The
Long Good-bye
By
John McPartlin
|
|
|
Sometimes
you have to
send a bad customer packing.
Small-business owners aren't used to turning away customers. Normally,
they focus on attracting -- and keeping -- customers to increase
their market share. And we've all heard that old saw about how
the customer is always right. But there's at least one situation
in which that conventional wisdom breaks down: when you are dealing
with a bad customer.
You know the
type. Boorish, pigheaded, manipulative -- or even unethical. Besides
being unpleasant, bad customers take up too much of your time and often
end up draining too many of your resources. So, what do experts suggest
you do when confronted with such customers? Surprisingly, the experts
say tell them to take a hike. But, first, you have to decide which customers
are truly "bad" -- and when's the best time to
say bye-bye.
Please Don't Go!
"Conventional wisdom about customers is based on scarcity," says Jim Cathcart, motivational speaker and author of Relationship Selling: The Key to Getting and Keeping
 |
| Mike Rorie of GroundMasters |
Customers. "You think you have to bend over backward, fold, staple and mutilate yourself to keep customers. That do-anything-to-me attitude will get you some business, but it won't get you any respect. Clients will stay with you because you are convenient, but they will have no pride in being your customer."
Cathcart says that many small businesses have a bad habit of actually rewarding their worst customers. They spend so much time and energy on them that they ignore their best customers, who may not be crying out for attention. Customers are then trained to act up when they want you to notice them.
"People learn
what works, and if the only thing that works is bad behavior, well,
here it comes," Cathcart says. "Along the same lines, if
you want your kids to be obnoxious, just wait until they misbehave and
then give them their way."
"You get fixated on doing whatever it takes to keep a customer,"
agrees Mike Rorie, president of GroundMasters Inc., a Loveland, Ohio--based
landscaping service. "But that's the wrong idea. You don't
want to work for everybody. There are always customers who won't
meet your profile, whether you are Procter & Gamble or Bob's
Window Cleaning. The only reason you can afford your bad customers is
because of your good ones."
| How Not to Fire Your Customer |
What happens when you really can't afford to fire your customer? In some cases, negotiation and conflict resolution can be better than a messy breakup. It costs a
whole lot more to get a new customer than to improve your relationship
with an existing one, especially if you are in a highly competitive
industry, says Laura Michaud, president of The Michaud Group,
an Elmhurst, Ill.based So what can you do to turn a bad customer into a good one or, at the very least, one you can stand? Ask yourself the right questions to identify the real problem and determine if the relationship is salvageable, suggests Jim Cathcart, author of Relationship Selling: The Key to Getting and Keeping Customers. For example: Is the problem related to the situation and not the customer? Is there a personality problem that could be resolved by switching players? Could the customer simply be going through a difficult time? Does your company have processes or policies that may be altered or flexed to correct the problem? Is your client even aware that there is a problem? Many times,
customers who are unruly or combative will change their behavior
if you explain that you can no longer tolerate the way they are
treating you. I've only done that a half-dozen times, says
Cathcart. But every time the person was shocked and embarrassed
by their rude behavior. Believe it or not, they have become some
of my best customers, he says. |
The
Good Customers Club
Customers
don't have to be difficult or annoying to be bad for business.
They simply may not fit your ideal customer profile.
In 1995, Norman Mayne, CEO of the Dayton, Ohio, grocery store chain
Dorothy Lane Market, determined that all customers weren't created
equal. "We realized through research that 15 percent of our customers
were "cherry pickers' who just bought things that were on
sale," Mayne explains. "Our other customers were the ones
subsidizing them."
Mayne created Club
DLM as a way to reward his best customers (i.e., the 30 percent of his
clients who provide 80 percent of his profits). "We decided to
stop the shotgun approach and try the rifle," he says. "Now,
we track people's purchases and give them benefits for shopping
with us."
