Back in early July, there was a brouhaha over Sprint's (NYSE: S) decision to terminate roughly 1,000 subscribers because of persistent calls to customer service (the average was about 40 to 50 calls per month).
But isn't the customer king?
Maybe so, but there are some customers that can wreak havoc on your business. For example, there always seems to be some people who pay late (or not at all). At the same time, they keep demanding more services and changes. Such customers can eat up lots of resources and drag down the performance of your business.
True, with some customers it might be smart to put up with their bad behavior, even if you must take a loss on their business. This can be the case when you want to land a marquee name. In this situation, a troublesome customer can be worth the price if they provide a boost to your credibility and a reference for future business.
But this is the exception. Basically, to run a profitable business, it's critical to be rigorous on the return on each customer. Simply put, there are some customers that are not worth it.
Perhaps the best way to deal with this is to screen potential customers. Although, this is not easy -- and does take some experience (each industry has its own nuances). Yet, it's common for business owners to ignore obvious warning signs because they have a hard time turning down customers.
Also, if you are extending credit, you should have a credit application. This means actually checking credit information, job information, bank information, and so on.
To get some more perspective on all this, I recently talked to Michelle Dunn, who is a recovering bill collector (more than 20 years in the business) and the author of books like Ultimate Credit and Collections Handbook.
According to her, it's smart to -- once a year -- spend time finding customers to fire.
She says: "When I work with business owners, I tell them that each year when they 'fire' their top 5 or top 10 'trouble' customers, a good way to fire them is to tell them that since you cannot provide the service that they need, it will be better if they go somewhere else. This way, you are not burning any bridges and you are being honest without going into detail about how this customer may drain your time, and cause you stress with their troubles."
Or, another approach is to increase your fees. This is likely to spur the customer to go elsewhere.
No doubt, all this sounds brutal. But then again, bad customers can be frustrating -- making life difficult for your employees, wasting time, and taking away from your bottom line. In fact, firing a customer can be extremely helpful for your business.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.
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Reader Comments (Page 2 of 2)
8-13-2007 @ 1:17PM
FAITHxFATE said...
I thought I was the only one that has fired her clients, sometimes it has to be done, if not they will run all over your business >^,,^
8-13-2007 @ 1:19PM
swilkinfl said...
As a small business owner, I have implemented firing troublesome customers and poor payers.
We bend over backwards in our customer service and have found that some customers are more trouble than they are worth.
Since doing this we have seen many return because they have gotten poor service elsewhere. If they were slow pay or no pay, we take them back with a SIGNED CREDIT CARD AUTHORIZATON FORM ON FILE. It can be a win/win. Also, it has actually boosted our bottom line, less write offs and quicker cash flow.
8-13-2007 @ 1:28PM
Anthony said...
I do so agree because I provide a service (Business) for customers, and some of them will keep taking advantage and taking advantage of my services. For Instance, one particular client will nonchalantly keep asking us to do more work or further work, beyond the scope of what's on the contract. And, therefore, I now try to do the work and/or services that are pricesly listed on the initial proposal and in the contract that the customer and I agreed on when they signed; on the contrary, sometimes I will have my workers do a little bit of extra work, if the client is loyal, pays on time all the time and does not complain much. In my business I expect (some) complaints, but I at times I tend to get too many complaints about an array of minor little work details that have absolutely no sugnificance at all with the service we provide. This is when the client is trying to get free services or get me to push my workers to work harder, doing more work; they complain just to complain, and that's when it is time to get rid of them.
8-13-2007 @ 1:40PM
csiada said...
SPRINT! I know this is off base, but SPRINT is really the service people need to drop. There customer service sucks. I got one of their phones which broke a week later and when i sent it in for repair they said they never received it and charged me $300.00 for the phone. When I refused to pay it they sent me to collections which is now affecting my credit report. I ended up paying the $300.00 but I will never ever ever use sprint or anyone affiliated with them. Sounds to me like they have let their big corporate heads swell!!!
8-13-2007 @ 2:31PM
Lissa said...
Well, I see we are at both ends of a common problem.
As a salesperson by trade, I often have to remind myself to let it go.... I own getflawlesshealth-mall.com. It's basically a herbalife product site. ( insert comment here). When I talk to potential customers and regulars I try to be as professional and caring as possible. After all- these people pay my rent. However, some people are unreasonable and as a small business owner I must be pragmatic. I make @100 calls a day to my IT clients and herbalife customers. Thats alot of calls! It may take 300 herbalife call backs to get a good customer - someone who buys the products,uses and appreciates it and my service. It takes about 20 to get someone who wants something for nothing. I used to send out lots of free samples. What did it get me? Buptkis, nada, nothing. Then I thought that I will do as the cell carriers do, freebies with purchase. That way with the first few sales, we split my profit- that works. I have several "regular clients" that I had to let go. They are whiny complainers. Health and nutrition or diet products are not instant gratification. I have people telling me I ate 3 shakes last week and I didnt loose weight! Ok, now drink one a day - not with a burger but instead of one, exercise for 30 minutes a day, and eliminate sweets - for a month and then call me. People want to speak to my boss because they can't send old used product back, or they didnt follow program, or they have buyers remorse or their spouses or friends laughed at them- what ever... We have to take responsibility for what we do and purchase sometimes. When I follow the program I loose, when I do not, I don't. I got people who pay with spouses credit card and then I have to deal with angry husbands and insulted wives, I have to wait a week for checks to clear because my bank gives me instant credit for deposits and I have to wait to see if the check was actually paid. I have people who insist on talking to me for an hour only to purchase one small thing. Sometimes it feels as bad as retail. Sometimes, I feel consumers are spoiled. When I buy a watch for 20 bucks it should work. However, I don't expect the same as a 200 dollar watch. I have decided to treat customers like dates. If it works out fine, if not less part as friends. Working with 1 troublesome client stops me from finding 1 good one. I can no longer afford to loose the good to keep the bad, or let the goodcustomers suffer ( via less service, higher fees, ) because of customer sharlatan tactics.
