Say Good Bye To Your Worst Customers!
Have you ever fired your customer? Sounds counterintuitive right? Think of it in this way – You get the customer you’re willing to accept. You may think that any paying customer is a customer worth having, but some customers are more trouble than they’re worth. There are some who actually cost you money every time you deal with them.
Let’s use the 80:20 rule (also called the Pareto Principle) to better understand your customer base. The 80/20 rule states that typically 80% of a company’s profit comes from 20% of their customers. Find out who the “20%” of your best customers are. Find out why they are doing business with you instead of someone else. This will point to your real niche or core competency. The inverse effect is also true, where 20% of your customers typically require 80% of your time, and taking that one step further, it means that 80 percent of your headaches will generally come from the worst 20% in this customer group. These are those customers or clients where you spend (waste) much of your time and energy trying to pacify, all at a cost.
Make a list of the qualities you want in your ideal customers. This may include things like “they pay on time”, “they don’t price-shop my product/service” or “they often refer their friends to me”.
Now, go through your customer database and categorize them into four “grades” – A, B, C or D.
An A-grade customer is your favorite kind of customer. This person probably pays invoices on time, is pleasant to deal with, is happy to pay your quoted price, refers people to you, spends a reasonable amount with you and ticks your other boxes you listed for ideal customers. If you could clone a customer, this person would be the one you’d choose.
B-grade customers are still good customers, although they’re not quite perfect. They might be more price conscious, but they still pay on time and don’t give you headaches.
C-grade customers will give you minor headaches. They’re the type that haggle for a discount every time you deal with them or bring back goods frequently because they’ve changed their mind. They don’t take your advice and will tend to pay late and need nagging.
D-grade customers are those you wish you’d never encountered. They are the scene-causers, the ones who treat you and your staff like dirt or even those you might suspect of shoplifting. They complain about anything and everything and they do it loudly and rudely.
The simple truth is that you don’t have to put up with D-grade customers, or even C-grade customers. When you decide whom you want to do business with, they’ll start to show up. Remember, one bad customer can ruin your day, and that has the knock-on effect of affecting the way you deal with your other customers and staff.
The easiest way to get rid of your “lower grade” customers is to create some new rules to protect you from bad customers, and stick to them. For example:
- We are phasing out our in-house account facility
- We are discontinuing our entry-level plan
- We will no longer offer discounts
Politely communicate the changes you’ve made to all your customers. Some will abide by your new rules and may move to becoming better customers. Others will leave, and you should expect that. Let them go.
Once your C-grade and D-grade have been phased out, you can devote more time to giving attention to your A-grade customers, and then asking them for referrals. You can also modify your marketing strategies to go after more A-grade customers.
Remember that every business is different. Someone you might regard as an A-grade customer may be considered C-grade by someone else and vice versa. Don’t let guilt or sense of duty hold you back from letting go of poor customers – consider that they may take their business to a company that suits them better, and leave you more room for additional A-grade customers of your own.