Club DLM's 50,000 members receive custom e-mails and printed newsletters
based on how much they spend. The newsletters include recipes and tips,
but also feature targeted coupons that offer higher discounts to customers
who spend more money each month at DLM stores. This loyalty rewards
program helped the small chain to post revenues of $60 million in 2003,
up from $36 million in 1997 -- and Dorothy Lane Market did not always
have to beat their competitors' prices to attain these impressive
figures.
Weed
Whacking 101
"I have a simple formula for when you should fire your customer.
That's when they cost you more money than you make from working
with them," says Laura Michaud, a former vice president of sales
and marketing for Beltone Electronics, a medical device manufacturer,
and current head of The Michaud Group, an Elmhurst, Ill.--based
consultancy.
Michaud recommends
reviewing all the revenue associated with a customer, along with all
the resources they extract from you. If you discover that the expenses
outweigh the revenue, then it's time to give that customer the
heave-ho.
Adding up how expensive a customer can be often involves thinking about
transactions you might not normally consider on a client-by-client basis.
These might include the strain on customer-service operations due to
clients who constantly need to be coddled, the number of sales calls
necessary to keep them satisfied, the amount of product returns they
may insist on, the number of times they pay late, and the hours it takes
to resolve their disputes. "If you look at the marginal profit
on a high-maintenance customer, it's pretty low. The highest profit
comes on the customers who don't require a great deal of handholding,"
Cathcart says.
Sometimes finances are not the only issue prompting a divorce. You may
need to fire a customer because his or her behavior could be damaging
to your reputation. Unruly clients who can never be satisfied often
weave their imaginary tales of woe into bad publicity for you and your
company. If you know there is nothing you can really do to make them
happy, it's best to distance yourself from them before they spread
their opinion that you are not a good company with which to do business.
|
| Laura
Michaud of The Michaud Group |
One of Michaud's consulting clients is a custom home builder who found himself selling his first finished home to a peevish customer. If he sold to this customer, the builder needed to honor a one-year warranty and suffer through 12 months of unrealistic demands. He decided to pull out of the deal because he suspected the arrangement would end badly, and he worried that his reputation in a small town would be irreparably damaged. "He did not want the reputation of being a builder who was hard to deal with," she says. "He ended up selling the house to a nice couple who loved him and gave him glowing testimonials."
You may need to
cut loose a customer also when he or she is ethically challenged. Another
of Michaud's clients ran a family business, but the family members
were constantly arguing with each other. When one confrontation heated
up so much that one relative pulled a gun on another, Michaud decided
she could definitely do without the drama. "I coach family businesses,
but I'm not a family therapist," she says. "When this
happened, I knew I had to let the client go. It was an ethical issue
of what I could continue to deliver to them and what my comfort level
was."
In some cases, a client may ask you to do something illegal, such as
fiddle with finances or overlook some regulation. These types of customers
are poison and should be avoided at all costs.
Early
Dismissal
Consultants and small-business owners agree that in the
early stages of building a business, you may have to compromise and
work with less-than-attractive customers. Then, once you are established,
you can begin to prune the weeds from your garden. "You have to
be past the survival stage, where you can afford to shut off a revenue
stream like that," says GroundMasters' Rorie. "Then
you can begin to transition out your bad customers."
 |
| and his team at Dorothy Lane Market |
And once you decide to pull the plug, plan the process carefully. "If you have 200 customers and 20 of them are bad, you can set a nine- or 24-month time frame for getting rid of them," Rorie recommends. "Identify them and purge them. It's costly, but you only bite the bullet once."
Be careful, however, not to create more problems for yourself while pruning your client list. "You never want to burn your bridges," Michaud cautions. "If you break off with a client, you have to make sure you are not doing something that will impair your reputation. I think you need to identify what the issue is -- Why are they costing so much? -- and then address it from their perspective. I would say to them, "Obviously, you are having a hard time with my company. We don't have this problem with other customers, so maybe this is just not a good match. You may find a better match with competitor XYZ.'"