8-13-2007 @ 4:01PM
Keith said...
Exactly right! I had a manufacturing company and found that 20 percent of my business was 80 percent of my headaches. I had 80 customers and fired 75 of them. Before doing that, I went to the 5 best and largest ones knowing that I could drastically increase my business with them and develop a close working relationship and partnership. I did just that and all headaches went away and business increased. Amazing what happens when you start selecting the customers and then aggressively go after them instead of just taking what comes along.
8-13-2007 @ 6:46PM
Tracie said...
I read this article with great interest. All I can truly say is "Wow." Although I can see both sides of this issue, I think this could lead to a great deal of problems. If someone is physically or verbally abusive to a business employee, that's one thing but to fire someone because he/she complains is different. How much is too much? I personally have used Sprint, and the customer service is horrible. When I called, I was on hold for never less than 15 minutes and then was greeted by someone who would sigh in my ear when I asked questions. I called twice to complain. Is that too much?
I have also called my cable provider to complain. I have digital phone and high speed. I was without service for 6 days. Thank God I had a cell phone (not Sprint). The customer service rep was completely shocked that I complained because it took a WEEK to get a service tech to my house, and then when I asked for a credit for the week I didn't have service, you would think that I was asking for her first born.
I readily acknowledge that customers need to abide by common courtesy rules. I mean come on.. just talk to people like you'd want to be talked to. Having said that, if I'm PAYING for a service, I expect that service to reflect the premium I am paying. If I am paying 10 bucks for something, I dont freak out as much as when I pay 220 a month for my cable. It's a give and take. If businesses dont hold up their end of the contract, nothing is done. If we complain or ask for a refund, we're met with resistance, threats, and firing. Kinda crazy.
8-13-2007 @ 6:47PM
joseph said...
Yes, sometimes customers are not even adding any value, just causing headaches and not worth the compensation or aggrevation,in some instances, loss of profits. Just to raise fees or prices was found very effective.
8-14-2007 @ 8:08AM
KAE said...
I used to work for a store that offered a lot of products with rebates each week. Every week, the same group of customers would show up and each of them would purchase one of everything. They would then cut the barcodes off the items and try to sell them on ebay. If the items didn't sell, they would tape the mangled packaging back together and return the items to the store. We let this go a few times even though we couldn't resell the products but after a clear return pattern was established, we "fired" them for excessive returns.
We also had a problem with people failing to send in the rebate information on time. We circled the information on the receipt and highlighted the instructions. Many of these people felt that since they were unable to follow simple instructions, we should pay the rebate amount to them from our cash registers. For a good customer, we might do this once. For the troublesome ones who tried to pull this constantly, forget it. (Rebates are paid from special advertising expense accounts through the corporate office. Anything we paid out of the register in the name of customer service came off the store's bottom line.)
I personally purchased several of our items and sent in the rebates so I could have a "customer's view" on the process. It took longer to receive the check than the posted times but the process itself was simple.
8-14-2007 @ 6:29PM
cc said...
I have a family member who works for a company who thinks it is so funny to keep charging for things they know is not working. Just because you own a company does not give you the right to be unfair either, now does it?
8-15-2007 @ 10:36AM
billy myers said...
Any good business must fire customers.
I was a regional manager of a now defunct dept. store, and I had people returning items that were 10 years old because the main office had a
"customer satisfaction or your money back." policy.
Needless to say, when they went into the store with this old stuff, the store manager would call me, so frustated with the company policy. I just sent a letter to the customer telling them there business is not needed or wanted.
worked every time.
8-17-2007 @ 3:07AM
Lisa said...
Absolutely! There are bad customers and bad businesses. As a customer, I like to always put things this way: "Can you help me resolve this?"--it usually makes the employee or owner feel like they are doing me a favor to help me, and I usually get more than I expected (although never as much as I "want", because that involves a chauffeured ride back to work or my home, and lots of chocolate).
I only get a bit "difficult" when something is defective (and bought with the expectation that it was NOT defective) and an employee or owner won't act to resolve the problem.
I also get "difficult" if I encounter an arrogant, ignorant physician. Okay, I don't get "difficult" in that situation. I get downright unpleasant. And then I yell and stuff.