Selling

Go Ahead, Fire Your Customer!

By Mark Hunter
September 10, 2013

We all have at least one customer with whom we just don’t like working, right? You may think I am going to say “fire” any customer who falls into this category, but that’s not exactly the path I’m going down. We can’t fire all of our difficult customers. However, there are some that really must go.

Here’s what I mean:

There are some customers who, after all that we do for them, still are not making any money for us. I’m not simply talking about a salesperson’s commission or bonus. It’s your company’s bottom-line profit that is taking a hit because of these difficult customers.

Obviously, as a sales leader, you don’t go out and intentionally find unprofitable customers. The reality, though, is that a few of them migrate toward that camp.

We wind up with unprofitable customers not because of the price we’re charging them, but because of the intensity of their demands and requests. This sounds familiar, doesn’t it? I imagine a few customers are coming to mind as you read this. It’s the customer who seems to always want one more thing. No matter the great service you provide them, they keep asking for something more.

Those demands begin to take a dangerous toll on your company’s profit.

The problem we get into is the more we serve this type of customer, the more they expect from us. Each time we help them, they come away thinking of something else they want from us. These ongoing demands on your time, not to mention the time of other people in your company, quickly erode profit. A once-profitable customer can become anything but profitable.

What is even more disturbing is that often this dynamic happens so slowly that we don’t even realize how unprofitable they have become. I refer to this as the “slow drain.” It gets out of control before anyone realizes how bad the situation is.

So, how do you determine which customers should be “fired,” and how do you actually fire them?

You must become more discerning of customers who place too many demands on you and/or other people in your company. Keep good records and listen closely to your support staff, and you will begin to realize that if a customer has become high maintenance, they are likely to remain high maintenance.

The Account Manager or Sales Manager is often in the best position to realize how high maintenance the customer has become. More than likely, most of the customer’s requests are flowing through them. They then dole out the requests to the respective departments. Collectively, the problem is mounting, but this isn’t necessarily clear to anyone but the Account Manager or Sales Manager.

Once a trend is spotted with a customer making multiple service requests, action must begin detailing the costs involved. A detailed account of what has transpired will help when you and management need to decide how to deal with the customer.

Once you have identified an unprofitable customer, you and your company must decide what you are going to do about the customer.

Too many times, companies roll over and allow the customer to continue on their “high maintenance” train wreck. Ultimately, the only thing that happens is lost profit and depleted sales motivation. You and other people in the company become disenchanted with the amount of support devoted to a customer who never seems to be happy.

If, on the other hand, smarter heads prevail, then you and management will realize something needs to be done to rectify the situation.

There are two options:

1. Confront the customer. Your objective is to decrease their requests.

2. Increase their prices. This will offset the additional costs you incur serving the customer.

Personally, I prefer option #2. Here’s why: Increasing their price either restores your bottom-line profit or they reject your price increase and leave. Essentially, what this option does is allow you to make the profit you need – or it releases you from a customer who is draining your profit. Either way, you and your company win.

This is a much better option than the first choice of confronting the customer. Confronting the customer tends to create a level of tension that winds up as long-term friction. Ultimately, no one is happy.

If you raise your prices for those difficult customers, you will gain the profit you need or the customer will walk away. The beautiful part of this approach to “firing” your customer is that they leave without ever realizing that you fired them.

Profit is good. Don’t sacrifice it in the name of “good customer service” that is not a reasonable level of service. The best service is that which satisfies your customer and allows you to make a profit. As a sales leader, you need to be spending time on profitable activities.

  • best practices , Low Margin by Customer , profitability , sales , unprofitable customer , Vendavo Profit Advisor

    Mark Hunter

    Mark Hunter, “The Sales Hunter,” is author of High-Profit Selling: Win the Sale Without Compromising on Price. He is a sales expert who speaks to thousands each year on how to increase their sales profitability. He was named one of the Top 50 Influencers in Sales by Top Sales World. To receive a free weekly sales tip and read his Sales Motivation Blog, visit www.TheSalesHunter.com. You can also follow him on Twitter, on Facebook and on Linkedin.