It’s commonly accepted that a customer is the most valuable asset a business has. It’s very likely you know this and live by this belief. It’s extremely challenging to find customers, which is why you work hard to keep them happy.
But have you ever wondered if you need to fire a customer?
Firing a customer is a serious and unusual experience for any business. You try very hard to keep the customers you have. What would make you fire one? That’s what we’re here to discuss.
Sometimes firing the customer is the right decision for your business. Your business runs by providing great products and services for customers, and in return, they compensate you. Customers may also provide you with greater benefits such as increased brand awareness or social media engagement.
There are cases where you may find that the customer is hurting the business. Working with them affects you and your people in a negative way. In such cases, the best course of action is to fire your customer. Here, we’ll explore different situations where this becomes necessary.
They Are Your Smallest Source of Income
The 80/20 principle, also called Pareto’s Law, says that in many events, 80% of the results come from 20% of the causes. This principle is very helpful when you need to think about firing a customer.
It’s very likely that 80% or the majority of your income comes from 20% or a handful of your customers. Since they are the most important sources of your income, you’re better off paying the most attention to them. It’s a waste of resources and effort to spend too much time on customers who contribute the least towards your business’s income. It may even be better to fire them since you’ll divert your resources to more useful activities.
Another way to apply this principle is to find out if there are specific customers who are causing the majority of the problems in your business. They may be extremely difficult to deal with or require too many customizations and changes.
Look over the resources your company is using on a customer and the state of your employees’ morale. It’s not a good sign if you are draining your resources to keep a single customer happy. If your support staff are spending most of their time on certain customers who never seem to be satisfied, then firing these customers can be better for your business.
Using Pareto’s Law can be a helpful guide for you to determine if your customers are keeping your business healthy or not.
It’s a Bad Product-Customer Fit
Sometimes a customer is just not a great fit for what you have to offer. Working with a customer who isn’t right for your business can be costly and time-consuming.
For example, if you’re a developer who can boost a site’s speed and performance, but the customer needs content marketing, then you’re not a great fit. It’s not a good idea to force your solutions to fit a customer’s requirements.
The number of customers you have is not the only important thing. It’s also important to make sure that the solutions you provide meet the problems customers have. This is why it’s important to understand your customer well. You can learn more about your customers by adding analytics to your blog to understand who your visitors are and what they are looking for.
You know your customer may not be a great fit if they are constantly asking for changes or never seems to be happy. Especially when most of your other customers don’t have the same issues.
Your business will benefit from firing them. It also enables your customers to find another provider who is better for them. You can also prevent similar problems in the future by setting clear expectations ahead of time.
They Disregard Your Advice
When working for a customer, your goal is to help them get what they want. However, it’s important to remember that you are the expert.
If a client ignores your advice or insists on working in a way that you know is wrong, then it would be better to fire the client.
This is because you run the risk of hurting your reputation. Your solutions and products reflect what your brand is all about. If a client won’t allow you to work according to best standards and practices, or if they misuse your products, they can hurt your business.
It can also impact your business negatively if something goes wrong. It’s very possible that the client may end up blaming you. It is worthwhile firing a client if they disregard your expert advice.
They Abuse Your Policies or Employees
It’s quite likely that you’ll deal with disgruntled or unsatisfied customers. Most of the time, it’s worth making the extra effort to fix their problems and keep them happy. However, there’s never a good reason to put up with abusive behavior.
It’s a good call for your business to fire customers who treat your staff disrespectfully by using abusive or inappropriate language. You’ll show that you’re supporting and protecting your staff members and don’t tolerate bad behavior.
You may also have customers who take advantage of your business by misusing your policies. For example, you may offer people access to content on a membership site at a discount. A user who signs up on your site, downloads all the content and then leaves instead of subscribing is misusing your site’s policies.
Some clients may not respect your payment procedures. You can save your business time and money by removing such clients. You also ensure that your employees’ are happier by having them work with better customers.
Poor Communication
Communication is vital to run things smoothly within a business as well as for managing outside relationships. Having a clear line of communication and getting responses from your customers is important to do your job well.
If customers take too long to reply or if their replies are unhelpful, you could lose and hours or days that could be used productively. This also builds uncertainty and a lack of trust. How will the customer communicate when it comes to important issues such as timely payments?
You’re better off and more productive by working with customers that communicate well.
Firing Your Customer May Serve Everyone
Firing a customer from your business is a rare and unusual situation. But it’s a good idea to know what to look for should such a situation arise.
When firing a customer, it’s important to ensure that there’s really no other option. You can reduce the possibility of a poor fit with your customer by defining the right customer profile for your business. Use CRM software to understand your current customers better. Add the best Google Analytics plugin for your site that helps you get insights into your site visitors. Learning who your customers are helps you create the right product and build good relationships.
When you do fire your customer, do so in a tactful manner. In some cases, there won’t be any need to burn bridges. Make sure that a person from your business with seniority and experience plays a key role in parting ways. Try to help your customers by referring them to other businesses.
By recognizing when you need to fire your customer, you’ll be able to take the right steps. You’ll help your business grow and you’ll give your employees a better work-life.
