The customer ISN’T always right. The RIGHT customer is always right.
This isn’t trivial but fundamental to all types of businesses. If you are serving all customers equally, then those who can provide your business or brand with profitable growth aren’t getting their fair share. It may be time to take an axe to your customer list and chop out the wrong customers.
The Customer ISN’T always Right
How can you determine who the right customer is that you should serve?
- The right customer is willing to pay for the value you offer them in your product or service.
- They recognize that you are offering them a solution to a problem and are willing to pay a premium for what you offer.
- They understand that you are helping them provide their customers with more value thus creating loyalty and enduring profits.
- They aren’t forcing you to provide features or service that aren’t built into your pricing model.
- They aren’t constantly putting you into a pricing war with your competitors to push down the price.
- They see your relationship as a partnership where you both help each other.
When you take a hard look at where the profits and growth come from in a business, it often can be a rude awakening. The high volume customer needs more product but you have to expand your capacity to meet their need. Yet, their price is so low that you end up with fixed overhead that makes sense if they remain loyal. But they are probably more loyal to a low price than to your value proposition. You will NOT make it up in volume. It never works.
Sometimes the smallest customers are the ones who are most demanding of your time. They buy very little and demand a disproportionate amount of your time and energy. They can eat up one of your most valuable assets – time.
If your business isn’t designed to serve the right customer, then your business is running you instead of you running your business.
Firing Bad Customers
I had to fire many bad customers when I owned my wholesale bakery business. They didn’t pay on time, they demanded extra service and wouldn’t pay for it, they argued over price. I spent so much time and energy serving them, that I didn’t have the free time to go find the right customers I wanted. In firing them, I was able to find more profitable customers who could grow with us and were willing to pay the price for our quality.
Recently, I advised a client that she had to fire half of our clients because they were eating up all her time and paying her at half her normal billing rate. She only needed two quality clients to replace fifteen of the wrong clients. Firing a customer is difficult. But if you aren’t careful, your hard work won’t be rewarded.
How to Chop Away The Bad Clients: You start by raising the price to them so that you get compensated for the extra effort. If they are willing to pay for it, then they become a customer of value. But if they aren’t, you say goodbye so that you can find customers who will grow with you. You do this politely, professionally but you need to do it now. You must free yourself up for the right customers.
Firing bad customers also acknowledges that your business is maturing. In the beginning, all business looks good. You’ll serve anyone. As a business matures, not all business is worth doing. If you sell direct to consumer and through distribution maybe focusing on one areas could be more profitable. Can you bring one-hundred percent of your organizations energy into one area and ignore other channels? Can you price and serve each channel differently so that customers receive different products and service levels commensurate with what they pay? Think about airlines with first class and economy. Customers in first class arrive to their destination at the same time – but they get something added to make them feel special.
Step Back and Grade Your Clients
When you develop criteria that identifies the characteristics of a great client/customer, you can use this filter to score them. Like most businesses, you are probably spending a disproportionate amount of time on customers who generate too little revenue. In on case, I recently saw a client spending 80% of their time on 20% of their customers. And those were the lowest paying customers who demanded the most attention.
Figure out what the right customer looks like.
Fire the bad ones and attract more of the right ones to work with you in partnership. Your time is valuable and you need more of it to find the right clients. It is about time.
Go ahead. Give your bad clients the axe.
Need help sifting through the good and bad clients? Give me a call. I can help you grow your business.