Focus Point: Total Customer Satisfaction?
Sometimes it’s better to just walk away
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Do you have a bad customer? You know, the kind who considers signing
the contract just the beginning of the next phase of negotiation?
One who loses sleep at night worrying that you might still be making
a profit? One who just can’t be pleased and is endlessly, and unreasonably,
demanding? One who tries to take advantage of you at every opportunity?
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Worse, the time exp-ended on the bad customer can seriously interfere
with providing the kind of attention that good customers deserve, an effort
that can truly help build a business. Not to mention the wear and tear
on you and other key staff members, which can quickly become a serious
problem in itself.
NOT RECOVERABLE
Both experience and research have also shown that dealing with customers
of this type is rarely profitable. That is, the time, effort and cost
of trying to appease them involves many direct and indirect expense that
are not recoverable. Plus, future business is likely to be on the same
basis, so a future payback is unlikely. Not only is the bad customer forever
unhappy, you may have made nothing or even lost money in the process.
It’s also been shown that good customers effectively end up subsidizing
bad customers. That is, profits from good customers end up covering the
losses caused by bad customers. If your good customers figure this out,
and some usually do, they won’t be pleased.
It’s also common for the bad customer to damage your reputation in one
way or another. A few even do so deliberately in an effort to make you
more dependent upon their business. And since they can never be satisfied,
everything that they will ever say about your company is likely to be
negative. That’s certainly not going to help you grow.
A few years ago, while working for an audio manufacturer, a venue manager
called me to complain that they had been shipped used equipment instead
of the new gear that they had paid for. Upon investigation, it was learned
that the audio dealer had in fact sold this venue equipment purchased
nearly a year earlier and which had been heavily used. It was also the
wrong gear for the job. To top it all off, the dealer blamed all of these
problems on us, the manufacturer.
It got worse. We learned that the dealer never sold our equipment unless
a buyer insisted upon it. The dealer also actively (and regularly) tried
to switch buyers to other brands, accompanied by highly negative comments
about us. Beyond that, a review of our records showed a pattern of other
abuses, including trying to return well-used equipment as new and untouched,
consistently being several months late in paying bills and more.
The real shocker, however, was when an audit showed that due to all these
abuses, the account was unprofitable despite substantial sales. And this
didn’t even include all the lost man-hours involved. So in addition to
all the negative publicity, the continual tiresome wrangling, and all
the extra time and effort, sales involving this dealer were at a net loss.
Unfortunately, this is not uncommon.
The lesson should be clear. But what if times are tough and you just need
to pay the rent? When things are not going well, sometimes you have to
do what you have to do, right? Maybe so, but be sure to think it over
carefully. Sales at a loss will not keep the doors open for long, and
the profitable sales that are missed are not going to help either.
GO AGAINST THE GRAIN
So... What do you do? Simply, convince yourself that having no customer
might very well be better than having a bad customer. If you can’t accept
this, you probably can’t do what’s necessary. However, this tends to go
against the grain, especially for anyone who has started and grown his
or her own company. Yet consider that a large amount of evidence supports
the idea that the damage a bad customer can do far outweighs any supposed
advantage in keeping them.
Once this idea is accepted, take action. It’s vital to weed out the good
customers from the bad. If you get a knot in your stomach when a particular
customers calls, there’s a good chance that you’re either doing something
wrong or you have a bad customer. Do the math, but be aware that sales
numbers on their own may not tell the whole story. (See sidebar)
And don’t be too harsh. Some people can be difficult and demanding, and
others simply may not be likeable. But, there’s a big difference between
not liking someone and proving that they’re costing you money. And almost
everybody is looking for a little better deal or occasionally needs to
cope with unexpectedly high costs.
What you’re after is identifying the truly bad customers; the ones that
drain away your profits, waste your time, prevent you from properly taking
care of your good customers and hamper your growth.
Upon defining a bad customer disengage, don’t dump. Keep up a good front
until a graceful exit can be made. No sense damaging your reputation by
not following through with current business. Come up with a plausible
reason not to deal with them next time. If they become aware that you
are dropping them because of their behavior, they may try to do you real
damage. After all, you’re of no further use to them.
THERE ARE WORSE THINGS
Try to train yourself to identify and walk away from this type of customer.
The easiest way to disengage from a bad customer is to not have them in
the first place. There are worse things than a lost sale, especially one
that will be unprofitable.
Once you are in the clear, consider figuring out a way to send your bad
customer to your competitor, especially a competitor whose business practices
you don’t admire. This may seem devious (O.K., it is devious), but the
outcome is also more or less inevitable, because bad customers tend naturally
to gravitate towards bad suppliers. Helping the process along a bit isn’t
really all that bad, is it?
The “total customer satisfaction” concept is not really wrong, at least
once you’ve weeded out the bad customers on whom the effort is wasted.
Checklist
How To ID A Bad Customer
• Is the customer profitable or unprofitable, considering all costs?
• Do they take up an undue amount of your and your staff’s time?
• Do they pay their bills in a timely manner?
• Are they never, ever satisfied?
• Do you suspect that they may be dishonest in a way that could hurt your company?
• Do you think that they may be saying negative things about your company?
• Will they help or hinder your efforts to grow your business?
• Do they continually pressure you for more than they are paying for?
Gary Stanfill has more than 30 years experience in professional audio. He served as president and general manager of Vega, and is now principle consultant for Colmar Systems, based in Southern California. Gary can be reached at gjstanfill@earthlink.net
January 2004 Live Sound International