Fully agree that, if selective and careful, some customers will never meet be in sync with the organization’s ability to serve and provide value. As long as there are ‘rules’ around this, firing these kinds of customers can make the company more financially sound and operationally efficient: http://customerthink.com/4-5-rules-for-creatively-firing-unwanted-customers/
Very good post. It is often a challenge deciding at what point the rewards of being without the customer outweigh the potential consequences of firing him. It helps to remember that the payoff from customer firings won’t necessarily be financial — at least not right away. The real dollar payoff comes when you replace that fired customer with one who’s far easier to do business with, and who doesn’t drain your organization of the emotional, time or monetary resources often in short supply to begin with.
Customers should be encouraged to exit for one of three reasons: they’re costing you too much economically, they’re taking too much of an emotional toll, or they’re violating a key value of your organization.
The economic cost means profit — most organizations are, after all, in business to ensure revenues adequately exceed expenses. Not always at the outset, but over time. With advertising, marketing, sales and solicitation expenses, there’s always a “sunk cost” in acquiring customers. If there’s not sufficient return on that initial investment over time you’ll want to rethink whether a continued relationship makes sense. Where you draw the line depends on your own tolerance for red ink. Without a compelling reason to be tolerant, I would suggest you have none.
The emotional costs involve the wear and tear on frontline associates. Some customers are so taxing or abusive that the damage they do to employee self esteem or everyday resilience robs you of fresh, enthusiastic people to effectively serve other, more deserving or valuable customers. Have you witnessed repeated abuse of frontline people by this customer? If yes, it may be time to consider favoring frontline morale over a given customer’s revenue contribution.
The final reason to bid customers adieu is the clear violation of a key organizational value. This travels beyond morality or ethics infractions — the consequences for such violations are often cut-and-dried — to more nebulous values-based scenarios. If your reputation is built on responsiveness and you have a customer whose chronic demands for special attention is causing serious delays in your operation, for instance, it might warrant parting ways.
Whatever the conditions, make sure you’ve reasonably exhausted all other options before cutting the customer cord. In some cases you’ll find special efforts can still “save” profitable but difficult customers on the verge of being fired. Sometimes the “customer from hell” may really be the “customer who has been through hell” and thus in desperate need of a bit more TLC than usual.
Hi Syed: I have a number of thoughts on your article. First, making a decision to cut ties with a customer needn’t be considered serious or unusual, though executives should be circumspect when making such choices. (please see an article I recently posted, Customer Retention is Overrated https://customerthink.com/customer-retention-is-overrated/, and Acquisition and Retention: The Yin and Yang of Customer Strategy http://customerthink.com/acquisition-and-retention-the-yin-and-yang-of-customer-strategy/). In those articles, I suggest that customer divestment is as essential to customer strategy as acquisition, retention, growth, and win-back. A key takeaway is that a company’s decision to divest a customer (or customers) needn’t be associated with rancor or failure. Often, it results from strategic changes, both on the part of the seller and the buyer. Note the recent decision by Nestle to see its US ice cream businesses for $4 B (https://www.barrons.com/articles/nestle-has-sold-its-u-s-ice-cream-business-for-4-billion-will-it-now-empty-the-freezer-51576155344). In the In another example, every mortgage contract I have signed contains a clause informing me that sometime during the financing period, the mortgage might be assumed by another entity. Customers get divested for many reasons.
Second, when used to describe divestment, ‘firing’ connotes the occurrence of breakdowns such as those you describe with policy or employee abuse. But I suggest using the term sparingly, and maybe apply it to the situations you mentioned along with some others (for example, when a customer becomes a credit risk, or engages in illegal trade). Otherwise, applying the term ‘firing’ creates bias that can skew decisions. I suspect that Nestle doesn’t use the term firing when referring to its frozen novelty customers as much as saying it is divesting them. Similarly, as a customer, I don’t feel ‘fired’ if my mortgage lender sells my contract. I understand that the transaction is pretty normal.
Third, I haven’t experienced the conundrum of cutting ties with customers that don’t follow my advice. When I sold software, this was a frequent occurrence for me. Some companies that bought my packaged software solution insisted right out of the gate that such-and-such a feature, workflow, or input screen had to be modified prior to implementation. I priced the requisite change and frequently included the caveat that some customers who made the same request later asked for the modification to be restored to the original. Clearly, the consequences of disregarding a vendor’s advice must be taken in context. When ignoring advice, restrictions, or terms of use create legal liabilities for the vendor, then it’s probably advisable to terminate the selling agreement. As in many selling situations, a good set of contracts is a vendor’s best risk mitigation.
Funnily enough I was discussing this very topic on LinkedIn this week. Of course there are situations that just are never going to work whatever the circumstances, but as a general rule, I would always want to offer my current customer the possibility of remaining as my customer, albeit within terms that suit me. What I would do conceptually (because it’s often more complicated in a real-world situation) is that I would first determine what I can do for this customer that allows me to turn a reasonable profit from the deal and that I believe will provide value for them and then I’d go to the customer with a modified renewal agreement that clarifies what I can do for them and explains what is included within the renewal price and also describes what my prof services fees will be for any additional assistance. That way I am not “firing” a customer at all, simply, putting the ball back into their court with terms that suit me but that also genuinely are workable for the customer, to let them decide if they wish to proceed on these terms or to not renew.
I have always said (to myself when self-employed, or company owners when employed)
You are not really “free” until you are able to fire a customer. I mean this in almost a slavery-like reality of the early years of a struggling business.