When to Fire a Customer

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By Joanna L. Krotz, Founder, Muse2Muse Productions LLC & The Woman’s Playbook

Knowing when and why to jettison customers can boost your profits, improve morale, and grow your business.

When you’ve exhausted yourself and your staff trying to please an impossible client, blame it on Harry Gordon Selfridge.

After amassing a fortune as a partner at the pioneering Marshall Field’s department store in Chicago, Selfridge went on holiday across the pond in 1906 (“Harry Gordon Selfridge,” n.d.). The merchant noticed that London’s offerings paled in comparison to Field’s. Sensing opportunity, in 1909 he opened Selfridges, the famous store that thrives to this day. Selfridge was a canny marketer and promoted the notion of shopping for pleasure rather than necessity, a radical idea at the time. His fashion-forward emporium adopted the slogan “The customer is always right” now invoked around the globe.

That century-old decree continues to dominate, even as businesses run on real-time forecasts, preferred customer databases, Cloud-supported decision-making, and Big Data lead generation — all of which can immediately calculate to the penny how much each transaction is worth in fixed and fungible costs.

Is every customer always right? Absolutely. Except when you can’t afford it.

These days, one-size-fits-all knee-jerk service no longer makes sense. If businesses stopped focusing only on customer service and took a disciplined look at operations, they’d likely improve performance and profits.

How to Call It Quits With Customers

Different businesses encounter different situations in which customers are flat-out wrong. Here are some scenarios where companies learned the hard way and responded with changes in policy or day-to-day operations.

Face-to-Face Customers Who Turn Ugly:

At a San Diego café, a female customer was first verbally abusive and then began to reach over the counter. As the manager attempted to calm the customer, she became enraged and tugged the manager’s hair so hard that she was lifted off the ground. At that point, another employee called a guard, and the scuffle died down, leaving the manager shaken and in need of chiropractic care.

The café quickly instituted new rules giving staff the power to exercise judgment and refuse service.

Such encounters are a lesson to management: Train staff to empathize with irate or upset customers. But also allow employees to say “I’m not a punching bag. I’m trying to help, and you’re being abusive.”

In addition, make sure your organization has developed and communicated clear policies about when to call authorities and how employees should document such interactions.

Clients Who Take Up All the Oxygen in the Room:

A medical device manufacturer learned from experience that quantifying customer relations is the smart route to growth. One of its clients, a Florida hearing aid retailer, slipped into financial trouble. Because the retailer was a substantial customer, the manufacturer tried to help. For a year, the manufacturer did all it could, suggesting changes and helping to draft a strategic plan to save the shop.

Eventually, the manufacturer exercised its 30-day exit clause. Six months later, the retailer went bankrupt.

When extending credit to a customer who might turn around, it’s hard to name the day or transaction that will put you over the line. Generally, if a customer is costing 10 percent more than the revenue gained, move on. But before cutting that customer loose, consider whether they bring you other revenue streams. For instance, does the customer refer other business? How much?

Clients Who Second-Guess You:

Most service firms have met a client who’s enticed by their expertise but then questions it. One in-demand motivational speaker tells of a manufacturer that hired him to address a sales convention. Soon after the commission, the client requested several phone conferences to preview the speech and asked for a written copy and time to edit and approve it. Most experienced speakers rely on notes or outlines and never write speeches word for word in advance.

The speaker, who gives some 60 keynotes a year, was initially bemused and, as the requests piled up, eventually exasperated. After trying to assuage the client’s nerves to no avail, he explained that if such ongoing reassurances were needed, then he wasn’t the right guy for the job. He suggested either raising his fee to compensate for the additional (and to his mind unnecessary) work or referring the client to another speaker.

At once, the client’s objections dropped away.

You often need to teach people how to buy from you. When the transaction overshadows the negotiation or purchase, the relationship falls apart. Yet as most service businesses will tell you, the relationship is the asset going forward, in terms of reputation, recommendations, contacts, and more. So every client deserves the benefit of the doubt, and attempting to calm nerves or find a teaching moment will likely be worthwhile.

On the other hand, like the speaker, be prepared to walk away. Just make sure you explain your reasons rather than giving the impression that you’re unreliable or uncooperative.

Identify Your Best Customers

Overall, pruning your client base of low-margin, high-demand, and time-consuming customers lets sales and service staff focus on the customers
who matter — that is, loyal repeat buyers, worthy new customers, and lucrative acquisitions.

However counterintuitive it may seem, firing customers can increase your profits and build a better company culture.

REFERENCE
Harry Gordon Selfridge. (n.d.). In Wikipedia. Retrieved October 16, 2017, from https://en.wikipedia.org/wiki/Harry_Gordon_Selfridge
Joanna L. Krotz runs Muse2Muse Productions, a boutique content provider, and The Woman’s Playbook, a platform for women-led companies. She has advised SMBs as an MSN and Entrepreneur.com columnist and is the author of Being Equal Doesn’t Mean Being the Same, a handbook for women entrepreneurs, and The Microsoft Small Business Kit, a guide to entrepreneurship.