Business is about choices and priorities. Growing your business isn’t just about choosing the customers you WANT. It’s also about managing your portfolio to choose, then eliminate or deprioritize customers you DON’T WANT. Strive to maximize revenue, but also aim to maximize profitability; create company and customer value; attract and retain top performing talent. And, let’s face it, we’ve all had customers that take more than they give, making it nearly impossible to achieve these goals. So, fire them. Get rid of your worst customers. It may hurt at first, but it’s the right decision for you and for them. Here’s are three reasons why you should fire your worst customers:
They take more than they give. Underperforming customer relationships may deliver revenue, but that revenue comes at a cost. It can require you to invest in low margin products or low value services, as well as drive up the costs of customer service. Those investments erode profit and prevent investment in areas like innovation and expansion. By keeping those customers, you’re letting them to make business choices and set priorities for you.
They make you look bad. Having a broad product or service offering can be good for business, but trying to be all things to all people inevitably means disappointing someone. That someone is your worst customer because you aren’t equipped to serve them, and underserving them makes you both look bad. Unhappy customers are more likely to tell others than happy customers. Let them find the right provider. Focus on what you can do well and on the customers you can serve.
They drive away talent. Holding on to your worst customers makes it nearly impossible to achieve customer satisfaction. If you can’t legitimately offer the product or service they need or if they don’t value the product or service you offer, they’re unlikely to be satisfied and they’re more likely to take their dissatisfaction out on front-line employees—whether store associates and account executives. This can drive away top talent and drive up recruiting costs.
Firing your worst customers starts with identifying them. You can evaluate customers quantitatively by calculating customer lifetime value (CLTV) to determine what they’re worth, long-term. Maybe they’re not worth much today, but they have the potential to fuel growth if you can hang in there. Or you can assess them qualitatively by where they fit in your portfolio and how they align to your business objectives. They may be a pain to deal with, but they may also be an influencer or “badge brand” that attracts other buyers. Once you know their value, compare that to the costs of the relationship, including marketing, sales, customer service and product support.
You may not have the luxury of getting rid of every difficult or unprofitable customer. But don’t be swayed from the decision to fire a customer just because they bring in revenue. High-revenue customers can cause cost margin if they’re always trying to get something for nothing or they drive up the cost of customer service. Northwest Airlines, for example, kicked a customer out of their loyalty program because he called customer service 24 times in 8 months, racking up thousands of frequent flier miles and travel vouchers, and potentially increasing overhead costs for customer service and/or impacting the quality of service to other customers.
If you’ve decided to fire a customer, do it confidentially and tactfully to avoid turning a business decision into a PR nightmare that alienates other customers and prospects. Merchants—stop offering promotions or selling unprofitable or underperforming products that attract the wrong types of buyers. Use sales and marketing analytics and digital marketing tactics to redirect them to other solutions that your company offers and measure the impact of that decision. Some customers will migrate to other products and services, some of which may have a higher margin. Other customers will go elsewhere. Factor that into marketing and business plans ahead of time.
Service providers—notify key employees (i.e., partners, directors, account leaders) and client leadership of the decision to discontinue to the relationship. But minimize communication by only saying what is necessary and only saying it to critical people in your company and at the client’s company. For example, ad agency, Cramer-Krasselt, recently decided to end its relationship with Panera Bread by not participating in an account review. The decision makes sense, but the way it was communicated does not. Skip the company memo that contains intimate details because it can, and most likely will, be leaked.
Firing a customer is a difficult decision. But business is about choices and priorities. Deprioritizing unprofitable, underperforming, dissatisfied or abusive customers can free your company to focus time and resources on attracting and retaining more profitable customers. It can release you to concentrate on your strengths or expand into new products or services. It can have a positive impact on employee morale by avoiding situations where front-line employees are trying in vain to satisfy customers whose needs are not being met. It can even also protect your brand reputation from complaints by dissatisfied customers. Most importantly, it gives those customers a chance find satisfaction—elsewhere.