Entering a relationship
When we start dating a new person, there are four possible outcomes for the relationship:
- Both mutually decide there is no further interest
- One of you can choose not to continue the relationship
- You can enter a long-term relationship until one of you decides you’ve had enough
- You can make the relationship permanent and stay together for a long time (and maybe forever)
The same four choices are likely in a business relationship. Today we will focus on option 3, with you being the one to break up with your customer. Another way to say this is that you fire your customer!
Firing a customer sounded like heresy until I tried to do it. Then it felt wonderful, and best of all, I changed the customer’s behavior and kept him as a customer. He got our excellent service and support, and we got the benefit of his checks! But this story will come later.
Why Would You Consider Firing A Customer?
There are two reasons why companies fire a customer:
- According to a Harvard Business Review blog post, 80% of your revenue and profit comes from 20% of your customers, and 20% comes from high-maintenance customers who generate a loss. They suck up your people’s time, tie up the phones, buy and return but skip the “keep” step, and generate unusual overhead costs. The worst part of this situation is that they keep you from serving or selling profitable customers and do not recommend your business to others.
- According to Seth Godin’s blog, of the small number of customers that cause your organization significant pain, 1% of the customers are responsible for about 95% of the “agony.” His approach is to train the 99% of the people causing the organization pain and fire the un-trainable 1%! Here is what he wrote:
“Successful organizations (and I include churches and political parties on the list) fire the 1% of their constituents that cause 95% of the pain.”
Seth differentiates their behavior from the high-cost crowd by implying that these people do not treat you, your employees, or your business professionally. The customer I tried to fire fell into this category.
The Customer I Tried To Fire
This customer was a medical doctor engaged in leading-edge research. He was good, but no one could be as good as he thought he was! Every time he had a service issue, he demanded an instantaneous response, even though he was not entitled to that level of service. When a custom part had to be repaired, he would have one of his “people” call every morning to check on what would be done that day and again in the late afternoon to confirm that everything was on track. You know the kind of customer I am describing. And it was extra bad because he had four of our products and, even though they were very reliable, he still had more problems than most customers (actually four times as many).
After putting up with his nonsense for years, our organization finally decided to part company. When I told our CEO about my decision, he said, “I admire your patience. We thought you would have done that years ago.” I then arranged to meet with the doctor and his wife, a Medical Doctor, and co-researcher at an airport where they were arriving and I was leaving. I explained that we were at the end of our rope and thought he should start replacing our equipment with our competitor’s products. He refused because our products and service were the best in the industry, and would only use the best. I relented when he promised to calm himself down, and his wife agreed to control him. I just looked at her and said, “He is a royal pain in the ass.” She smiled at me and said, “Yes, he is, isn’t he.” He behaved, and we co-existed for many years after that.
The story’s moral is that even the most demanding customers can be trained if your products and services are outstanding. So, don’t put up with bad behavior from your customers. Either teach them or, if the behavior is so bad, send them to a competitor, sit back, and laugh, knowing they are now swimming with a piranha.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization better relationships with your customers, please get in touch with us or check out some of our free articles and white papers here.