If there’s ever been a better example of how NOT to handle your customers, it’s Sprint Nextel. Today, the company announced that it would cut approximately 4,000 jobs and close about 8 percent of its stores amid the continued migration of thousands of customers fed up with Sprint’s spotty coverage and poor customer service.

Sprint has been killed in recent years, losing ground to rivals like AT&T amid network and customer service problems that have driven away high-value post-paid customers who pay monthly bills. Adding fuel to the fire, the company has also been damaged by its subprime borrowers, or prepaid customers who pay for calls in advance so they don’t need to commit to long-term contracts. With interest rates rising and the U.S. economy in a credit crunch, these customers have begun jumping ship and cutting into Sprint’s profits in the process. This subscriber slump brings defections to 1.2 million in 2007, or a 3 percent churn rate, according to Sprint. The whole thing has backfired into a PR nightmare, with notable blogs, industry publications, and even the Wall Street Journal commenting on the issue.

Customer churn within the telecom industry is nothing new. It without question remains the prevailing CRM issue among telecom giants, and for good reason. Given the ease at which somebody can research, shop, and opt-out of a plan is ridiculously easy, as long as you’re willing to pay a parting fee. And given the way Sprint Nextel has treated many of their customers, I can’t see why you wouldn’t. When you’re a service provider, providing top quality service is the heart of your business. AT&T and Verizon Wireless have done an excellent job of understanding that, which is why they’ve also done an excellent job of luring away many Sprint customers with better call quality and popular handsets, and have consistently beaten Sprint on dropped calls and failed connections in customer service studies, such as J.D. Power & Associates.

In Sprint’s defense, targeting your most profitable customers with superior service is nothing new. Verizon, AT&T, and others are just as guilty as Sprint is, and its one of the primary reasons CRM systems exist. But it’s the manner in which you handle your lower-margin customers that spells the difference in your company’s perception among its customer base. If Sprint’s call centers were overwhelmed with calls from low-margin customers, rather than jacking up rates or outright firing them, Sprint could of introduced new service channels or beefed up existing ones, including IVR and Web self-service at virtually no extra charge to the customer, and attempted to migrate customers to a more convenient channel for them - and a more cost-effective means for Sprint. The alternative is alienating current customers - and turning off potential ones.

Need some comical proof of just how bad things with Sprint got? Check out this blog courtesy of Russell Shaw.