Do you have some customers that are frankly a complete pain to deal with? Maybe they argue about price, or they don’t communicate with you (except to complain). Perhaps they don’t pay their invoices without being chased, or they don’t give you referrals. Chances are they just generally stress you out, and take up more of your time and energy than is warranted.
The fact of the matter is, you’ll always get the customers you’re willing to accept. Well, maybe now is the time to raise your standards, and get some better customers!
Who is your ideal customer?
If you’re just starting out or trying hard to grow your business, you may think that any paying customer is a customer worth having. I’d argue that some customers are more trouble than they’re worth. There are some who actually cost you money every time you deal with them.
The 80:20 rule (also called the Pareto Principle) states that 80% of your business comes from 20% percent of your customers. This also means that 80% of your grief will generally come from just 20% of your customers. So what can you do to stack the odds in your favour?
Well, the first thing I would recommend is that you have a think about what makes a great customer, from your perspective, then make a list of those qualities. This may include factors like:
- not quibbling about price;
- willingness to refer other businesses to us;
- paying your invoices on time;
- not giving unreasonable deadlines;
- being appreciative of what you do;
- treating your staff in a polite and courteous way.
Time to grade your customers!
Now, with your ideal customer in mind, go through your existing customer database and categorise them into four grades – A, B, C or D.
An A-grade customer is your favourite kind of customer. They probably pay your invoices on time, are pleasant to deal with, happy to pay your quoted price, refer other people to you, spend a reasonable amount with you and generally meet all the criteria you listed for your ideal customers. In fact, if all your customers were like this, your life would be a lot easier!
B-grade customers are still good customers, although they don’t quite fit your ideal customer blueprint. They might be more price conscious, or not buy as much from you, but they still pay on time and don’t give you problems.
C-grade customers give you some challenges. They’re the type that haggle for a discount every time you deal with them, bring back goods frequently because they’ve changed their mind, or expect you to deliver at the last minute. They don’t take your advice, and will tend to pay late and need chasing.
D-grade customers are those you wish you didn’t have to deal with at all. They are the ones that cause a scene, complain about everything, who treat you and your staff discourteously and don’t pay you what they owe you without being hounded. Dealing with this sort of person or company takes up your time, energy and patience, and frankly you wish they’d just take their custom elsewhere – preferably to one of your competitors!
Well, the simple truth is that you don’t have to put up with D-grade customers, or even C-grade customers, if you don’t want to. When you decide exactly who you want to do business with, you’ll start to attract that type of customer. Remember, one bad customer can ruin your day, and that can affect the way you deal with your other customers and your staff.
Move your customers up the scale
If you feel brave enough, just take the bull by the horns and “sack” your worst customers. You can tell them you’re no longer able to give them the level of service they need, and perhaps refer them on to another supplier. Then to ensure your remaining customers and your new customers work with you in the way you want, you need to create some new rules and procedures that will protect you from bad customers, and stick to them. For example:
- Reduce your credit terms;
- Discontinue entry-level programmes;
- Stop giving discounts;
- Beef up your credit control procedures, e.g. by charging interest on late payments.
Then politely communicate the changes you’ve made to all your customers. Your good customers will continue to be good customers. Some of your less good customers will abide by your new rules and may move to becoming better customers. Others will leave, and you should expect that, and let them go.
Make space for more A-grade customers
Once your D-grade and perhaps your C-grade customers have been phased out, you will have more time to devote to servicing your A-grade customers and making their experience of your business even better. Then you can ask them for referrals to other businesses like them, helping you to build up your ideal customer base.
Remember that every business is different. Someone that you might regard as an A-grade customer may be considered C-grade by someone else, and vice versa. Don’t let guilt or a sense of duty hold you back from letting go of your D-grade customers – consider that they may take their business to a company that suits them better, and leave you more room for additional A-grade customers of your own.