Strategic Planning

When to Fire Your Customer

when to fire your customerEveryone knows it’s important to retain customers.  Good customers are hard to find and worth keeping. It’s almost always more profitable to keep existing customers than to replace them with new ones.


But what about that problem customer? You know, the one that everyone wishes secretly (or not so secretly) would just disappear?


Sometimes it’s best to just let that problem customer go. Not only can this save you and your team some grief—it might actually save the company money. Let’s take a look at some of the common types of problem customers:


·         The Check is in the Mail. Customers who pay late cost you money. If it’s habitual and you’re in a tight margin or credit intensive business, it may be time to cut them loose.


·         I’m Outta Here Unless You… This customer continually threatens to pull his/her account unless you give something extra. This reduces margins. If it happens once, it might be a genuine threat and worth handling. If it happens often, it’s probably just a negotiation technique. Stop giving in, and don’t worry if the customer actually follows through.


·         The Chronic Complainer. This customer constantly speaks negatively about your product, prices, or service, but still buys from you. Address the complaints, but don’t let it continue.  If someone is complaining to you, s/he is probably complaining about you to others, hurting your brand.


·         Captain Rude. No one should have to endure verbal abuse. Don’t be afraid to set clear boundaries with this customer. Communicate your expectations about rudeness, and if this customer breaks the rules, say goodbye.


·         The Other Guy Does It Better. Some customers constantly talk about your competition. The really brazen ones may even tell the competitor they’re playing a back-and-forth game with you. If this happens once, it may be worth working through, but again, if it’s happening often, this customer may not be worth the trouble.

Check the Math Before You Fire Your Customer

When you’re dealing with a problem customer, take a look at the math to determine that customer’s monetary value.  It may seem a bit uncaring, but math is cut and dried and makes decision-making far easier.


·         Determine the customer lifetime value. Look at the customer segment and the average lifetime value of a customer within that segment. If a problem customer is in a low value segment, it’s an easy decision to let them go.


·         Estimate the replacement cost. Losing an easy-to-replace customer isn’t necessarily a loss. Don’t keep a customer if retention costs more than securing a new one in the same segment.


If the math doesn’t provide a clear answer, consider the qualitative. Think about how the customer makes you or your employees feel or how hard you must work to keep them happy.


·         Has this customer always been challenging/ dissatisfied? Chronically unhappy people usually don’t become satisfied after sufficient wooing. It’s pointless exhausting yourself to please others.


·         Can they be converted? Say a customer is giving off a “maybe I’ll change my mind” vibe. If you sense a potential behavior change, retention efforts may be wise even if the math doesn’t say so up front.


·         Does this customer mistreat your employees? This must be a consideration – always. If a customer is verbally abusive or harassing one of your employees, let them go in a hurry.


Firing a customer is not an easy decision. After you work hard to earn their business, the idea of cutting them loose may seem counter-intuitive. Check the math and consider the ramifications of keeping them around.


Sometimes a fond farewell is the wisest investment.

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