Did you read that correctly: “Fire your customers”?
Yes, you did!
You’ve had it drummed into your head forever: “The customer is always right,” “The customer comes first,” “Always please the customer.” What do you do if the customer is unpleasable? What if the customer is actually costing you time, money and maybe even your sanity? Sometimes it is time to fire your customer!
The Dale Carnegie training courses – A gold standard for business etiquette – would agree that there are times when it is good and appropriate to fire your customer. (Although they might call it setting customer expectations.) It could be time to re-set your customer’s expectations and fire them.
How do you know when it’s time to fire a customer?
There are some things to think about when considering firing a customer, the most important thing to ask is if the “problem customer” is making you and your small business money, or are they costing you money?
- Is the customer ever satisfied?
We’ve all had THAT customer…the one that you cannot please, no matter what you do. They aren’t satisfied with any solution, and they continuously exhibit repetitive, unceasing, bad behavior. This customer drains the joy out of you, your staff and even other customers. When a customer is never satisfied, it’s time to fire them.
- Are they the 20% of the 80/20 rule?
The 80/20 rule, also known as the Pareto Principle, was named after the Italian economist, Vilfredo Pareto who observed in 1906 that 20% of the Italian population owned 80% of Italy’s wealth. The observation has held true in the business world, even in the 21st century: 80% of most company’s sales, comes from 20% of their customers. Is your problem customer part of the 20% who purchases your product? Do they contribute significantly to the 80% of your sales? If not, you should concentrate on the customers who are part of the 20%.
- How much time is it taking your staff to please this customer?
You might deny it publicly – but every business has that one customer who makes their employees hide, cringe, or draw straws on who has to “deal with” THAT customer. If your business is a tip-based, or commission-based company, employees may refuse to help Mr. or Mrs. Difficult. Time really is money and if your problem customer repeatedly wastes your time, or the time of your employees, while not contributing to the 80% of sales…it’s time to let them do business elsewhere. After all, you don’t want to lose your great employees over one horribly unhappy customer.
How do you decide which customers to fire?
Maybe you have more than one difficult customer. (It happens!) However, some difficult customers may actually be worth the time and effort it takes to make them happy, because they purchase a lot of your product, or tip very well. How do you decide which customers are best for your business?
Look at your customer base:
Rank your customers on how easy they are to work with:
- 1 – No problems (the perfect customer.)
- 2 – Some problems – Maybe they are very irritable, but still manage to make up 80% of your sales without draining away your time and energy.
- 3 – Problem Customer: look at that 80/20 rule again. Are 20% of your customers causing 80% of the problems?
Decide if they are worth it:
- Check sales from group 3 – the problem customer. Do they make up 80%? Do they pay on time?
- How much time do they take? Are they wasting 80% of your time or the time of your employees?
- How much effort goes into making them happy? If your group 3 customers are wasting most of your time, without any benefit, you need to decide if they are worth the effort.
Pay attention to your top customers:
It’s human nature to try to make someone happy. No one wants a bad business review, and it is often a compulsion to make every customer happy. Studies show however, that often-top customers are overlooked in an effort to make less-than-ideal customers happy. Take a good look at who is helping your business and increasing your profits. Make a concentrated effort to find out what you do well for the number 1 group of customers and continue to cater to them. You need to make a concentrated effort to avoid Baker’s Law: Bad customers drive out good customers.
How to fire a customer:
You can fire a customer (or even a group of them) without causing your business irreparable harm. The key is to be polite and professional. Here are some steps to take:
- Craft an email or letter
- Thank them for their business
- Tell them you are sorry that you can’t fully serve them
- Give examples, if possible
- Offer alternatives
- Send them to your competition – they may be able to make them happy!
- Be truthful, but don’t be harsh
- It’s better to say you are cutting back on certain aspects of your business, than to tell them they are horrible, never pay on time, and cause your employees to hide.
Examples of how to fire a customer:
Here are some ideas to help you get started on that email, or letter:
“Our company is moving in a new direction. As a result, we’re wrapping up some of our contracts, including yours. We’ll complete your project, but after that point you’ll need to work with a different service provider. Here are a few providers that can meet your needs:”
“I’m sorry that we cannot meet your needs with our current product line. Here is a company that can better help you.”
“I apologize, but we are no longer going to offer XYZ services to you or your firm. I’m enclosing a few companies that might be a better fit for you.”
“There have been issues with our business relationship and I think it will be best for both of us if we go our separate ways. I’m happy to help you find another service provider that would be the right fit for your needs.”
Successful businesses fire the customers that they cannot make happy, or if they cannot turn a profit from that group. If you want to grow your business, take a hard look at which customers are helping you grow, and which are weighing you down. Wouldn’t it be great to turn that 80/20 rule into 90/10? It’s possible, and you’ll enjoy running your small business more!
For additional resources on what to say to difficult customers, or for resources on how and when to fire a customer, please contact us at the Small Business Development Center – SBDC – serving Collin and Rockwall Counties, Texas.
Blog post by: Alex Plotkin