Focus Point: Total Customer Satisfaction?
Sometimes it’s better to just walk away


Look familiar? A bad customer can ruin your day, and that’s just for starters.

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?

A few years ago, the theme was “total customer satisfaction”. Doing whatever it takes to make each and every customer a happy camper. Trouble is, it quickly became apparent that for a small percentage of customers, there is just no such thing as “satisfaction”, total or otherwise. The whole concept was based upon customers all being nice, reasonable, logical and honest. But, of course, not all are.

Unfortunately, the bad customer is an unpleasant reality. If one (or more) of your customers fits the description, are you doing anything about it? Dealing with even one bad customer can exact a heavy toll on your business. Very often, it can take up a huge amount of time, far more than is justified by the money being brought it. Your margins can go through the floor, a real risk in a dicey economic climate.

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

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