get a new phone. The next night I called Sprint to cancel- they forced me to wait 15 minutes on hold for a “retention specialist” – even though I wanted a “cancellation specialist”- no matter, the cheery voice immediately told me that she could have waived the contract extension- well, too late, the switch was made.

Some observations- the first Sprint contact’s English was good- but it was obviously an offshore call center. The “retention specialist” was an American. When I asked the first guy for a supervisor- the response was exactly the same- it’s sad that you have to actually cancel the account to get to someone who can make a sound business decision.

What’s worse- I hate ATT in every way possible. Their billing plan isn’t near as nice as Sprint’s, their network is sluggish compared to Sprint- yet, they were smart enough to buy the Apple deal- which I’m sure Sprint had an opportunity to do to.

When I was talking with the “retention specialist” I suggested that with the amount of money Sprint has to spend to acquire a subscriber- the willingness to lose a happy loyal customer over what amounts to a one year extension of a contract is really bad business. What’s worse, I doubt I’d ever recommend Sprint again.

The best source of new customers is now your current customer. Especially when you offer free in network calling- almost begging you to cajole your friends and family to switch to the same cell carrier you are on.

You see, besides all that marketing and innovation- the other part of business that may need to be included in Drucker’s equation is Public Relations 2.0. In a connected world- how your customers, former customers- talk about you, online, offline- may be the most important part of your balance sheet. Goodwill is no longer something you buy with more advertising- it’s what you earn by delivering an outstanding customer experience- and whether it’s at “Sprint Speed” or not- doesn’t really matter. This post will be there for years to come- making future Sprint Customers thing twice into entering a contract with a company that cares more about their contracts than their customers.

No matter what your business is, your future customers are most likely to trust what your current and former customers say about you more than what you say about yourself. Actions speak louder than words- even with a $1.2 billion ad spend.