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When (and how) to fire a customer

How would I feel if [insert employee’s name] went to work for a competitor tomorrow? That question, over the years, has helped me drill down at employee performance review time. A tidal wave of relief means one thing, a panic attack quite another. I value staff appropriate to four straightforward attributes — the talent, experience, common sense, and productivity they bring to our business.

Applying that litmus test question to customers, how would you feel if you lost customers A or Z to a competitor? Sick of Ms. Jones, who always expects a little extra when the meat hits the scale? Tired of Mr. Doe, who thinks “retainer” entitles him to dial-a-paid-listener chats? If you’re sick and tired of more than a few clients, here are a few more questions to ponder before showing them the door.

What is your true definition of a good customer or a good sale?

I define a “good sale” as a transaction that ends with a satisfied client, at reasonable profit to the vendor. By definition, then, either the problem sale did not please your customer, or it was not profitable to the company due to the amount of time or cost invested in post-sale haggling. That’s the quick keep-or-keep quiz for client retention. Consider the lifetime of a client relationship: is the business acquisition or retention cost worth it?

What’s the real problem?

If customers A, B, and C have personalities that could tick off a saint, and they, individually or collectively, are causing undo organizational stress or reallocation of company resources at the expense of profit, fire them. However, if your organization has a lot of problem customers, you well might wonder if salespeople have over promised and/or if product or customer service has under-delivered. (This is especially common during times of organizational growth, when staffing hasn’t yet caught up product demand or marketing pushes.)

In that case, before pulling the trigger, ask:
1. What is the scope and span of the problem? (Do you have only a few similar problems, or many difficult, diverse situations?) Is it unique to one customer base, product or process?

2. What or who brought these customers in? Does one rep, division, or marketing push generate the most problem clients? Why?

3. Are your commissions or marketing materials properly structured to push your sales staff toward the least-resistant, most-profitable (sweet spot) audience? Does staff know the difference between “A” business and “C” business? Do you incentivize targets differently?

If you still, after analysis, decide to fire a customer…

Here are steps to help with image or damage control, because very often, fired customers badmouth a brand to potentially excellent customers:

1. State the reason you need to stop doing business with them in non-inflammatory language, and focus on the customer’s perceived product or service difficulties, not personalities. “We don’t seem to be able to meet your expectation of… so…” Don’t be afraid to admit, if this is the problem: “At the steep discounts you’ve come to expect for your account, we can no longer offer our services because we are actually losing money on these transactions.” Sometimes that customer will then opt to pay the higher market rate charged others.

2. If possible, offer a small severance package. “Since we weren’t able to please you with regard to our delivery schedule, we’d like to rebate your shipping cost on this transaction and conclude our business relationship on a positive note.”

3. If possible, refer the customer to a competitor who is better sized or equipped to deal with this type of business or client. Being handed off is mildly insulting, but being dumped altogether, with no safety net, invites brand retaliation.

Best wishes with your review and client separation plan! Join me again next week, when our topic will be polishing your own personal brand to advance your career or business.

About Jody Glynn Patrick

Jody is President of Glynn Patrick & Associates, which provides management consulting, executive coaching and strategic planning services. She is Publisher Emeritus of In Business magazine, which she published for 17 years. Selected as the “U.S. Business Journalist of the Year” in 2007 in Washington, DC, by the U.S. Small Business Administration, Jody has been a business reporter, editor, radio talk show host , and has won other state and national journalism awards. At the same time, she has helped corporate clients grow their businesses — the basis for her practical coaching advice here. She also was the 2005 Athena Award recipient for her leadership role in mentoring other professional women. Jody will be talking with you weekly on TDS’ blog to share her insights and tips from the C-Suite perspective. Follow on G+.

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