Do you have certain customers that are frankly a complete pain to deal with? They argue about price, they don’t communicate with you (except to complain), they don’t pay their invoices without being chased, they don’t give you referrals and generally stress you out and take up more of your time and energy than is warranted. Well, the fact of the matter is you’ll always get the customers you’re willing to accept.
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, but 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, which 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:
- they don’t quibble about price;
- they refer other businesses to us;
- they always pay on time;
- they don’t give us unreasonable deadlines;
- they appreciate what we do;
- they are polite and courteous to us.
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. This person probably pays your invoices on time, is pleasant to deal with, is happy to pay your quoted price, refers people to you, spends a reasonable amount with you and meets all the criteria you listed for 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 problems. 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 nagging.
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 sort of person 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.
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:
- Reducing your credit terms;
- Discontinuing entry-level programmes;
- Stopping discounting;
- Beefing 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.
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, making their experience of your business even better, and then asking them for referrals so you can 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 poor 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.