“ASK ALAN” is a nationally syndicated semi-monthly column with ideas and advice for decision-makers of businesses. The column reaches more than seven+ million business leaders. I hope this article resonates with you! Regards, Alan
ASK ALAN: Severing Ties With a Customer
Relationships must work both ways
Back in the day, I could never imagine the notion of severing my relationship with a customer. Starting, growing, and managing three businesses over the years, has taught me to think differently about that. I have learned that if customers are not treating your business or employees well, then they need to go! I believe that relationships must work both ways.
In my experience as a consultant and coach, I have learned that it is not always in my best interest to work with certain businesses or their executives. And, I have coached my clients to distance themselves from customers who take advantage of their relationship and cost the business money.
Not long ago, a client revealed that a customer was abusing one of his employees and his general manager was not prepared to accept that abuse of his team. He asked me what I would suggest in that situation. I responded that I thought the idea that he was unwilling to accept that abuse toward a member of his team was brilliant.
In a recent article by Frederick Reichheld, “Firing a Bad Customer in 2021” Reichheld believes that “taking feedback from the wrong customers makes frontline employees feel alienated.” His stance is that “employees should be empowered to choose the customers from whom they receive feedback.” I cannot find any excuse for a customer to be discourteous, insulting, or disrespectful towards an employee.
One example of an organization that handles this well is Uber. If you use their ride-share service, then you know that the customer writes a review of the driver. However, the driver also reviews the customer. If a customer gets a one-star review, that serves as a warning to others.
You may recall when some retailers trained their clerks to memorize the statements: “the customer is king,” or, “the customer is always right.” It was a time when many businesses created policies about accepting all returned merchandise and giving one-hundred percent refunds, no questions asked. Then companies began using customer relationship management, (CRM) software that tracked the behavior of customers. It was then that they realized merchandise was routinely used, then returned for a full refund. You may have even read about this abuse. A select group of customers was routinely purchasing expensive formal wear, only to return it immediately after their event for a full refund. Subsequently, these customers who consistently abused the privilege were banned from these stores.
A few years ago, I had a B2B client who was in the distribution and repair business of pneumatic tools. He mistakenly believed that his “best” customers were those who purchased quantities of merchandise to benefit from volume discounts. To further prove his point, he suggested that we make a bet. The wager was about whose notion was correct. It turned out that some customer purchases were destroying his net profit. Why? Because these customers were honestly, though repeatedly, taking advantage of the company’s volume discounts. After acknowledging this mistake, the company created a rating system for their customers, based on net profit. They labeled each customer as either “platinum, gold, bronze, or lead. To his amazement the client found that almost thirty percent of their customers fell into the “lead” category. The downstream consequence of changing the discount policy required them to also change the commission structure of the salespeople who were innocently perpetuating these bad habits. After settling his wager with me he said, “I’m shocked how much time I’ve wasted on the phone with our worst customers while keeping the best ones on hold!”
Your customer attention should be saved for your most profitable accounts and if those are also the ones that are the best to work with, then you really need to keep them happy.
After spending additional time with this client’s employees, I uncovered a problem with selective vendors. Some of them were repeatedly short-shipping or delivering damaged merchandise. Doing this to such an extent that the practice was hurting the business’s bottom line. To end this bad practice, they agreed to segment their vendors. They did this by assigning a letter grade to each vendor. Any vendor who received a grade of C or less for two consecutive quarters was put on notice. Those who continued this hurtful practice were replaced with new vendors.
How Do You Sever Ties With a Customer?
You can do this:
Or, this:
– Be open and honest about why you are dismissing them.
People may not like it or want to hear it. But if you calmly reiterate what the issue is and why you’re making this decision, you are managing it as best you can.
– Try to fix things first.
It is also crucial to give the offending customer feedback offering a solution to resolve the issue before you fire them.
– Develop an ideal type of customer to target.
Your ideal customer should generate more than revenue; they should be profitable. Customers that are not the right fit for your product or service will inevitably end up costing you more than they are worth.
In conclusion…
Like many of you, I initially believed that firing customers or clients would be insanity. However, I have learned that hanging on to them when they are simply not worth it, is the real insanity. In the end, it is better to cut the cord so they can become customers of your competition!
– For previous ASK ALAN columns, click here.
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